Some Tax Saving option in Section 80C
When we talk about tax planning, most common term flash in mind is Section 80C. The Section 80C offers various options to fulfill people’s different need. In Jan-March quarter most of the person rush for tax saving instrument and often make wrong decision in hurry. They don’t even realize that they have invested their money in those products which is really not suited them. The right time to make tax plan is the beginning of fiscal year (April-May).Today I am throwing some light on those products which are available in under section 80C.
Provident Fund: It is the very common and popular in service class people. As employer deduct the some portion of money for contribution in provident fund from employee’s salary. PF gives 8.5% per annum and is very secure in terms of safety. Employee can liquidate it at the time of retirement. However, partial withdrawal is also permitted with some condition.
Public Provident Fund or PPF: It is very good option available with low risk and offer tax free return after maturity. It offer return market linked for current year it is 8.8%.The lock-in period is 15 year but partial withdrawal is possible after fifth year.
Bank Fix Deposit: The 5 year bank fix deposit is also available. Various bank offer return 8-9% this year (See earlier blog). The return is taxable as per one’s tax slab. The lock in period is 5 year. It is low risk product but keep in mind the post tax return also before investing in fix deposit.
National Saving Certificates or NSCs: It offer 8.5% return and is very safe investment. The lock in period of these instruments are 5 and 10 years. The person can choose any maturity 5 or 10 year based on their need.
Senior Citizen’s Saving Scheme: It offer 9.3 % return and added in taxable income. It is the most suitable option for senior citizens (above age 60 year) as it gives regular interest income in each quarter. It has no risk and very safe investment option. The lock-in period is 5 year.
Insurance Policies: It is long term product and lock in period depend on plan’s maturity. It has highest degree of safety but its average return around 6-7% only.
ULIP or Unit Linked Insurance Plan: The return is market linked as no fix return offer. Partial withdrawals possible. It is in the form of bundle which offer insurance, tax exemption and return also. The cost and charges is high compare with other products. The risk is depend on which option you have chosen.
ELSS or Equity Linked Saving Scheme: It is market linked product. There is no fix return. The lock in period for this product is 3 year. It has shortest lock-in period among all Section 80C options. It is high risky investment product.
NPS or National Pension Scheme: It is retirement goal oriented product. No withdrawal allowed before retirement. The return is market linked and it has very low expense ratio means low cost product.
Besides the above mentioned investment products which are in under section 80C, there are some expenses also eligible in under this section.
Home loan repayment: Principal portion of EMI is eligible for deduction till Rs 1,00,000 limit.
School Fees: Tuition fees of up to two children in a recognized educational institute for eligible for Section 80C
Home Purchase: During the purchase of home whatever stamp fee and registration fee you pay is also deductible from taxable income.
There is also other option available for tax deduction other than Section 80C which we will discuss later. If you want more clearity on these products pleas ask through email
Regards,
Arvind Trivedi
Certified Financial Planner
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