Payment Applicable for Tax Saving Deduction U/S 80C

Investors are always on the lookout for investment options that provide multiple benefits. Apart from high returns, a major factor of consideration while choosing investment options is the tax benefits available with that investment.

Section 80C of the Income Tax Act provides a significant number of tax benefits and is considered one of the most popular sections of the Income Tax Act. Different investment instruments provide benefits under Section 80C, making them among the most sought-after instruments within the investor community.

Read on to learn about the best investment under Section 80C of the Income Tax Act.

1.Equity Linked Savings Schemes (ELSS):

ELSS is one of the most popular investment instruments that offer benefits under Section 80C. Not only does this instrument offer substantial tax benefits, but it also ensures high returns. The instrument is also popular owing to its low lock-in period which is only for a duration of 3 years. ELSS has the prospect of delivering returns higher than other tax-saving instruments, including Fixed Deposits, National Pension Scheme or even Public Provident Funds. Even the interest earned by investing in ELSS is only partially taxable.

2. Fixed Deposits:

While not all fixed deposits offer tax benefits, there are several funds that do offer tax benefits under Section 80C of the Income Tax Act. However, it is important to note that these tax-saving FDs come with a lock-in period of 5 years and only offer tax benefits on investments of up to Rs. 1.5 lakh. The returns on fixed deposits are lesser than on market-linked instruments, but investors receive guaranteed returns - which makes the instrument popular among investors who are willing to take lower risks. The minimum investment limit for an FD is Rs. 1000, making it easy for investors across all strata to invest. The rate of interest earned on these investments can differ.

3. Public Provident Fund (PPF):

PPF is considered to be a great tool by investors who are looking to build their corpus for retirement purposes. These are tools which offer benefits that come into play long after the investment is made and are ideal for meeting goals in the long-term. They also ensure disciplined savings, since they come with a lock-in period of 15 years which can be further extended by 5 years. However, after 7 years of deposits, partial withdrawals are possible, which makes them a good tool for easy liquidity. The interest earned on this investment instrument is tax free up to a limit of Rs. 1.5 lakhs.

4. Employee Provident Fund (EPF):

Another long-term investment scheme, the Employee Provident Fund is available to salaried employees. The employee’s contribution to the EPF amounts to 12%. The EPF is accessible to all employees who earn more than Rs. 15,000 a month. Under Section 80C, contributions made by an employee are tax-deductible. Contributions made by the employer are tax-deductible as well, but deductions aren’t available under Section 80C. The entire PF balance, including interest earned on it, is tax-free if it is withdrawn after 5 years of making continuous deposits. Alternatively, the PF balance can be withdrawn if the employee leaves a job and does not take up employment with an employer covered by the PF Act, within 2 months.

5. National Pension Scheme (NPS):

The NPS was started by the Indian government to ensure a source for pension for people engaged in the unorganised sector. Under Section 80C of the Income Tax Act, deductions of up to Rs. 1.5 lakhs can be claimed on investments in the NPS. Deductions on both, the employee’s and employer’s contributions to the EPF, can be claimed under Section 80C. The Scheme is open to all residents within the age group of 18 to 60 years. Only partial withdrawals can be made from this fund, and that too only after a period of 15 years.

6. Unit Linked Insurance Plans (ULIPs):

ULIPs are another popular tax-saving instrument for individuals looking to gain benefits of both insurance cover and high returns from investment. ULIPs are particularly suited for investors with different risk profiles, since investors can choose how to allocate their investments across different funds. Additionally, the tax benefits include exemptions on the amount invested, the withdrawals made and the maturity amount as well. Under Section 80C, deductions can only be claimed on the premium paid towards this instrument.

Section 80C ensures that investors have options for making the best investments which guarantee the highest tax benefits. Invest 4G, available on Canara HSBC, is a ULIP and considered to be among the best investments under Section 80C. The ULIP offers investors flexibility to choose between 7 funds and 4 portfolio strategies.