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How to Save Income Tax FY 2017-18

List of instruments with tax benefits under Section 80C of Income Tax Act 1961

  • Provident Fund (PF) : Automatically deducted from the salary. Employee's contribution is counted towards section 80C investments.

  • Voluntary Provident Fund (VPF): Employee also has the option to contribute additional amount through voluntary contribution (VPF).

  • Public Provident Fund (PPF): Public Provident Fund (PPF) is one of the best options. Current rate of interest is 8.10% compounded yearly which has a maturity period of 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000. This interest rate is guaranteed but keeps changing year on year.

  • Bank Fixed Deposit(Bank FD): Bank FD having maturity period of 5 years or more can be claimed as deduction under section 80C.

  • School/college Tuition Fee: Tuition fee can be claimed as deduction under section 80C.

  • National Savings Certificate (NSC-VIII Issue): It has a maturity period of 5 and 10 years and currently offering an interest rate of 8.50% p.a. on 5 year NSC and 8.80% p.a. on 10 year NSC which is compounded half yearly.

  • Health Insurance Premium: Health insurance premium paid for individual, spouse and children is eligible. One can claim deduction up to Rs. 25,000 per year for medical insurance premium instalments. For a senior citizen (60 years or above) spouse, this limit increases to Rs. 30,000 per year.

  • Life Insurance Premium or unit-linked insurance plan (ULIP): Life insurance premium paid for an individual, his/her spouse or children can be claimed as a rebate.

  • Equity Linked Savings Scheme (ELSS): Mutual funds offer special schemes created for offering tax savings called ELSS and investment under such scheme is eligible for deduction under Sec 80C. There is a mandatory lock-in period of 3 years in this scheme.

  • Home Loan Principal Repayment: The principal component of the EMI of home loan qualifies for rebate under Sec 80C.

  • Stamp Duty and Registration Charges for a home: The amount paid as stamp duty and registration charges on buying a house are eligible under section 80C.

  • Infrastructure Bonds: An investment under such bonds is eligible for deduction under Sec 80C.

  • Sukanya Samriddhi Investment: It is a special deposit scheme launched by Prime Minister Narendra Modi on 22.01.2015 for girl child in which money to be deposited for 14 years and fixed return of 9.1% per annum compounded annually is offered. Moreover, the interest earned on account is also tax free. The amount deposited under this scheme qualifies for rebate under Sec 80C.

  • Retirement benefit plan offered by mutual fund: An investment under such bonds is eligible for deduction under Sec 80C.

  • Senior citizen savings scheme (SCSS): Available only to senior citizens. It offers 9.30% p.a. as interest.

  • Post Office Time Deposit: Time deposits with a post office for 5 year or more is also eligible for tax benefit under section 80C.