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Best Tax Saving Schemes under Section 80C | Company Vakil

In this article, the readers will learn all about the Section 80C and the tax saving schemes it offers in brief details. One of the best tax saving schemes can be Investment made in the ELSS fund. Simultaneously, the Tax Saving Mutual Fund can also be called the best. These investment funds are designed in such a way that will give the investor a double advantage of both saving the taxes and at the same time, receiving higher amounts of returns on the investment.

H2:Here are some key points to paint a clear picture about this topic.

  • Savings of up to Rs 45,000 in the taxes is possible if one invests in the ELSS fund
  • Offers a locking period of 3 years, which is the lowest
  • From past records, it is evident that the returns are much higher compared to the NPD, PPF or FD
  • The interest which is earned can be partially taxed

 

H2: Here is a list of other tax saving funds under the Section of 80C

  • ULIP: Unit Linked Insurance Plans
  • NSC: National Savings Certificate
  • NPS: National Pension System
  • EPF: Employee Provident Fund
  • PPF: Public Provident Fund
  • Tax Saving Fixed Deposits

 

The payments made for saving the taxes following the Section 80C include – Repayment of home loan, Tuition fees of children and last but not the least, Life Insurance Premium (LIC).

 

H2: Investments made in Tax Saving Fixed Deposits

The Tax Saving Fixed Deposits are quite similar to the normal fixed deposits. The main differences are that the former come with lock-in period of around 5 years and also the tax break following the Section 80C made on the investments worth up to Rs 1.5 lakhs. The five key points worth examining are as follows:

  1. Eligibility: This type of Fixed Deposit accounts can be created by the residents of Indian individuals
  2. Liquidity: The lock-in period for these fixed deposits are up to 5 years
  3. Rate of Interest: The rate of interest varies from bank to bank typically within the range of 5.5 percent to 7.75 percent for this type of fixed deposits.
  4. Limit of Investment: The limit of investment is Rs 1000 at least
  5. Treatment of Tax: There is tax on the earned interest.

 

H2: Investments made in Public Provident Fund (PPF)

The Public Provident Funds, known as PPF for short, normally the tax saving funds which are backed up by the Indian government and they are long term in nature. According to the Section 80C, the deposits which are made in the Public Provident Fund accounts are susceptible for the tax deductions. The five key points worth examining are as follows:

  1. Eligibility: This type of deposit accounts can be created by the residents of Indian individuals, including both the salaried and the non-salaried people. However, a PPF account cannot be created by a HUF (Hindu Undivided Family)
  2. Liquidity: The lock-in period for these fixed deposits are up to 15 years, but there is scope to extend it for more 5 years. After 7 years of creation, partial withdrawal is permitted
  3. Rate of Interest: The present rate of interest is 7.6 percent p.a.
  4. Limit of Investment: The minimum rate of interest is Rs 500 and the maximum rate of interest is Rs 1.5 lakh
  5. Treatment of Tax: There is no tax on the earned interest

 

H2: Investments made in Employee Provident Fund (EPF)

The Employee Provident Fund, known as EPF in short, is a tax saving investment plan especially designed for those retirement of the employees who are salaried. This includes around 12 percent of the basic salary along with the DA which the employer deducts and deposits in the EPF. They can also deposit in any other well-known provident funds.  The five key points worth examining are as follows:

  1. Eligibility:This type of deposit accounts can be created by any employee whose basic salary is greater than Rs 15 thousand per month.
  2. Liquidity:After leaving the job, withdrawal of the provident fund can be done within 2 months and if the person does not take any employment within that 2 months under an employer who is covered by the provident fund act.
  3. Rate of Interest:The rate of interest set on this type of accounts is 8.55 percent
  4. Limit of Investment: The employee and the employer both have to contribute to the minimum 12 percent of the basic pay along with the DA.
  5. Treatment of Tax: If the withdrawal is made after a full round of 5 years, then the entire provident fund balance along with the interest becomes free of tax

 

H2: Investments made in National Pension System (NPS)

The National Pension System, known as NPS in short, is pension program which has been introduced by the Government of India in order to permit the unorganized field and the working professionals to obtain pension after their retirement. According to the Section 80C, to avail the deductions of tax, investments worth up to Rs 1.5 lakh can be done. The five key points worth examining are as follows:

  1. Eligibility :This type of deposit accounts can be created by the residents of Indian individuals within the age range of 18 to 60
  2. Liquidity:After 15 years of lock-in period, partial withdrawals have been permitted but only under special circumstances and conditions
  3. Rate of Interest :The rate of interest for the NPS accounts differs between the range of 12 percent to 14 percent
  4. Limit of Investment: There has been no limit set to the maximum investment
  5. Treatment of Tax: There is no tax on the contributions made by the employers

 

H2: Investments made in Unit Linked Insurance Plans (ULIP)

The Unit Linked Insurance Plans, known as ULIP for short, is a blend between the investment and insurance. A portion of the amount invested in this program is also used to give insurance. The remaining amount is invested in the stock markets. According to the Section 80C, investments up to Rs 1.5 lakhs made by this program can obtain tax breaks. The five key points worth examining are as follows:

  1. Eligibility: Any investor can buy off an ULIP account for himself, or the spouse of the child
  2. Liquidity: Since it is connected to the market system, the interest rates differ.
  3. Rate of Interest: The rate of interest for the ULIP accounts is 21.22 percent as seen from the previous records
  4. Limit of Investment: There has been no limit set to the maximum investment
  5. Treatment of Tax: There is no tax set on the maturity amount, the withdrawals or the investments

 

H2: Investments made in “Sukanya Samriddhi Yojana”

One of the most famous and well liked tax saving schemes introduced by the Indian Government is the “Sukanya Samriddhi Yojana”. The goal of the scheme is to ensure the development of the female children in the country. The five key points worth examining are as follows:

  1. Eligibility: Until the girl reaches the age of 10, the parents or the guardians can create this account for her.
  2. Liquidity: If the girl reaches the age of 18 years, up to half of the total investment, that is 50, percent can be withdrawn prematurely.
  3. Rate of Interest: The rate of interest for this type of scheme is 8.1 percent.
  4. Limit of Investment: The maximum limit of investment is set to be Rs 1.5 lakhs in a financial year.
  5. Treatment of Tax: There is no tax set on the maturity amount, the withdrawals or the investments

 

H2: Repayment of the Home Loan

According to the Section 80C, tax deductions can be imposed on the repayment of the home loan taken to construct or to buy any residential property.  This deduction has been made applicable for transfer expenses, registration fees and the stamp duty.

 

H2: Payments in the tuition fees of children

Section 80C declares that the tuition fee that is paid for 2 children is susceptible for the deduction of tax to up to Rs 1.5 lakhs. The fees have to be only courses that are full time. It can be paid to any educational institution situated in India – school, college and university and so on.

 

H2: Payments for the Life Insurance Premium (LIC)

According to the Section 80C, the yearly premium set for the life insurance in the name of tax payer or his wife and children is tax saving payment which is eligible. However, keep in mind that the validity of the deduction lasts only is the premium is below 10 percent of the assured sum.

 

H2: FAQ (Frequently Asked Questions)

 

H3: “What is Tax Saving FD? Does this come under Section 80C?”

The Tax Saving Fixed Deposits are quite similar to the normal fixed deposits. The main differences are that the former come with lock-in period of around 5 years and also the tax break following the Section 80C made on the investments worth up to Rs 1.5 lakhs. The rate of interest varies from bank to bank typically within the range of 5.5 percent to 7.75 percent for this type of fixed deposits. They guarantee returns and offer full protection of the capital. But note that, the interest gets added to the taxable income of the investor once it reaches maturity.

 

H3: “When is the best time to invest in SIP?”

There is no time limitations determined to be best to invest in the SIP. But it is recommended that you do it in the beginning of the month since you receive your salary at that time. So, you will have more money to invest in.

 

H3: “Is investment in ULIP comes under Section 80C? When can I withdraw?”

The Unit Linked Insurance Plans, known as ULIP for short, is a blend between the investment and insurance. A portion of the amount invested in this program is also used to give insurance. The remaining amount is invested in the stock markets. According to the Section80C, investments up to Rs 1.5 lakhs made by this program can obtain tax breaks. Guaranteed returns are not offered by the ULIPs since they are the product of an equity based market. One of the drawbacks is that, no clarity regarding where the investments are getting made or how much of that invested amount gets deduced for expenses and commissions are not provided by the ULIP.

 

H3: “What is NSC – National Savings Certificate? Does this come under Section 80C?”

The National Savings Certificates, known as NCS for short, is allowed to have tax breaks for the financial year when they have been bought. According to the Section 80C, investments limited to Rs 1.5 lakh can be done in order to save taxes. The lock-in period is five years and they can be purchased from a fixed post office. The interest has been annually compounded and are taxable. The rate of interest is 7.6 percent for the present financial years 2018 to 2019.

 

H3: “What is EPF? Does this come under Section 80C?”

The Employee Provident Fund, known as EPF in short, is a tax saving investment plan especially designed for those retirement of the employees who are salaried. This includes around 12 percent of the basic salary along with the DA which the employer deducts and deposits in the EPF. They can also deposit in any other well-known provident funds. The present rate of interest for this type of fund is 8.6 percent.

 

H3: “What is NPS – National Pension System? Does this come under Section 80C?”

The National Pension System, known as NPS in short, is pension program which has been introduced by the Government of India in order to permit the unorganized field and the working professionals to obtain pension after their retirement. According to the Section 80C, to avail the deductions of tax, investments worth up to Rs 1.5 lakh can be done. According to the section 80CCD (1B), extra amount of Rs 50,000 can be added to the existing amount in NPS. They offer many programs to suit their subscribers. The highest exposure to the equity has been capped to 50%. One of the drawbacks of the NPS is that the proceedings after maturity are taxable. Not only that, there are also no guaranteed returns.

 

H3: “Is investment in Sukanya Samriddhi Yojana comes under Sec 80C? When can I withdraw?”

One of the most famous and well liked tax saving schemes introduced by the Indian Government is the “Sukanya Samriddhi Yojana”. The goal of the scheme is to ensure the development of the female children in the country. According to the Section 80C, the maximum limit of investment is set to be Rs 1.5 lakhs in a financial year. The rate of interest for this type of scheme is 8.1 percent. There is no tax set on the maturity amount, the withdrawals or the investments. If the girl reaches the age of 18 years, up to half of the total investment, that is 50, percent can be withdrawn prematurely.

 

H3: “What is Senior Citizens Savings Scheme (SCSS)? Does this come under Sec 80C?”

The Senior Citizens Savings Scheme, known as SCSS in short, is a tax saving scheme aimed for people who crossed the age of 60 or those who crossed the age of 55 and asked for a retirement. The maturity period for this scheme is 5 years and the rate of interest is 8.6 percent per year. According to the Section 80C, investments worth Rs 1.5 lakhs can be done to save the taxes.

 

H3: “Why ELSS is considered the best tax saving option?”

The ELSS, also known as the Equity Linked Savings Scheme, is a tax-saving scheme of mutual fund nature that invest minimum 65 percent of their total assets within the stock markets. A tax break is possible, according to the Section 80C, if the amount of investment is Rs 1.5 lakhs. The lock-in period of the ELSS is only 3 years which is the lowest among all the funding systems and this is the main advantage of this programs. The drawback is that they do not offer a guaranteed return. However, those who do return, have a generation of around 12-15 percent returns over a long term period. Moreover, the ELSS funds equity based funds and there is a levy of 10 percent LTCG tax on all the profit from the investments which were held for a period of 1 year.

 

The Section 80C has been considered a valuable alteration helping both the individual as well as the overall economy of the country. They offer a chance to get rid of the unwanted taxation by following certain conditions.

 

 

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