Continuing further from our previous article part I Tax Savings details for Section 80C, here is the list of Qualifying Investments which are eligible for tax deductions under section 80C. The list is huge, that means you have lots and lots of options to select for tax saving as per your individual need and risk appetite. However, there are also some shortcomings of this huge no. of options.
Provident Fund (PF) & Voluntary Provident Fund (VPF):
Now-a-days, almost all companies are legally required to deduct Provident Fund from employees salary. This itself forms a major constituent of the investments under section 80C, for all the salary class employees.
Apart from the normal PF, any investments you make on your own in the Voluntary Provident Fund (VPF) also qualifies for tax saving under section 80C.
Public Provident Fund (PPF): On the lines of PF and VPF, the 15-year long PPF contributions also qualify for tax savings under section 80C.
Life Insurance Premiums:
Any premium you pay towards life insurance policies for you own self, your spouse or your children, qualifies for tax savings. However, please note that you can NOT claim tax deduction for life insurance premiums paid for your parents, in laws, siblings, etc.
If you have multiple policies, you can add all of their premiums together and claim for the collective sum. And most important point - manay people think that only LIC policies premiums are eligible for tax deductions, its not so - any life insurance policy premium paid to private insurance firms also qualifies for tax benefit under section 80C.
Equity Linked Savings Scheme (ELSS):
For the high risk takers, the ELSS scheme which has a minimum lock-in period of 3 years and invests your money in equity mutual funds also qualifies for tax savings.
Home Loan Principal Repayment:
If you have taken a home loan, there are two components you need to repay back to the bank or NBFC - first is the interest component on the loan amount and second is the loan amount itself, i.e. the principal amount.
Under section 80C, you get a tax relief on the repayment of principal amount. To see more on Home Loan related Tax Benefits, please check Home Loan Tax Benefits and All Home Loan Articles
National Savings Certificate (NSC):
If you have bought the 6 year long tax saving NSC, then that amount can be claimed for tax deduction under section 80C.
Infrastructure Bonds:
Recently, government came out with the new section especially for tax deductions to be offered for investments in Tax Free Infrastrucutre Bonds.
See more details on them and a list of available Tax Free Infrastructure Bonds.
Pension Funds – Section under 80CCC:
This is a special sub-section called 80CCC, which is a part of section 80C, exclusively for investments in pension funds. So if you are investing in any qualifying pension funds either from government or provate financial companies, then you can claim tax benefit on that investment.
Tax Saving Bank Fixed Deposits (5-Yr FDs):
Special Fixed Deposits issued by bank in the name of minimum 5 year long Tax savings fixed deposits give you another option for tax savings.
Senior Citizen Savings Scheme 2004 (SCSS):
This is recently introduced scheme under which ONLY senior citizens can invest and get returns of around 9% per annum. Any investments made in this SCSS scheme is eligbile for tax deductions.
5-Yr post office time deposit (POTD) scheme:
There are multiple post office savings scheme available for investments for various tenure. However, only one of them, that of 5 year and currently offering 7.5% interest rate is eligible for tax benefit. No other post office saving scheme qualifies for tax deductions.
NABARD rural bonds:
NABARD i.e. National Bank for Agriculture and Rural Development has issued special bonds called the NABARD Rural Bonds. Investments in these bonds is tax free under section 80C.
Unit linked Insurance Plan ULIP Investments:
Any ULIP investment, basically a mix of investment and insurance gives you tax deduction under section 80C. However, one must be aware about the long lock in periods and heavy policy charges which vary from one ULIP scheme to the other.
All the above mentioned schemes qualify for the tax benefit under section 80C. However, they are all investment schemes where you need to put in money for a certain period of time (lock-in period) to claim tax benefit. Apart from that, there are other certain expenses also which can give you tax relief under section 80C. Head on to next part Section 80C Tax Benefit on Expenses
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