The time has come for tax payers to reduce their tax liability. They would start to think of various ways to minimize the income tax. Under the Income Tax Act section 80C provides various options for tax payers to save tax up to Rs.1 lakh.
Employee Provident Fund
A contribution to EPF will be eligible for deduction under Section 80C. The contribution has been deducted from salary/wages by your employer and deposited along with Employer’s contribution to the Government. But only the Employee’s contribution to the fund is eligible for deduction.
Public Provident Fund
This is a voluntary contribution to PF opened for general public. Anyone can open PPF account either in Banks or Post Office across the country. Contribution of up to Rs.1 Lakh in a Financial Year would be eligible for exemption. The account matures after 15 years extendable in blocks of five years after maturity. The minimum investment is Rs.500/- in a year and maximum is Rs.1.5 lakh but not more than 12 installments. The current interest rate for PPF is 8.8% p.a.
National Savings Certificate
Investments up to Rs.1 lakh is eligible for deduction under Section 80C but there is no maximum limit for investment in NSC available in Post offices. The two schemes NSC VIII issue matures after 5 years with the interest rate of 8.6% and NSC IX issue matures after 10 years with the interest rate of 8.90%.
Fixed Deposit Tax Saver
Minimum investment of Rs.10000 and maximum of Rs.1 lakh is eligible for deduction in Tax Saving Fixed Deposit. The invested amount gets locked for 5 years with the prevailing interest rate at the time of investment as per RBI rates. One can deposit in Tax Saving FD in banks to get the deduction.
Senior Citizen Savings Scheme
Any citizen who has attained the age of 60 years or above is eligible to invest in this scheme to get deduction under Section 80C. Those who retired under VRS scheme and attained 55 years of age can also open account. There is no age limit for Defence personnel who have retired from the service. The tenure of deposit is 5 years and extendable by 3 years. Maximum investment limit is Rs.15 lakhs. The current interest rate is 9.3%.
Life Insurance Premium
Amount paid as insurance premium for one’s own life or spouse or children name is eligible for deduction. Amount up to Rs.1 lakh paid as premium is claimed as deduction.
Children’s Tuition Fees
The fees paid for children’s education is one the deduction available under this secion. Only tuition fees paid for children are eligible. Tuition fee paid for one’s own education is not eligible. The fees paid for other purposes like books, transportation, other extra - curricular activities are not eligible.
House Loan Repayment
Repayment of Housing loan up to Rs.1 lakh can be deducted. Only the principal amount paid in installments in a year is eligible for deduction. This is one of the effective way of deducting tax as well as investing in House property.
Equity Linked Savings Scheme
Equity linked Savings Scheme Mutual Funds is an investment option available for equity investors to get deduction. They can invest in ELSS Funds to get deduction up to Rs.1 lakh under this scheme. There is a lock-in period of 3 years only after that the invested amount can be redeemed. Since the scheme is linked with share market there is no guarantee on return but staying invested for long-term is always beneficial. Usually equities deliver better returns than any other asset class for long term.
Note
Though there are various ways of saving tax schemes available as said above. One cannot get deduction more than Rs. 1.5 lakh aggregated under section 80C. Investors/Tax payers can choose any one of the above according to their risk, return and number of years of investment time.
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