Financial Instruments for Tax Saving

Tax saving as per Section 80(C)

Section 80C provides a list of instruments, which you can invest in for saving tax. One can invest a maximum of Rs 1 lakh in all the following instruments put together so that the entire amount of Rs 1 lakh shall be deducted from the taxable income. Deduction is received for the following investments-

1. Any life insurance policy or unit-linked insurance plan (ULIP). Lock-in period for ULIPs is 3 to 5 years and the returns vary according to the performance of fund. But if the annual premium exceeds 20% of the sum assured on your policy, then tax benefit will not be received.

    

    

2. Any retirement benefit plan which is offered by mutual funds. Examples are Templeton India Pension Plan and UTI Retirement Benefit Plan

    

    

3. A Provident Fund, which is covered under the Provident Fund Act. This means investments made through salary deduction in the Employees Provident Fund (EPF) account as also investments directly in the Public Provident Fund (PPF). One can invest up to Rs 70,000 in PPF. Current rate of return on EPF is 8.5% & that on PPF is 8 %

    

    

4. Approved superannuation fund. In this the employer, on behalf of employee, does deducts the investment amount from employee’s salary.

    

    

5. The National Savings Certificates (NSCs).

    

    

6. The Equity Linked Savings Scheme (ELSS) that are offered by mutual funds.

    

    

7. Certain Pension policies provided by insurance companies where the benefits were earlier available u/s 80CCC. Earlier, a limit of Rs 10,000 was present on such investments; however now that ceiling has been removed.

    

    

8. Bank fixed deposits which provide the Section 80C tax benefit. They have a lock-in period of 5 years.

    

    

9. Apart from above investments, one can also get a deduction on certain expenses like the principal repayment on home loan and tuition fees paid for children’s education.