Hi Every One
In earlier post Beginners Dilemma : How to save maximum income tax and Got your First Salary : A Financial Guide for you I have discussed the very generalized concept of tax saving. If you have gone through the article then probably you have the fair idea about all the instrument present for tax saving. Now In this article I will go deep into section 80C. This is the most important clause for investment and income tax saving. Complete financial planning is not at all possible without knowing this clause. There is a fixed limit of 150000 rs which we can invest yearly. Surely it is not a small sum for a middle class salaried person, It requires 12500 monthly investment to reach the annual target. There is 10+ instrument available to invest money under this section and every instrument have fixed locking period that can very 3 to 60 year, locking means you can not withdraw your money before this period. Because of this locking it becomes important to understand each and every instrument so that we will get our money back in most desired situation. Try to understand how to use this instrument effectively. List goes as follows.
1.EPF:Employee Provident Fund
This is by default instrument if you are a salaried person. Your employer is deducting a certain amount and contributing towards your EPF contribution.
2.PPF:Public Provident Fund
you can open a PPF account in any nationalized bank and contribute annually up to 150000 rs. Locking period for this instrument is 15 year, though in certain special cases you can withdraw the amount. Current declared rate of interest is 8.1% which keep on revising quarterly. In this instrument even interest earned is tax-free.
3.NSC : National Saving Certificate
You can buy from NSC from post office. Locking period can be 5 or 10. Current interest rate is 8.1% compounded annually.
4. ULIP:Ulip is insurance plus investment product which you can by under 80C.
5. Child Education:Amount spent over the education of two children can be claim under 80C deduction.
6. House Loan Repayment :Principal paid toward the home loan you can claim in 80C.
7. Different Government Bonds:
Time to time government releases some bonds which you can buy as per the locking period of bonds, Infrastructure Bonds are the latest issue of Indian Government. The return is completely taxed free here.
8. Investment under NPS:
NPS Contribution comes under 80C, If you already exhausted your 80C,you can claim additional 50000 rs deduction under section 80CCD1B.
9. Registration and Stamp Duty: Cost occurs in registration of land can be claimed in 80C.
10. Life insurance premium: Premium paid towards life insurance is claimed under 80C.
11.ELSS Equity Linked Saving Scheme:
This is the least locking instrument of 80C which is three-year. In these type of mutual fund return is completely taxed free but it has market linked risk involved. If you can take risk you can invest and get the money back just in three years.
12 Fixed Deposit:You can opt for five-year fixed deposits of bank but interest earned is taxable here. So It won’t give much return after taxation.
13.Sukanya Samridhi Account:
This is the newest scheme launched by Prime Minister Narendra Modi. Objective of scheme is to accumulate the wealth for the education and marriage of girl child. You can opt it for two girl children. You have to invest for 14 year after opening of account. Maturity period is 21 years. Currently offered interest rate of this scheme is 8.6%.
This is the brief idea of 80C instruments you may get specific details of some of these instrument in later post if my readers need it. Try to exhaust your 80C limit with well proved financial instrument. It helps you to build huge corpus.
Cheers! Keep sharing