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How to save taxes under section 80C

There are various deductions which a taxpayer can claim from his/her total income to bring down taxable income and thereby reduce the tax outgo. In this article, we will discuss some of the important deductions under Section 80C a taxpayer can claim.

Investment in Equity- Linked Saving Scheme (ELSS):

As the name suggests, ELSS funds are the mutual funds that invest a majority of their assets within the equity market. Its lowest lock-in amount vis-a-vis different Section 80C instruments and skill to grow exempt capital makes it a favourite among taxpayers. When finance in ELSS, you cannot withdraw your capital before the obligatory three-year lock-in. Also, Budget 2018 has levied a tenth tax on long-run capital gains from all equity investments, together with ELSS funds. If you sell your ELSS units once one year, the tax is charged if the gain exceeds Rs. 1 lakh. A TDS also will apply to any dividend attained from ELSS schemes. However, because the LTCG tax is applicable on all equity-oriented funds, it’s tier taking part in field for all equity funds. As compared to different tax savings choices like PPF, NSC etc., and ELSS still have the advantage of finance into equities.

Lock in period: 3 years

Rate of Return: 15%-18%

Exemption: 10% LTCG tax on gains above Rs. 1 Lakh

Bank Fixed Deposit (FDs):

Banks provide tax-saving FDs that are like regular FDs however have a lock-in amount of 5 years. Interest rates on tax-saving FDs vary across banks. Though FDs provide mounted returns, the interest you earn on your investment is added to your financial gain and is rateable.

Lock in period: 5 years

Rate of Return: 7.8%

Exemption: Taxable

Public Provident Fund (PPF):

PPF is one of the investment choices for people who wish to avoid wasting and grow cash for his or her retirement. It’s a comparatively safer avenue as its returns are fastened by the Finance Ministry each financial year. Although you cannot withdraw investments in PPF before the lock-in amount of fifteen years, the returns you earn are non-taxable.

Lock in period: 15 years

Rate of Return: 7.8%

Exemption: Tax free

Employees Provident Fund (EPF):

EPF is a mandatory retirement saving theme for all salaried people in organisations that employ twenty or more people. It amounts to 12% of the salary system subtracted by your employer each month. This quantity is an equal contribution created by the employer is deposited with the Employees’ Provident Fund Organisation (EPFO). However, you get a tax exemption solely on the contribution that you just create.

Lock in period: till 58 age

Rate of Return: 8.5%

Exemption: Tax free

Investments in ULIP (Unit linked Insurance Plans):

ULIPs are a combination of insurance and investment. A region of the invested with quantity in ULIPs is employed to produce insurance and rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks below Section 80C.

Lock in period: minimum 10 years

Rate of Return: 3%-4%

Exemption: Taxable

National Savings Certificates (NSCs):

Investments in NSCs, issued by post offices, are eligible for tax write-off below Section 80C. These have a five-year lock-in amount and a hard and fast rate of interest. The minimum investment is Rs. hundred and there’s no cap on the most quantity you’ll be able to invest. It’s noteworthy that the certificate may also be unbroken as collateral to urge a loan from a bank.

Lock in period: 5 years

Rate of Return: 7.8%

Exemption: Taxable

National Pension System (NPS):

Another retirement-directed investment, the NPS is intended to relinquish you a lump-sum quantity and an everyday financial gain once you retire. Upon maturity, 40% of your corpus is exempt from tax & you can make rest of 60% tax-free by investing in an annuity plan. A regular payment may be a product that provides you with an everyday pension. If you decide on to exit the NPS before the age of sixty years, you may be ready to withdraw solely two-hundredths of your corpus and switch the remainder into regular payment.

Lock in period: till 60 age

Rate of Return: 10%-12%

Exemption: Taxable

Investments in Sukanya Samriddhi Yojana:

The scheme Sukanya Samriddhi Yojana is one of the most popular schemes that aim at the betterment of the girl child in the country. Guardians can open an account in the name of a girl child till she attains the age of 10 years.
Lock in period: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years.

Rate of Return: 8.5%

Exemption: Tax free

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