Tax Saving Tips – Investments and Deductions Under Section 80C
Your hard
earned income is subject to taxation under the Income Tax Act. You can save a
part of your income as a tax deduction; thus reducing your total taxable
income. Such tax deduction options are available under the various sections
of it act. Section 80 c provides that Rs 1 lac per annum can be saved from
being taxed by investing in such instruments:
§
Public Provident Fund (PPF)
§
National Savings Certificates (NSC)
§
Contributions to Employees Provident Fund (EPF)
§
Fixed Deposit (FD) with Banks having a lock-in period of five
years
§
Equity Linked Savings Scheme (ELSS) of Mutual Funds
§
Unit Linked Insurance Plan (ULIP)
§
Life Insurance Premiums
§
Repayment of Housing Loan (Principal)
It is
applicable for individuals irrespective of their tax bracket and annual
income. These are the tips under this section that will help you save your
tax from your income.
PPF PUBLIC PROVIDENT FUND
It is the risk
free government tool with a lock in period of 15 yrs and is beneficial for
those seeking long term investment. You can invest up to Rs 1lac in all at
the current rate of 8.8%. . The interest earned here is not taxed. The
minimum investment in PPF is Rs 500 per year and the maximum investment is Rs
1,00,000/- per year. It can be a lump sum investment or can be divided
in to a 12 transaction per year. A special benefit that comes along is that
in case of insolvency it will not be attached to the assets of the insolvent.
PPF can be used for minors as well, who can avail benefit of the same when
they turn 18.
NSC NATIONAL SAVING CERTIFICATES
Very secure
since it is backed by the government. Interest rate for 5-year NSC delivers
8.6% whereas 10-year NSC offers 8.9%. Interest earned is subject to tax and
there is no limitation on the amount of investment. NSC is eligible for use
as a security in order to derive a loan from the banks. Minimum amount is
Rs100.
EMPLOYEES PROVIDENT FUND
Employees
provident fund is the deduction from the salary (minimum a 12%) made by the
employer into a provident fund account. This deduction is mandatory on the
earned income as an aid to both private and non pensionable public sector
employees. A fraction of your monthly income is deducted and gets accumulated
till the time employee attains the retirement age. After the age of 55, the
employee can withdraw full amount at any time. Apart from monthly deduction
the employee can contribute extra through VPF voluntary contributions.
FIXED DEPOSITS
In a Fixed
Deposit Saving Scheme a certain sum of money is deposited in the bank for a
specified time period with a fixed rate of interest. For tax free bank
deposit under section 80c, lock in period of 5 yrs is a must and premature
withdrawal is not allowed. The amount under this FD is deducted from the
taxable income and the maximum permissible amount is Rs1 lac. This amount can
be undertaken for a loan. A safe investment option beneficial for those who
want to lock their money for long. However the interest received on such
deposit is taxable.
EQUITY LINKED SAVINGS SCHEME (ELSS) OF MUTUAL FUNDS
This market
linked investment comes up with a 3 year lock in period. ELSS is your helping
hand in saving tax offering high returns. With low expenses, this option
ensures a high liquidity and growth in long term. Withdrawing before a 3 year
period is not allowed. Also ELSS returns are not guaranteed as they are
market linked investments.
ULIP- UNIT LINKED INSURANCE PLAN
ULIP is
the risk free investment option that lets you flexibly invest wherein part of
the premium pay goes toward the sum assured and the balance will be invested
in whichever investments you choose depending upon the scheme-equity, debt or
a mix of the both. The premium that is paid under these schemes is considered
under this section. It can be partly exposed to stock market. ULIP schemes
come in insurance cover forms as well as investment options.
LIC PREMIUMS
This includes
the premiums that you pay for the LICs or insurance policies under other
private insurance companies. The policies ensuring life of self, spouse or
any child are considered. Also,
insurance premiums paid for parents, is covered for deduction under 80C.
Thus, the total amount for all premiums from all eligible policies can be
included as the deduction.
REPAYMENT OF HOUSING LOAN (PRINCIPAL)
Under section
80c , the principle component that you pay for your home loan is eligible for
deduction. The yearly amount that is spent under the repayment of housing
loan as the principal can be deducted from the taxable income.
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Wednesday, February 06, 2013
Tax Saving Tips – Investments and Deductions Under Section 80C
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Fine information. This post is relevant for me to get the idea about how different schemes are helpful to save my tax. Thanks for sharing knowledge about various tax saving schemes and tips under Section 80C.
ReplyDeleteThanks Jashn Sharma Further u can Put ur views & suggestion for my blogs
ReplyDeleteThis is the very good Tax Saving Investment which are helpful to save tax. Finally i got the different schemes from this blog and it is for me to save tax properly.
ReplyDeleteThanks Kesar walia any more suggesstion are welcome for My Blogs
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