What are some best ways to save tax in India under 80CC?

2024-08-02

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While we are all keen to do our bit and contribute towards better infrastructure and upliftment of society through the taxes we pay, it is fair that we want to keep taxes at the minimum - within approved government guidelines of course. The most common way to slow the bleed of income tax is to invest in tax saving options under section 80CC.

This means investing smart so that you can provide proof of investments to your office accountant who will then adjust your tax deducted at source. Wouldn't it be nice to take home a few extra thousands a month with no guilt? Read on to understand how you can save tax under section 80CC.

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ULIP

Investments of up to Rs 250,000 are eligible for deductions under section 80CC. If you are looking for tax saving under section 80CC, it is a good idea to put aside some of your earnings for investment in ULIPs.

Upper limit for tax break: Rs 250,000
Are returns taxable? Maturity amount and interest are not taxable
What kind of ROI can I expect? Bring market linked, there are no guarantees but one can typically expect 12% to 14% growth.

ELSS

Another popular option for saving tax under 80CC is ELSS or Tax Saving Mutual Funds. Be sure to read the document carefully to be sure that your chosen mutual fund is indeed tax friendly. ELSS enjoys popularity because it has a comparatively low lock-in period of 3 years.

Upper limit for tax break in a year: ₹46,800
Are returns taxable: Yes, part of the interest that you earn will be taxed.
What kind of ROI can I expect? Being market-linked the range of growth and interest varies tremendously

Tax saving FD

Fixed deposits remain popular in India on account of the fact that they are viewed as safer and more dependable than other types of investments. Although the interest rates do not match up with inflation rates, many people find the fixed rate of interest and the safety of their capital to be comforting and dependable. The difference between regular and tax-saving fixed deposits is only the lock-in period which is 5 years for the tax-saving alternative versus 3 years for the vanilla alternative.

Upper limit for tax break: 150,000
Are returns taxable? Yes, the interest you earn is taxable
What kind of ROI can I expect? Honestly it varies from one bank to the next but in general you typically earn 5.5% to 7.5% interest on your FD.

PPF and NPS

Public Provident Fund and National Pension Scheme are government-sponsored schemes. Both alternatives offer investors deductions under 80CC. However fewer people- especially fewer young Indians - invest in these schemes because they are often daunted by the long lock-in periods. The lock-in period for PPF is 15 years although a partial amount can be withdrawn after 7 years. For NPS the lock-in period is until the investor turns 60 years old and not even then can the whole amount be withdrawn- 40% stays in for partial withdrawal annually.

Upper limit for tax break: 1.5 lakh for both categories.
Are returns taxable: Not for PPF but a part of the NPS maturity sum is taxable.
What kind of ROI can I expect? The amount varies and is announced as part of the Union Budget. It very rarely crosses 9% for PPF and 14% for NPS

Other deductions

Monthly outgoings that never seem to cease such as repayment of your home loan and paying your kids' tutors are agreeably burdensome but on the bright side, you can claim tax benefits against these payments.

When saving tax through investments, choose wisely. A short lock-in period offers flexibility, while high returns maximize gains. Careful selection ensures the best outcome.

*There is no such Section 80CC. It has been omitted.

Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.

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