There are numerous clever strategies to Tax Saving Investment and get the most savings. Tax preparation, however, is often a let’s do it later activity for most people. A better strategy is to start investing in the first quarter of the fiscal year to give one time to make wise plans and to take advantage of the best returns from various Tax Saving Investments.
It is crucial to take safety, returns, and liquidity into account when picking the best Tax Saving Investment programs. Also, it’s critical to have a thorough awareness of the tax implications of the returns. The potential to accumulate wealth over the long term is limited if investment returns are taxed.
Section 80C of the Internet Income Tax Act is a crucial part to understand before going on to the list of finest Tax Saving Investment options. Section 80C of the Income Tax Act sets down the guidelines for the majority of tax saving investment plans.
According to this clause, the investor is entitled to a tax exemption on their investments up to a maximum of Rs. 1, 50,000. A few examples of these investments are bonds, ELSS (Equity Linked Savings Scheme), fixed deposits, life insurance, public provident fund, and life insurance. There aren’t many investment options that offer an additional tax deduction over and above this cap. Let’s look at the greatest investments for Tax Saving Investment under section 80C of the IT Act.
Best Tax Saving Investment Under Section 80C
Regardless of the market’s broad selection of Tax Saving Investment items. It is frequently unclear which approach will work best for them. To assist you in choosing the investment plan that is best for you based on your risk tolerance and preferences, we have compiled a list of some of the top tax saving investments under Section 80C of the Income Tax Saving Investment Act, 1961.
|ELSS Fund||Not fixed||3 years|
|National Pension Scheme (NPS)||9% to 12%||Till Retirement|
|Unit Linked Insurance Plan (ULIP)||Returns vary from plan to plan||5 years|
|Public Provident Fund (PPF)||7.1% currently||15 years|
|Sukanya Samriddhi Yojana||7.60%||21 years|
|National Savings Certificate||6.80%||5 years|
|Senior Citizen Saving Scheme||7.40%||5 years|
|Bank FDs||5.5% to 7.75%||5 years|
|Insurance||Returns vary from plan to plan||3 years|
Also Read: Learn How Americans Define Wealth in 2023
80C Investment for Senior Citizen
Senior Citizens who are looking for tax saving investments can invest in the following investment schemes:
Recurring Deposits and Fixed Deposits
The two most popular tax saving investing strategies are recurring deposits and fixed deposits, particularly for older residents. Senior persons may get up to Rs. 50,000 in interest income tax-free under Section 80C of the Income Tax Act.
Senior Citizens Saving Scheme
The Senior Citizen Savings Scheme was created specifically for seniors 60 years of age or older. Seniors who have selected the Voluntary Retirement Scheme may enroll in it at age 55. Any investment made under this plan is allowable, and the top limit is still $150,000.
National Pension Scheme
The National Pension Scheme encourages you to make monthly contributions to a pension account while you are still employed. The National Pension Schemes are open to senior citizens up to the age of 70. Under section 80CCD, a division of 80C, a tax deduction is allowed for contributions made to this program. The total deduction allowed under both clauses, however, is limited at INR 1,50,000.
Tax Free Bonds
Public sector undertakings issued bonds can be a beneficial tax saving instrument for senior citizens who look for safer investment options. The bonds can be bought through a Demat account. The interest earned on these bonds are tax-free.
80C Investment Options for Hindu Undivided Family
Hindu Undivided Family (HUF) investment possibilities differ because HUF is viewed by Indian law as a unique identity. HUF are eligible for an annual tax exemption of Rs. 2,50,000 under Section 80C of the Income Tax.
In addition, HUF is excluded from investing in several financial products. These instruments include the Public Provident Fund (PPF), monthly savings programs, National Savings Certificates, and recurring deposits.
HUF may invest in stock, mutual funds, fixed deposits, life insurance, and equity-linked savings schemes (ELSS), among other things. These investment products qualify for the same Section 80C tax incentives for HUF that are accessible to individuals.
What are the Payments Eligible for Deduction Under Section 80C?
A few payments are also eligible for deduction under section 80C:
Payment towards Life Insurance
The cost of a life insurance policy is obviously one of the most common methods to reduce taxes. However, the exemption is only valid if the premium represents less than 10% of the insured amount.
Repayment of House Loan
A person who takes out a house loan to build or buy a residential property is also free from paying taxes on the money they return. Stamp duty, registration fees, and transfer charges are also eligible for the deduction.
Payment towards Children’s Fees
The cost of a child’s education up to Rs 1,50,000 is another expense that can be deducted. It qualifies for a tax deduction under IRS Section 80C.
80C Investment Proof
These plans can assist with tax saving investment. You must provide investment substantiation for that each year to guarantee that your company doesn’t withhold additional taxes. It might be confusing to submit evidence if you are unsure of the paperwork needed. Here is a table you may use as reference to make everything easier for you:
|Type of Investment||Investment Proof|
|ELSS Mutual Funds||Consolidated email statement of ELSS investment or copy of investment certificate|
|Fixed Deposit||A copy of FD receipt or bank statement|
|Insurance Policy||Copy of policy document and premium payment proofs|
|PPF||Copy of deposit receipt|
|ULIP/ Pension Schemes||Premium Payment proofs|
|House Loan||Interest Certificate from bank with proof of principal payment and interest|
|Interest accrued on NSC||Copy of NSC bought|
|Children Tuition Fees||Copy of Payment Receipt|
|All other Tax Saving Funds||Copy of Investment Certificate|
How many tax-free investment instruments can one have?
There is no restriction on how many tax-free investment vehicles one may use. There is a maximum deduction amount, nevertheless, beneath which one cannot claim the tax advantages. These restrictions are governed by several sections of the Income Tax Act.
How will I be able to pay less tax on higher income?
Making investments in tax-free investment vehicles can help you save on taxes. This will enable you to pay lower taxes on large income.
How much should I save for my taxes?
According to Section 80C of the IT Act, 1961, you are eligible to claim a tax deduction of up to Rs. 1 lakh 50 thousand for the premiums you have paid.
What is the maximum limit of investment under Section 80C?
Under Section 80C of the Income Tax Act of 1961, you are permitted to invest up to Rs. 1,50,000 of your total taxable income.