Income Tax: As the financial year progresses, it’s important for individuals, especially salaried employees, to ensure they are utilizing the full benefits of tax deductions available under Section 80C of the Income Tax Act. By investing smartly, taxpayers can reduce their taxable income by up to ₹1.5 lakh annually, while simultaneously growing their savings through various secure and high-return investment options.
For salaried employees struggling with rising living costs and the burden of taxes, utilizing Section 80C can be a game-changer in managing finances and building wealth over time. Here are some of the most popular investment options to maximize tax benefits under Section 80C.
1. Invest in Equity-Linked Savings Schemes (ELSS)
ELSS are market-linked mutual funds that not only provide tax benefits but also offer high returns, making them a popular option. With a short lock-in period of three years, ELSS offers potential long-term wealth creation. Although returns are market-dependent, ELSS is often considered to outperform other 80C options in the long term.
2. Contribute to Employees’ Provident Fund (EPF)
The contributions made by both employees and employers towards EPF qualify for deductions under Section 80C. EPF provides guaranteed returns and is backed by the government, making it a safe investment for building a retirement corpus. Additionally, withdrawals after five years of continuous service are tax-free.
3. Public Provident Fund (PPF)
PPF is one of the most secure tax-saving investment options, offering guaranteed returns with an attractive interest rate (currently around 7.1% per annum). It has a lock-in period of 15 years, making it ideal for long-term savings and wealth creation. The interest earned and the maturity amount are tax-free, adding to its appeal for conservative investors.
4. National Savings Certificate (NSC)
For those seeking a low-risk, government-backed investment, the NSC is a viable option. It has a five-year maturity period and offers fixed returns, providing a stable income source. Although the interest earned is taxable, reinvested interest qualifies for further deduction under Section 80C.
5. Life Insurance Premiums
Paying premiums for life insurance policies not only ensures financial security for families but also qualifies for tax deductions under Section 80C. This is an essential tax-saving tool that offers both protection and savings, with payouts from certain policies also being tax-free.
6. Home Loan Principal Repayment
For individuals repaying a home loan, the principal portion of their EMIs is eligible for deduction under Section 80C. This helps in reducing taxable income while enabling homeowners to build a valuable asset.
By strategically planning investments under Section 80C, taxpayers can reduce their financial burden while securing their financial future. Whether opting for low-risk government schemes or exploring high-return market-linked options, individuals can make the most of these tax-saving tools.
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