Best Tax Saving Investments Options Under Section 80C

Every Indian, irrespective of salaried or self-employed person is obliged to pay taxes on their taxable income. The tax slab rate as per the Indian Income Tax Act 1961 is different for different income categories.

But this does not signify that you need to pay the entire taxed amount since the IT Act also gives certain provisions for exemptions and deductions. These deductions fall under several categories and one important among such categories is deductions under Section 80C.

In this article, we will provide you with comprehensive details on the various tax-saving investments you can choose to get deductions on your taxed amount under Section 80C.

What is Tax Saving Investments?

If you are a salaried individual or a self-employed person, you tend to get income from different sources such as your salaries, interest from investments, sale of assets and many more. All your income in one financial year is taxable under the Income Tax Act 1961.

At the end of the financial year, your incomes are segregated under different sections and your taxable income is generated.

This taxable income is taxed under the tax slab rate which is officiated by the income tax authorities. Presently, both the old tax regime and the new tax regime are followed by the taxpayers as per their choice, but with different terms. 

Here is the latest income tax slab for the financial year 2023-24.

Hence, if you put your money in various tax-saving investment options, you will be able to get deductions under Sections 80C, 80D, 80E and many more. Keep reading to know more about what tax-saving investments you can opt for to get maximum benefit.

What are Deductions Under Section 80C?

A variety of investment options and expenses are listed in Section 80C that are eligible for tax savings. These investment alternatives, often known as investment options under Section 80C, come in a variety of forms.

The Public Provident Fund (PPF), Unit Linked Insurance Plans (ULIP), ELSS Tax Saver Mutual Funds, National Savings Certificate (NSC), National Pension System (NPS), and other well-known choices are among them. From these options, the total tax deductions that you can be eligible for is a maximum of Rs. 1.5 lakhs in a year.

There are a few eligibility criteria that you need to keep in mind before claiming deductions under this section. They are as follows:

• Section 80C of the income tax rules is relevant for both individuals and Hindu Undivided Families (HUF), including both Indian residents and NRIs.
• It’s important to note that partnerships, companies, and other corporate bodies cannot benefit from the tax deduction associated with 80C investments.
• To take advantage of tax deductions within this section, ensure you submit your income tax return by July 31st. Timely filing allows you to maximise the benefits of deductions on best investment options under Section 80C.

What are the Best Tax Saving Investments to Choose to Get Deductions Under Section 80C?

There are various tax-saving investments that you can choose to get exemptions or deductions on your total taxable income. Some of the best options to consider are discussed below.

Public Provident Fund (PPF)

If you are looking for stable growth of your fund and use it as a tax-saving investment option, then PPF or Public Provident Fund is for you. The contributions made towards your PPF account are directly eligible for deduction of tax under 80C. The maximum amount that you can deposit in your PPF each financial year is Rs.150,000. 

This mainly suggests that the investor will be eligible to claim the total deposited amount as an exemption while paying their taxes. Also, if there is any voluntary contribution done by an employee of a company towards his provident fund gets eligible for a deduction of tax under the Income Tax Act’s Section 80C.

Tax saving investments – PPF

National Pension System (NPS)

If you intend to get deductions on your taxable income then the National Pension Scheme or NPS stands as one of the best investment options under Section 80C. This scheme is regulated by the PFRDA or Pension Funds Regulatory and Development Authority, and any individual between the ages of 18 to 60 years can invest in it. Moreover, as the charges are low, the scheme is very cost-effective.

The fund managers after you invest the fund manage it by segregation it into three different asset profiles, which are Corporate Bonds (C), G Government securities (G) and Equities (E). Also, as an investor, you can manage your portfolio both passively and actively. The aggregate deduction limit under Section 80C and others cannot exceed a total of Rs. 1.5 lakhs.

You must note that NPS is a suitable investment option if you are looking to keep your money as a retirement corpus and have a varying appetite for risks. 

Equity Linked Saving Schemes (ELSS)

ELSS or Equity Linked Saving Scheme is known as an equity-related mutual fund scheme that has a lock-in period of 3 years and a minimum of 80% of the total asset gets invested in the stock market. The returns for your ELSS funds mostly vary on the performance of the market.

Nonetheless, this stands as a very popular tax-saving investment scheme among investors looking for long-term growth and returns on their funds.

Moreover, ELSS is also known as a tax-saving mutual fund since you can claim an annual deduction of Rs.1.5 lakhs under Section 80C of the Income Tax Act on your taxable income. Due to the lock-in period of 3 years, the growth in your fund is significantly visible and does not hurt your pocket. 

National Savings Certificate (NSC)

If you are looking for savings investment options under Section 80C that can help you grow your finances long-term, then NSC is the best choice. National Savings Certificate is such an investment scheme that is set up through a post office. This is a key Government Savings Bond which helps investors make small and safe investments as per their financial goals. 

This tax saving scheme comes with a lock-in period of 5 years and you can get the total amount only after the maturity of the investment horizon, that is, 5 years. This is a major player in claiming tax deductions under Section 80C, with the maximum limit being Rs. 1.5 lakhs each year.

Nonetheless, there is no maximum limit on this investment tool per year. In case you have a lower risk appetite and claim tax exemptions annually, easily think of putting your money into this.

Tax Saving Fixed Deposits (FD)

Tax Saving Fixed Deposits is a major investment option under Section 80C, closely resembling regular FDs in most aspects. The key distinctions include:

• Tax-saving FDs grant a tax exemption on investments up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.
• They come with a fixed lock-in period of 5 years.

Unlike regular FDs, tax-saving FDs lack the option to withdraw funds prematurely with a penalty. Any Indian resident can initiate a tax-saving FD with a minimum investment of Rs. 1,000.

This choice suits individuals seeking a low-risk, long-term investment. Tax-saving FDs assure the safety of your investment throughout the tenure, providing a guaranteed income. The interest rates on tax-saving FDs may vary among banks, and it’s important to note that the returns from this investment are subject to taxation.

Get a full list of tax saving investment options under 80C here

How to Plan for Tax-Saving Investments?

Most individuals tend to begin their tax planning in the final quarter of the financial year. However, waiting until the last minute may lead to less-than-optimal investment decisions. Ideally, it is advisable to initiate tax planning at the start of the financial year.

This not only provides ample time but also allows for longer investment periods, accelerating progress toward financial goals. Consistently following this approach every year can expedite the achievement of your financial objectives.

Consider the following steps to effectively plan your savings Investments Options Under Section 80C.

• Review if any investments or premiums made during the year qualify for tax deductions. Examples include contributions to EPF, home loan repayments, and school/tuition fees.
• Understand your investment goals and risk tolerance to select the most suitable investment option.
• Invest the appropriate amount to meet your financial objectives while simultaneously benefiting from tax savings.

Final Words

Overall, whenever you are planning your finances, it is important to consider all the areas that will give you maximum benefit. Choosing the best tax-saving investments will only help you reduce the tax amount that you need to pay.

However, it is always essential to check, analyse and get detailed insights on all the tax saving schemes to get maximum benefit from them. If you want expert advice, do visit Aspero as we can give you insights towards the best tax-saving funds and investments by analysing your present finances and future monetary goals.

So, do visit Aspero today to analyse and invest in some of the best tax-saving schemes in India!

To discover more insights into fixed-income investments, explore Aspero Fixed Income Academy.