What is Section 80C? For those who are oblivious to Indian taxation, certain investments notified by the government are eligible for tax deduction from gross total income upto a maximum of INR 1 lakh per annum. This tax deduction is available across individual tax slabs.
We list out the available investments/tax saving options under Section 80C in the current Financial Year 2012-13 (AY 2013-14) in a simplified illustration:
The Income Tax Act, 1960 has provided Section 80C benefit to encourage long term savings and investments. One can choose a combination of fixed income, life insurance and market-linked investments depending on one’s financial goals and investment horizon. The minimum lock-in period for section 80C investments is 3-years (for ELSS).
If you are saving for your retirement, you can diversify among ELSS, EPF and PPF investments and avail deduction on home loan principal payment and children’s annual tuition fees, but with an overall cap of INR 1 lakh per annum.
For those who are retired, they can choose among SCSS, PO MIS for regular income and safety of capital invested.
Tax advantage is just an add-on benefit. Never make investments just for saving tax.
NOTE: ‘Rajiv Gandhi Equity Savings Scheme’ or RGESS is for individuals with annual income below INR 12 lakhs. The maximum investment per year is INR 50,000 and maximum tax deduction is 50% of amount invested. This tax deduction is over and above the INR 1 Lakh limit under Section 80C. This is second such tax saving scheme encouraging equity investments after the current ELSS (Equity-linked savings scheme)
Priya Rao is our in-house Financial Planner and a personal finance enthusiast. She is a Certified Financial Planner(CFP) and can be reached at firstname.lastname@example.org