INCOME TAX SAVING SCHEMES: INVESTMENT INSTRUMENTS THAT ARE HELPFUL IN SAVING YOUR TAX UNDER SECTION 80C

With us being in the last quarter of the financial year 2020- 21, the deadline to submit the tax-saving investments is quite near. Though, it’s suggested to begin with your tax-saving investments in the beginning of the year so you can choose the best type of investment suitable to your portfolio, a lot of individuals tend to procrastinate and wait till the last moment.  If you have not chosen the right investment for your portfolio, fret not. You can still do it. Following are top income tax-saving schemes that are helpful in saving tax under Section 80C.

Equity Linked Savings Scheme (ELSS)

These are a type of mutual funds that invest majorly in equity and equity-linked securities. ELSS tax saving mutual funds are eligible for a tax deduction under Section 80C of up to Rs 1.5 lac. However, if you invest in these mutual funds, you should be cautious about the three-year lock-in tenure. Thus these mutual funds offer the dual benefit of ta-saving and capital appreciation opportunities. Investments in these tax saving mutual funds have the potential to generate double-digit returns when invested for a longer duration.

Public Provident Fund (PPF)

Offered by the government of India, PPF schemes are long-term tax-saving schemes that helps in creating a financial cushion for investors post retirement. The interest rate on these tax-saving schemes are set and revised by the Indian government each quarter. PPF investments enjoy the advantages of an EEE status, i.e. exempt, exempt and exempt. This means that the principal amount invested, the interest earned, and the maturity amount earned on PPF accounts are all exempt from tax. Investments in PPF funds enjoy tax benefits of up to Rs 1.5 lac deduction u/s 80C.

National Pension Scheme (NPS)

NPS is a retirement-focused scheme that matures when an investor turns sixty years of age. Investors investing in these schemes are instructed to invest a maximum of 75% of their corpus in equity funds and the remaining in debt funds. NPS schemes are also eligible for Rs1.5 lac tax deduction under Section 80C. An investor can also avail added tax benefits of up to Rs 50,000 under sub-Section 80CCD (1B) of the Income Tax Act.

Senior Citizen Savings Scheme (SCSS) – SCSS is a savings scheme which is available to investors who are aged 60 and above. SCSS schemes tend to mature in five years. However, you can extend it by another 3 years. The interest rate on these tax-saving schemes is acknowledged by the government at the time of purchasing the scheme. SCSS offers one of the highest interest rates when compared to different savings schemes available in India. Just like any other section 80C investments, SCSS schemes are also eligible for Section 80C dedcutions.

Unit Linked Investment Plan (ULIP)

ULIP is an investment plus insurance investment product where a part of the corpus is used for investments in desired financial products. On the other hand, the other part is used for securing the life of the investor. These funds provide investors with the flexibility to switch between funds about 3 to 4 times in a any financial year. An investor can claim tax deductions of up to Rs 1.5 lac by investing in ULIP under Section 80C of the Income Tax Act, 1961.

Irrespective of the investment option you decide to go forward with, do not choose a tax-saving investment with the sole purpose of saving tax. Make sure that it aligns with your risk appetite, financial objectives, and investment horizon. Happy investing!