A handy list of instruments with tax benefits under Section 80 C

by Bindisha Sarang Feb 7, 2013

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Without a doubt income tax matters are one of the most boring tasks you look into every year. But, without a doubt, it’s also one of the most important matters to look into. Your employee provident fund (12 percent of your basic salary) would pretty much take care of a major part of your 80 C deductions. Here’s a quick handy list of a few ways which will help you get deductions under Income Tax Act Section 80 C.

1) Name: Public Provident Fund

Details: You get an 8.8 percent tax-free investment. Lock in period is 15 years and maximum amount Rs 1 lakh per financial year. Read more here.

Tool to save tax. Andrew Middleton/Flickr

How: Open an account at your local post office or nearest branches of State Bank of India or ICICI bank. (ICICI Bank allows online investments)

2) Name: Life insurance premiums

Details: Premium amounts you pay for life insurance policy for self or wife and children. Premium paid on a life insurance policy (other than a contract for a deferred annuity) issued on or before 31 March 2012 will get deduction only to the extent of 20 percent of the actual capital sum assured and those policy issued on or after the 1st day of April 2012 will get deduction only to the extent of 10 percent of the actual capital sum assured. Term plan works best as life insurance.

How: Apply online on insurance company websites or other portals that offer such services. You can also go through an insurance agent.

3) Name: National savings certificate

Details: For a five-year NSC, the return is 8.6 percent and for 10 years 8.9 percent. Interest income every year is taxable. But, as the interest is also reinvested, it becomes part of the overall section 80C contribution.

How: Apply at your local post office.

4) Name: Senior citizen savings scheme (SCSS)

Details: Only open for senior citizens. They offer 9.30 percent as interest. Maximum investment allowed is Rs 15 lakh in a financial year, but only Rs 1 lakh will get benefit under Section 80 C.

How: Approach your local post office or ICICI Bank.

5) Name: Five-year tax savings fixed deposit

Details: Lock-in period five years. No pre-mature withdrawals are permitted. Rate varies from bank to bank. Interest earned is taxed and you won’t get a loan against the FD. Investment limit is Rs 1 lakh.

How: Open an account at any scheduled commercial bank. You can also make online investment via net-banking.

6) Name: Equity-linked savings scheme

Details: This is a mutual fund scheme that gives your money equity exposure and the returns here are market-linked. Keep in mind that this comes with a lock-in period of three years. The dividends you earn are tax-free.

How: You can invest through a financial agent, online mutual fund portals or mutual fund house.

7) Name: Principal repayment of your home loan

Details: Repayment of principal of your home loan gives you a deduction under 80C of up to Rs 1 lakh. Read more here.

Where: Get a statement form your bank mentioning the amount of principal amount you have paid in the financial year.

8) Name: School/college tuition fees

Details: You get deduction under Section 80C for tuition fees paid for your children’s full-time education in India. Read more here.

How: Submit your tuition fee receipts.

9) Name: Pension plans (traditional)

Details: Here you can get a deduction up to Rs 1 lakh for premiums paid for pension plans under Section 80 CCC. But keep in mind total deduction under Section 80 C and 80 CCC should not exceed Rs 1 lakh.

How: Submit application on insurance company website, or though insurance agents or online insurance aggregators.

Take a print out of this list and keep for reference even as you make your investments this tax season.