Top Tax Saving Investment Avenues: 5 Tax Saving Investment Avenues Under Section 80C

Article 80C of the Income Tax Law provides for a deduction of Rs 1.5 lakh from the taxable income of an individual for certain investments made during the year. There are different ways of making investments and getting a deduction under this law. Some are discussed below.

1. Public provident fund (PPF)
This is a 15-year escrow account that can be opened with a bank or post office. The maximum contribution that can be paid in one year is Rs 1.5 lakh.

2. ELSS Fund
Mutual fund companies have specific recognized tax savings programs known as the Equity Linked Savings Schemes (ELSS) with a three-year lock-in period. Investments in these schemes up to Rs 1.5 lakh during a financial year may be eligible for tax exemption below 80C.

3. Insurance plans
One can choose to invest in a traditional insurance plan that offers endowment benefits or a unit-linked plan that offers market-linked returns to take advantage of this tax-exempt benefit.

4. FD tax savings
Banks offer term deposits that have a five-year maturity and are referred to as tax-saving FDs. These deposits generally carry a lower interest rate than other deposits with a shorter maturity.

To read also: Top 5 of the most advantageous bank FD rates

5. Sukanya Samriddhi Yojana
The contributions paid into the Sukanya Samriddhi account held for the girl are also eligible for deductions and the maximum investment per fiscal year is limited to Rs 1.5 lakh.

Point to

  • There are other payments such as the life insurance premium, the principal paid on the mortgage, the contribution to PF which also offset the full deduction of Rs 1.5 lakh.
  • One must take into account the amounts already eligible for the deduction as above and can only make new investments for the deduction of the balance, if necessary.

(The content on this page is courtesy of the Center for Investment Education and Learning (CIEL). Contributions by Girija Gadre, Arti Bhargava, and Labdhi Mehta.)

Dorothy H. Lewis