Section 80C: The simplest way to save taxes if you aren’t sure how to

How often do we see the Indian working class looking happy about measures brought in by the government. Section 80C is one of those rare occasions i.e. simple way to save taxes or tax saving. Let us first have a clear idea about what actually section 80C is and how does it affect you?
The Government exerts certain taxes against its citizens who exceed the prescribed income by the government. These taxes are collected from citizens to provide them civic amenities. But who likes to pay taxes? literally no one. That is where our hero 80C steps in to save us from taxes.

Though 80C doesn’t put the taxable amount in your pocket directly, it does ensure that they are used for you in a much more direct way than the taxes. The taxable amount of up to 1,50,00 can be deducted from the tax that you have to pay to the government and put to your use.

Understanding the taxes and how they work is among the very basic rules in managing your personal finances and making them work for you and at the end save taxes. This is where you step one foot ahead of your officemates in growing your money. So let us learn about 80C and how to use it for your own benefit.

Benefits of Section 80C and how to avail them

There are many sections that offer benefits regarding tax exemption like 80C, 80D, 80E, 80CCD, 80CCC, 24, 80CCG, 80U, 80G and many more. We in this article will specifically talk about 80C. Under 80C, the deductable tax amount can be used to invest in different schemes or you can also spend it in different ways like paying the tuition fee for any school or college.

Investments to make under 80C to save taxes

There are many ways prescribed under 80C to invest a portion of your taxable money. Investing rather than paying it to the government is a good thing, right? We have come up with 7 best options for you to invest your exempted money under section 80C.

1. Employee provident Fund(EPF):

This is the most sought after investment opportunity for employee’s as everything is handled by the companies they work in. Every salaried employee with a salary above 15k per month is eligible for EPF. Employee provident funds are created by taking 12% of your basic salary and another 12% from the employer’s fund. The special thing about this fund is that you can withdraw your EPF amount in case you are unemployed for at least two months.

2. National Pension system(NPS):

The National Pension Scheme was started in 2001 for government employees and later in 2009, it was modified to attract all the employees. This scheme allows you to contribute an amount regularly which can be used after your retirement. Though you can also withdraw a partial amount in 15 years. The contribution of the employer to this scheme is tax free. There is no limit to contribute in this scheme and you can avail maximum amount 1.5 lakh per annum under this scheme.

3. Public provident fund:

Public provident fund is a long term scheme which is aimed at both the salaried as well as non-salaried personnel. Public Provident Fund scheme investments saves you tax as well as provides guaranteed returns at a tax free interest rate of 7.6% per annum. The PPF have a lock in period of 15 years and hence called long term scheme, but the premature withdrawals are allowed after 7 years. however the special thing about PPF is that you can start investing with amount as low as 500 or with a maximum amount of up to 1.5 lakh.

4. Fixed Deposits:

The most preferred options by Indians or shall I say the previous generation Indians. Fixed Deposit isn’t the best idea to grow your stagnant money. But it is one of the best options for you to invest your tax amount which is exempted by the government when you invest in it. As, if you don’t invest it then it will go into the government’s pocket. Also, another great benefit of investing into FD is that you can always take a loan against it. Taking a loan against the money which otherwise would have gone to the government is one way of using your FD.

5. Unit Linked Insurance Plans(ULIP):

The current trend has it’s say that investing in the stock market is growing your future. Though it may involve an amount of risk, the long term investment does minimise risk. The ULIP is a balance of investment between stock market and insurance. The ULIP can be bought for yourself, your child, or your spouse with the exempted tax by the government.

6. Life Insurance:

Another great way of saving taxes is investing in Life insurance policies listed under IRDA(Insurance Regulatory and Development Authority of India). The policies can not only belong to you but to your child or spouse or any of your family members under HUF(Hindu Undivided Family). The only catch here is that the premium amount should at least be 10% less than the promised tax exemption amount.

7. Sukanya Samriddhi Yojana:

This scheme is exclusively planned for parents or guardians of a girl child. You must open a Sukanya Samriddhi Yojana account for your girl child before she turns 10. You can use the maximum limit of 1,50,000 of your tax exemption to invest in this scheme per year. Another great benefit is the scheme is totally tax free. There won’t be any tax charges for withdrawals. You will be liable to withdraw 50% of the amount when your child reaches the age of 18.

We hope you had fun reading this informative article and we do believe that you are ready now to take all the advantages of Section 80C.

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