It is the beginning of the new financial year and with it comes the time to plan your investments.
Although there are many lucrative investments in the financial market, some of them are specifically beneficial not just from the returns point of view but also from the tax point of view.
Section 80C under Income Tax Act is one such section which exempts investments and expenses as a deduction from the total income of the person
The total amount of deduction allowed under section 80C is for Rs. 150,000. Therefore, you should plan your investments in such a way that the total investments and expenses allowable under the section amounts to Rs. 150,000.
Let’s have a look at the investments which are allowed as tax deductions under section 80C
Investment in PPF
Investing in a Public Provident fund account is a great idea. Not only does it help in planning the retirement funds but also gives fixed returns. To know more about PPF account, click here.
Employee’s share of PF contribution
If you are under employment then check whether your employer is deducting your salary with respect to contribution towards EPF. The amount deducted as employees’ share of contribution is allowable as a deduction under section 80C.
National Savings Certificate is a savings scheme by the government under which a savings bond is issued by the government which can be subscribed by the general public. Upon subscription, the amount of money invested is allowable as a deduction under this section.
Life Insurance Premium payment
Any amount paid towards the premium of a Life Insurance Policy of self, spouse and children is allowed as deduction. Also, any contribution made to notified annuity Plan of LIC is allowed as deduction.
Children’s Tuition Fee
Any amount paid towards the tuition fee of your child’s school/college expenses is allowed as deduction.
Principal Repayment of home loan
If you have taken a home loan and are repaying the home loan, then any amount paid towards the principal repayment is allowable as deduction.
Investment in Sukanya Samriddhi Account
Sukanya Samriddhi Scheme is a government scheme that specifically aims at empowering the girl child. Parents can plan and save some amount every year for the education and marriage of the girl. The amount invested in the scheme is allowed as deduction.
Unit Linked Insurance Plans are insurance schemes where the investor gets a fixed sum at maturity along with the insurance cover. The amount invested towards the premium is allowed as deduction.
Equity Linked Savings Scheme is the investment made in mutual funds that are allowed as tax investment or any contribution to notified Pension Fund set up by Mutual Fund or UTI.
Sum paid to purchase a deferred annuity
Five-year deposit scheme
Any amount paid towards investment in a Fixed deposit account with a minimum lock-in period of 5 years is allowed as deduction.
Senior Citizens savings scheme
Any person above the age of 50 can invest in the Senior Citizen Savings Scheme that not only offers great returns but also tax benefits. It provides fixed and better returns than a Fixed deposit.
Planning an investment for home
Subscription to Home Loan Account scheme of the National Housing Bank or Subscription to deposit scheme of a public sector or company engaged in providing housing finance
Investment in securities
Subscription to notified securities/notified deposits scheme or Subscription to equity shares/debentures of an approved eligible issue.
Subscription to notified bonds of NABARD
This article has been authored by CA Karan Batra from www.charteredclub.com