Tax-saving investments under 80C are crucial for everyone since these tax-saving investments can save a lot of taxes for you. Here in this article, we are listing the top 7 tax-saving investments under 80C.
One can invest up to Rs 1.5 lac in a financial year and avail tax benefit U/S 80C. Usually, all tax-saving investment schemes have a lock-in period of 5 years to 15 years.
post updated on 7 Feb 2023 -2 Feb 2024
Table of Contents
What is an investment under section 80C?
One can invest up to 1.5 lac each Financial year and take exemption under section 80 C. This way the taxable income amount can be reduced.
For example, if your income is 7 lac in a Financial year ( April to March) than your income tax will be as follows:
| OINCOME 10 lakh | OLD TAX System |
| taxable Income | Rs 10,00,000 |
| Standard deduction | Rs. 50,000 |
| Deduction U/S 80C | Rs 2,00,000 ( NPS is considered) |
| Deduction U/S 80 D | Rs 50,000 |
| Net taxable income | Rs. 7,00,000 |
| tax on Net income | Rs.54,660 |
Let’s explore the investments under 80C
1.Tax saving Bank fixed deposit
Tax saving FD is the easiest and the simplest way to invest money safely.
One can invest money in a fixed deposit for five years and avail tax benefit under section 80C.
Please note that Fixed deposit duration lower than 5 year, does not qualify for tax deduction under section 80C.
One can open a tax-saving FD online or in the bank where you have a savings account.
Drawback: The interest which you earn from an FD is taxable on maturity.
2.National saving certificate:
NSC is 5 year safe and government-backed post office saving scheme, where you can invest your money safely.
You can invest your money in a lump sum purchase a National Saving Certificate and earn a fixed rate of return. NSC is a 5-year scheme in which you get a return of 7% (current interest rate 2023). 7.70% ( Feb 2024).
NSC has a lock-in period of 5 years. At the end of 5 years, submit the certificate and get the maturity amount( deposit amount+interest earned).
Drawback: The interest is taxable under income from other sources.
3.Public Provident Fund
PPF is another most loved tax saving investment in India. PPF is a government scheme where you can invest your money and avail tax benefit under section 80c.
This is a 15-year scheme. The current interest rate is 7.9 7.1% ( 2023/2024) compounded annually.
For taxation purposes, the PPF enjoys EEE advantage.
When you deposit your money you get tax deduction under section 80C, the interest part is also tax-free and when you withdraw your money on maturity the Corpus is tax-free again.
You can open PPF account with minimum Rupees 500 and maximum Rupees 1.5 Lakh in a financial year.
Even a parent can open a PPF account in the name of the minor child but the maximum amount can not exceed Rupees 1.5 Lakh.
Make sure that you invest in on or before the 5th of every month so that you get an interest amount of the entire month.
Drawbacks you cannot withdraw your money before the completion of 15 years. however, you can withdraw your money partially and in some special conditions.
4.Employees Provident Fund
You can enjoy tax benefits under section 80C for your contribution to EPF. The current interest rate is 8.65% 8.5% ( now) per annum.
For taxation purposes, the Employees Provident Fund enjoys EEE advantage.
When you deposit your money you get tax deduction under section 80C, the interest part is also tax-free and when you withdraw your money on maturity the Corpus is tax-free again.
5. National Pension Scheme
NPS is a retirement scheme floated by the Central Government of India. Since it is a retirement scheme one has to invest till retirement. Upon retirement, a lumpsum amount is given to the subscriber and life lifelong pension starts at age.
If you are an employee then your contribution is divided into two parts i.e. Employee contribution and Employer contribution.
One can make investment of additional 50000 and take tax exemption U/S 80CCD (1B) over and above 1.5 lac ceiling each year.
Employee’s own contribution to NPS
Subscribers will get tax deduction under section 80CCD 1 but the amount of contribution should not be more than 10% of basic and dearness allowance.
Moreover, this limit is under the ceiling of 1.5 Lakh Of section 80C to 80 CCE.
Employer contribution
This limit is 20% of the entire income in the full financial year for self-employed people.
Employer contribution will also get exemption under Section 80 CCD (2) for 10% of basic and dearness allowance. ( This amount can be a part of salary but it will not be counted in 1.5 lac ceiling.
Additional Rebate
All individuals can also get of INR 50000.
6.Tax saving Mutual Funds- ELSS
Almost all mutual fund house offers tax saving mutual fund schemes which are called ELSS /Equity Linked Saving Schemes.
ELSS schemes have the least lock-in time of 3 years only as compared to other tax saving options.
If you deposit your money with the ELSS scheme you get a tax deduction under section 80C. ELSS Mutual fund invests money across all market caps i.e. they follow a diversified approach.
You may expect a return of 12% per annum from ELSS schemes provided you remain invested for at least 5 year.
7. Sukanya Samriddhi Yojana
SSY is another very good option to invest for tax-saving purposes. You can invest only if you are the guardian of a girl child less than 10 years old. This scheme matures at 21 year age of girl child.
The maximum contribution is 1.5 lac in a financial year. The current interest rate is 8.4% 7.6% (2023). 8.2% ( Jan – March 2024).
Conclusion
You can choose any tax-saving investment based on your duration and risk-bearing capacity.
