The Income Tax Act, 1961, allows deductions on certain tax saving investments that you can claim to reduce your overall taxes. Here are 9 types of tax saving investments that you can make and save up to a maximum of 1,50,000/- from your taxable income. All of the following investment strategies are allowed under Section-80C.
ELSS (EQUITY LINKED TAX SAVING INVESTMENT SCHEME)
ELSS is an equity-heavy mutual fund. This tax saving investment is deductible from your taxable income. The minimum lock-in period is of 3 years.
NATIONAL PENSION SCHEME
It is an investment you have to do till the time of your retirement. It gives a guaranteed return as this is a notified scheme backed by the Central Government.
NATIONAL TAX SAVING INVESTMENT CERTIFICATE
National Saving Certificates are government bonds issued by the post offices with a minimum lock-in period of 5 years. The principal amount received on maturity is exempted from tax.
FIXED DEPOSIT IN BANKS
One can do a fixed deposit with any scheduled bank for a minimum of 5 years. Such a tax saving investment is eligible for deduction under Sec-80C. The principal amount received on maturity is exempted from tax while the interest earned on such investment is taxable on an accrual basis.
SUKANYA SAMRIDDHI YOJANA
If you want to save for your girl child’s future, you can do so with the added benefit of tax exemption. If you open an account with any nationalized bank specifically for your girl child till she attains the age of 10 years, you shall get tax exemption on the deposits you make towards that account. The amount can go from a minimum of 250 rupees to the maximum tax deduction limit of 1.5 lac rupees in a financial year. You shall have to continue making deposits for 15 years. Not only can you claim a deduction on the deposits, but also on the interest earned. You can subscribe to this scheme for a maximum of 2 girl children.
PURPOSE OF HOUSING LOAN IN TAX SAVING INVESTMENT
Tax saving investment as a house loan can be no less. Deduction under Section-80C is allowable on the repayment of the principal loan amount only.
LIFE INSURANCE PREMIUM
Almost everyone buys a life insurance policy nowadays. The Income Tax Act allows deduction on the premium paid for life insurance done for self, spouse, and children. Unlike medical insurance, a deduction is not allowed for life insurance taken in the name of parents.
ULIP
Your investment in ULIPs (Unit Linked Insurance Premium) either for yourself, your spouse, or your children is allowed for deduction under Section-80C.
POST OFFICE TIME DEPOSIT ACCOUNTS
Your tax saving investment in Post office Time deposit accounts, locked in for a minimum of 5 years, is allowable for a tax deduction. But there is no deduction on the interest earned and is subject to taxation.
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