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According to the latest Budget-2014, to encourage household savings the savings , the central government has raised the investment cap under Section 80C from Rs 1 lakh to Rs 1.5 Lakh. Presently the exemptions under section 80C, 80CC and 80CCC is 1.5 Lakh on investments and expenditure.
Amendment of section 80C
In section 80C of the Income-tax Act, in sub-section (1), for the words “one lakh rupees”, the Amendment of words one hundred and fifty thousand rupees shall be substituted with effect from the 1st day of section 80C. April, 2015. The amendment of Section 80C take effect from 1st April, 2015 .
EPF/VPF | PPF | NSC | BANKS FD | Post Office Time Deposit | ULIP | SCSS | PPF | NHB Suvriddhi | Life Insurance Premium | New Pension Scheme(NPS) | Tax Saving Mutual Funds(ELSS) | Tuition Fee | Home loan Principal | Stamp duty and registration cost | Pension Plans from Insurance Companies
The maximum deduction under 80C combining all investment all investment deduction is Rs 1,50,000/-.
|Tax Saving Options U/s 80C|
|Fixed Income(Investment-Debt)||Market Linked||Expenditures|
|Provident fund(EPF/VPF)||Life Insurance Premium||Tuition fee for 2 children|
|Public Provident Fund (PPF)||New Pension Scheme(NPS)||Stamp duty and registration cost of the House|
|National Saving Certificate (NSC)||Tax Saving Mutual Funds(ELSS)||Home loan Principal Payment|
|TAX Saving 5 years FD from Banks||Pension Plans from Insurance Companies|
|Five years Post Office Time Deposit(POTD)||Unit linked Insurance Plan(ULIP)|
|Senior Citizen Saving Scheme(SCSS)|
I. Fixed Income(Investment-Debt)
- Provident fund(EPF/VPF):
- For salaried employees EPF one of the deduction. If a company have twenty employees, Under EPF rules of Govt. of India, you need to contribute 12% of your basic Pay including DA to EPF. The interest earned on EPF/VPF is tax free. Can take loan against EPF and also do partial withdrawal under certain conditions. This is the best convenient option to invest as the amount is deducted from salary.
- Public Provident Fund (PPF):
- Salaried employee and self-employed person, PPF is one of the good option. The best long term saving options which assured good returns. This can get from post offices, 24 nationalized banks and ICICI Bank with mandatory locking tenure of 15 years and can be extended further 5 years at a time. Maximum investment under this is allowed Rs:1.5 lakh per year. For keep the account active minimum investment Rs:500 is required every year . PPF interest is tax free. It cannot be attached by court orders. Highest safety backed by Govt. of India.
- National Saving Certificate (NSC):
- NSC is TAX saving fixed deposit scheme which you can get from Post offices. These NSC is available with period of 5 years and 10 years tenure. The interest on NSC is varied every year. Tax payer can avail deduction is only maximum 1lakh. This NSC can be kept as collateral security to get loan from varies banks. Highest Safety and backed by Govt. of India.
- TAX Saving FD from Banks :
- There is big differences in Tax saving FD and normal FD, both are alike except the label. The normal FD will not entitled for tax saving. These tax savable FD has minimum mandatory tenure of 5 years and is stamped by bank authorities on top of the page regarding five years lock-in period. The interest earned on this is taxable and cannot withdraw prematurely. By keeping this FDs as collateral security can get loan from the banks.
- Five years Post Office Time Deposit(POTD) :
- Post Office Time Deposits are quite similar to bank fixed deposits. These fixed deposits are available for varying time duration. Only five years Post Office Time Deposit (POTD) is eligible for tax saving . Interest on POTD is Taxable.
- Senior Citizen Saving Scheme(SCSS):
- People with 55 year of age who have retired by VRS can open SCSS after 3 months of retirement. Minimum investment Rs 1,000/- while maximum investment Rs:15lakhs. The interest paid out quarterly. No partial withdrawal is permitted before 5 years.
- NHB Suvriddhi:
- National Housing Banks’ Term Deposit Scheme is also one of the tax eligible schem and is approved for U/s 80C deduction. The mandatory tenure of NHB Suvriddi scheme is 5 years . The Maximum Investment amount on this per year is Rs 1 Lakh. Interest getting on this is taxable one.
- Life Insurance Premium
- The product you should consider from life insurance companies is Term Plan and suitable for salaried employees. The premium paid for life insurance for Self, Spouse and Children can avail tax deduction under section 80C. Only premium equal to 10% of sum assured will be allowed for this.
- New Pension Scheme(NPS)-80CCD
- The employee who joined after April 2009 came under this New Pension Scheme. In NPS has two types of accounts Tier-I and Tire-II. The contributions made under Tire-I account is eligible for tax deductions. Salaried employees who is under NPS can claim deduction up to 10% of their salary, which comprised Basic Pay + DA , which is treated of tax deductions. NPS can invest maximum of 50% in selected stocks. On death the entire amount is paid to the nominee.
- Tax Saving Mutual Funds(ELSS):
- The acronym of ELSS is Equity Linked Saving Scheme. These type schemes specially created for tax savings. This is popularly known as ‘Tax Saving Mutual Fund’ .The ELSS is carries the some market risks as any other equity fund. The fund with tenure 3 years is considered for tax deductions. The gains on ELSS Fund are not taxable.
- Pension Plans from Insurance Companies-80CCC
- The premium paid towards any Pension Fund annuity plan is eligible for deduction under Sec 80CCC and will give you tax relief in that financial year upto Rs.1,00,000/-. This deduction made under section 80CCC is part of section 80C. There were few launchers in Pension Plan this year from life insurance companies. Tax payer can choose LIC or private insurer as their option . This is not good investment option and might give bad returns. They generally have assured a very low returns in the range of 1-2% per annum, which is very low return. This is not suggestible as tax saving options.
- Unit linked Insurance Plan(ULIP):
- ULIP acronym is Unit Linked Insurance Plan which is combination of life insurance and equity investments. For hefty commissions (70% in first premium) in the ULIP the agents were pushing the scheme to the people. There are other investment options which can yield the same gains.
- Tuition Fee:
- Tuition fee expenses for maximum of two children is deductible u/s 80C. Maximum Deduction Rs 1,00,000/- is permutable. For full time courses this deduction is applicable not for tuition fee to coaching classes or private tuitions.
- Stamp Duty and Registration Cost of the House:
- The Stamp duty and registration charges on purchasing new house up to Rs.1 lakh is tax deductible u/s 80C. The payment made in the same financial year is considered to deductible and cannot be carried forward to the next year. The house should be in the name of assesse claiming deduction and stamp duty, registration cost should made from own funds.
- Home loan Principal
- An individual having home loan, can claim the principal repayment as deduction under section 80C. The deduction up to Rs 1,00,000/- is allowed on the principle repayment of the housing loan is self-occupied or vacant. The deduction for interest incurred on principal can be deductible under Section 24 of the Income Tax Act.