Even for experienced tax savers, this year poses a new challenge to smartly use the additional Rs.50, 000 under Section 80C to save on income tax. Following is the list of avenues to deploy your money to save taxes.
Public Provident Fund 8.7%
This government-backed instrument comes with 15-year tenure and offers a fixed rate of return each year. It is a good option for those without a PF account to build a retirement corpus.
Provident Fund 8.75%
The amount deducted from your salary every month towards Employees’ Provident Fund will qualify for deduction under Section 80C. You can also claim additional contributions under the Voluntary Provident Fund within the Section 80C limits which qualify for deduction under Section 80C.
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Life Insurance Premiums
The Life Insurance premiums paid towards policies for self, spouse and children qualify for deduction under Section 80C. Deductions are allowed only for premiums up to a maximum of 10 per cent of the sum assured for policy issued on or after April 1, 2012. For policies issued before March 31, 2012, deduction is allowed only for premiums up to a maximum of 20 per cent of the sum assured.
5-Year Post Office Time Deposits 8.4%
The 5-Year Post Office Time Deposit is offering tax benefits under Section 80C.
5-Year Bank Deposits 8.5% Deposits for a 5-year period in scheduled banks qualify for tax deductions. The interest accrued at the end of the tenure is tax-free.
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Stamp Duty and Registration Charges The amount you spend on Stamp Duty and Registration while buying a house will qualify for tax benefits under Section 80C in the year of purchase.
Pension Fund no guaranteed returns Contribution towards a pension fund qualifies for deduction under Section 80C. These include pension plans from insurers and select MF schemes like UTI Retirement Benefit Pension Fund and Templeton India Pension Plan. Many MFs are now launching similar schemes.
Child Education Expenses, Tution Fee
The amount spent on children’s education also qualify for Section 80C tax benefits.
Home Loan Principal Repayment
When you are repaying your home loan through EMI, it contains both the principal and the interest. The interest on home loan qualifies for tax deduction under Section 24, while the principal repayment qualifies for benefit under Section 80C.
National Savings Certificate 8.5%, 8.8%
This government-backed instrument comes in two variants of 5 and 10-year tenures with interest of 8.5 per cent and 8.8 per cent, respectively. The interest accrued every year is taxable, but it will be deemed as reinvested and qualifies for Section 80C benefits.
Senior Citizens’ Savings Scheme 9.2%
This offers Section 80C benefits to the seniors. Interest is payable quarterly at the end of March, June, September and December. Interest paid is taxable.
ELSS no guaranteed returns
These are equity mutual funds with a 3-year lock-in on the investment. Investments in such schemes qualify for tax deductions. These are also the only tax saving instrument with the shortest lock-in. However, they do not guarantee any returns.
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