Section 80C, even a layman who doesn’t have thorough knowledge about Income Tax knows about this. Under Section 80C of the Income Tax Act, government gives tax benefits to certain financial products in order to encourage savings. The investments made in these products are eligible for Tax Exemption up to a limit of Rs 1 lakh. If your annual income is more than 500000 and you invest Rs. 1 lakh in this investments you save Rs 33,000 in taxes.
The concern is how many of you know about the investments that come under Section 80C. People are aware only about ULIPs; this scenario is because insurance companies are promoting their products massively to increase the sales. But understand ULIP is not the only product that offers Tax benefit under section 80C. In this article we are introducing all the investments which come under section 80C.
Generally people think about investments only in the month of February or March because they are concerned only about Tax saving, they never bother to understand the productivity of the investments. In this scenario there is a possibility of losing money that you have saved without paying tax.
For Example: Mr. X’s annual income is Rs.300000. His total tax liability is Rs. 14000. By investing Rs. 100000 in any investments that come under Sec-80C he can save Rs. 10000. But by making an investment in a wrong product he may lose more than 20000. This is where you need to concentrate.
While choosing a place to park your investment you need to be very careful because the effectiveness of investments depends on many factors such as investment objective, age, risk aversion, economic conditions etc.
Life insurance is an important aspect of life; it helps you to cover the uncertainty of life. Every earning person having dependents should have adequate life insurance coverage. Any contributions made as a premium of Life Insurance policies are eligible for income tax deduction under Section 80C. Apart from premium of your own policy, premium paid on behalf of your spouse or your children is also eligible for exemption under Section 80C. If you and your spouse (husband/wife) both have Life Insurance policies, and your spouse's taxable income doesn’t come under the tax bracket, you can show both of your Insurance premium and get more benefit of deduction under Section 80C. Premium in excess of 20% of sum assured is not eligible for deduction in other words; to get the full tax exemption on the premium paid your sum assured should be atleast 5 times of the premium paid.
Any amount invested in Fixed Deposits with a term greater than or equal to 5 years is eligible for tax exemption under section 80C. This is a recent amendment and is one of the best risk free saving options where you can save money as well as get benefit of Section 80C.
See Also: Types of fixed deposits
Senior Citizens Savings Scheme (SCSS) is a Government of India Product. It is one of the safest investment options. An Individual who attained the age of 60 can open this account. Under this scheme there is lock in period of 5 years, on the option of depositor it can be extended for another 3 years. This scheme offers 9% interest to the depositors. Interest earned from the investments is not exempt from tax.
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