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Top 10 Tax Saving Options Available Under Section 80C

How to make the best use of section 80C of Income Tax Act? Which is the best instrument among all the instruments available under section 80C of Income Tax Act?

As we know that there are lots of instruments available for claiming deduction under section 80C of Income Tax Act but the question arises in our minds that which is the best among these? Well, the answer differs from person to person based on his/her objectives. Before investing, one should always check whether the investment he is looking for will meet his objectives.

One can consider investment according to his/her preferences to make the best use of section 80C of Income Tax Act. Some of the scenarios are mentioned below:

For the persons - who do not want to take any risk, want guaranteed returns and can wait for 15 years - They can invest in Public Provident Fund (PPF) which offers guaranteed returns which are tax free.

For the persons - who do not want to take any risk, want guaranteed returns and cannot wait for very long term (like 15 years) - They can invest in Bank's Fixed Deposit of 5 years which offers guaranteed returns and the money with interest is free after 5 years. They can also consider National Savings Certificate (NSC) of 5 years offering guaranteed returns. Point to be noted that both the interest incomes i.e. from Bank FD and NSC are taxable in the hands of investor as per applicable tax slab.

For the persons - who are young, can take risk and want maximum returns - They can invest in Equity Linked Savings Scheme(ELSS) offered by Mutual Funds which invest funds in diversified equity shares which generate very good returns in the long run. There is a lock-in period of 3 years under such schemes. The main point is that these returns are totally tax free in the hands of investors. The investor has the choice, either to withdraw the funds after 3 years or continue till he likes. There is also a facility of making partial withdrawal.

For the persons - who are senior citizen - They can invest in Senior Citizen's Saving Scheme which offers guaranteed periodical returns.

For the persons - who are young and incur lots of expenses and have less savings - They can claim deduction of education fees of their 2 children under section 80C. They can also consider their Provident Fund.

For the persons - who do not have enough Life Insurance Cover - They can take Life Insurance Policies of self, spouse and children and can claim insurance premium as deduction under section 80C. In this way, both the purposes, of having life insurance and investment for rebate under section 80C, will get fulfilled.

For the persons - who have no pension backed employment - They can invest in Pension Plans or National Pension Scheme (NPS) for claiming deduction under section 80C. In this way, they can get pension after retirement.

For the persons - who do not have own house - They must take home loan. There are lots of benefits of taking home loan, first, that the person can claim tax deductions up to Rs. 1.5 lakh under 80C towards repayment of principal as well as payment of Stamp Duty & Registration Charges on purchase of the House . Second, he is allowed further deductions of Rs. 2 lakh towards repayment of interest on home loan under Section 24B. Third, he can claim an additional deduction up to Rs. 50,000 as first-time home owner who has taken a home loan below Rs. 35 lakh for a house value less than Rs. 50 lakh. Hence he can enjoy triple benefit.

For the persons - who want to save for girl child - They can invest in Sukanya Samriddhi Scheme which offers guaranteed good returns for the girl covered by the scheme.