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Saving tax under Section 80C

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A maximum of Rs. 1.5 Lakh can be saved / invested in a good financial instruments for saving tax under Section 80C of Income-tax Act.

The allowed tax saving instruments are:

  • Equity Linked Savings Schemes (ELSS) offered by Mutual Funds
  • Premium paid for a Life insurance policy such as Term Insurance etc. or a Unit-Linked Insurance Plan (ULIP)
  • A Retirement-benefit plan offered by mutual funds
    • Examples are the UTI Retirement Benefit Plan and Templeton India Pension Plan.
  • A Provident Fund, provided that the fund is covered under the Provident Fund Act. This would mean investments made by you through salary deduction in the Employees Provident Fund (EPF) account or as direct payment as also investments that you make directly in the Public Provident Fund (PPF). You can invest up to Rs 1.5 lakh in the PPF account. The current rate of return on EPF is 8.75 per cent while that on PPF is 8.7 per cent.
  • An approved superannuation fund. Usually your employer, on behalf of you, does this by deducting the investment amount from your salary.
  • National Savings Certificates (NSCs).
  • Pension policies offered by insurance companies where benefits were earlier available under section 80CCC within the overall limit of Rs. 1.5 lacs. Earlier, there was a limit of Rs 10,000 on such investments; however that ceiling has now been removed.
  • Tax-Saving Bank fixed deposits that provide the Section 80C tax benefit. They come in with a lock-in of 5 years. Apart from the investments mentioned above, you can also get a deduction on certain expenses that you incur. Mainly, these include the principal repayment on your home loan and the tuition fees you pay on your children's education.

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