The month of March is going on, which is the last month of the Indian financial year. In this, most taxpayers invest in several options for tax benefits. Section 80C of Income Tax gives the person the benefit of exemption of up to Rs 1.5 lakh from taxable income. Under this, there are several ways by which tax exemption can be taken. Let us know five popular ways in which tax exemption is available under section 80C.
Public Provident Fund (PPF)
Investing in PPF is not only safe, but also offers the full benefit of tax exemption. There is little risk in this for investors. Since investment in PPF is fully protected by the government, it is completely risk free. Currently the interest rate on PPF is 7.1 per cent, which is compounded annually. Comparing this to the fixed deposits of many banks, Public Provident Fund (FD), PPF pays more interest to its subscribers. There is a 15-year period for subscribers after which they can withdraw the amount under the tax exemption. But subscribers can apply for another 5 years. In this, deduction of up to Rs 1.5 lakh can be taken on the amount invested in the scheme. Both the interest and maturity amount earned in PPF are tax deductible.
This not only reduces the tax liability of the investors, but also increases their savings in the long term. The ELSS investment amount is invested in the equity market as per the name. There is a lock in period of 3 years in ELSS. However, after this lock-in period ends, the investor can continue it if there is a lot of decline in the market at that time and the returns are getting less. According to financial planners, when the market gets stronger and the net asset value (NAV) increases, then the investor can think of exit. It should be noted here that investors get huge benefit in the form of tax savings with higher returns if they invest for a longer period of time.
A person can choose to invest in a traditional insurance plan, in which endowment benefits are available. Or you can invest in unit-linked plans, which give linked returns from the market.
Tax Saving FD
Fixed deposits offered by banks that have a maturity period of five years and save tax. They generally have lower interest rates than other low maturity deposits.
Sukanya Samriddhi Yojana
Under the scheme, only one account will be opened in the name of a girl child. SSY account can start from a minimum of Rs 250. In this, a minimum deposit of Rs 250 and a maximum of Rs 1.5 lakh has been fixed in a financial year. One can invest in Sukanya Samriddhi Scheme for a maximum period of 15 years. Tax deduction up to Rs 1.5 lakh can be claimed under section 80C on the amount deposited in SSY. Apart from this, the interest on the deposit and the money received on completion of the maturity period is also tax free. In this way SSY is the tax saving scheme of ‘EEE’ category.