7 Investments to Save Tax Under Section 80C

7 Types of Tax Saving Investments Under Section 80C

Section 80C of the Income Tax Act, 1961, offers many ways to save tax. You can choose from several 80C tax saving options, depending on your needs. Let us look at some popular investments under Section 80C of Income Tax Act,1961 (under old tax regime) that can help you reduce your taxable income by up to ₹1.5 lakh every year.

Life Insurance Premium

Life insurance is a simple and important option under 80C investment options. When you buy a life insurance policy for yourself, your spouse, or your children, the premium you pay qualifies for 80C tax savings. You can claim a deduction up to ₹1.5 lakh (under old tax regime). It also provides financial security to your loved ones. However, premiums paid for parents are not eligible for tax benefits under Section 80C.

Public Provident Fund (PPF)

PPF is a government-backed savings scheme that offers secure returns and tax benefits. Under 80C tax saving options, any amount you invest in PPF between ₹500 to ₹1.5 lakh annually is eligible for deduction (under old tax regime). The interest you earn and the maturity amount are completely tax-free, making it a safe and attractive option.

Employees’ Provident Fund (EPF)

Salaried individuals who contribute to EPF automatically enjoy investments under 80C benefits. Your own contribution to the EPF account qualifies for deduction under Section 80C (under old tax regime). The employer's contribution is tax-free but does not qualify for deduction. EPF also provides a guaranteed return and long-term wealth creation.

Equity Linked Savings Scheme (ELSS)

ELSS is a type of mutual fund that invests mainly in stocks. It is one of the few market-linked 80C tax saving options. ELSS has a lock-in period of 3 years, which is the shortest among tax-saving instruments. While it offers the potential for higher returns, it also carries market risk. You can claim up to ₹1.5 lakh under 80C tax savings (under old tax regime) through ELSS investments.

Unit Linked Insurance Plan (ULIP)

ULIP offers both life insurance and investment opportunities. The premium paid for a ULIP qualifies for 80C investment options (under old tax regime). It gives you the flexibility to invest in equity, debt, or balanced funds based on your risk appetite. However, if the annual premium exceeds ₹2.5 lakh, the maturity proceeds become taxable as per the Union Budget 2021.

Tax Saver Fixed Deposits

A tax saver FD has a lock-in period of 5 years and is eligible for tax deduction on investments under 80C. It offers fixed returns and is considered low-risk. However, the interest earned is taxable. Despite this, it remains a safe choice for conservative investors looking for guaranteed returns and 80C tax savings (under old tax regime).

National Pension Scheme (NPS)

NPS is mainly aimed at retirement planning . Contributions up to ₹1.5 lakh qualify under 80C investment options, while an additional ₹50,000 can be claimed under Section 80CCD (1B) (under old tax regime). This makes NPS one of the best 80C tax saving options for those planning their retirement.

How to Maximise Tax Savings under Section 80C?

To make the most of the investments under 80C, you should start early in the financial year. Many people rush towards the end, which may lead to poor choices. Plan your investments across various options depending on your risk appetite, return expectation, and financial goals.

If you prefer safer options, you can put your money into PPF, EPF, or Tax Saver FDs. If you are willing to take some market risk, ELSS could help you earn better returns while saving tax. For long-term goals like retirement, NPS is highly recommended. Always remember, the total deduction under Section 80C cannot exceed ₹1.5 lakh (under old tax regime).

Choose the Right Instruments under Section 80C

Choosing the right 80C investment options depends on what you want to achieve:

• For financial security:

  
  Life insurance and ULIPs are good choices.

• For safe savings:

  
  PPF and EPF.

• For higher returns:

  
  ELSS is a smart pick if you are willing to accept market risks.

• For retirement planning:

  
  NPS offers benefits, including an extra deduction of ₹50,000.

Make sure to read the terms carefully and align your choice with your long-term goals. Also, review the rules regarding taxation on maturity to avoid surprises later.

Conclusion

Saving tax is not just about choosing any random investment. Investments chosen under Section 80C help you collect wealth in addition to tax savings benefits. Getting the proper investment under section 80C gives you both financial expansion and tax benefits (under old tax regime). Select investments that match your needs, then keep them for extended periods, as filing your Income Tax Return (ITR) will let you benefit from these deductions.

A life insurance plan paired with Public Provident Fund and Equity Linked Savings Scheme can create an effective solution which provides safety, solid returns and tax benefits.

FAQs

What is covered under 80C?

Section 80C covers many ways to save tax. It includes payments like life insurance premiums , savings in PPF and EPF, investments in ELSS, ULIPs, Tax Saver FDs, and NPS (under old tax regime). It also covers repayment of home loan principal, Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme, and National Savings Certificates.

Is EPF part of 80C?

The money you put into the Employees' Provident Fund (EPF) through your salary gets counted under Section 80C. One financial year allows you to deduct tax on your EPF contribution up to ₹1.5 lakh, through which both tax savings and savings accumulation become possible.

Who can claim deductions under Section 80C of the Income Tax Act, 1961?

Individuals and Hindu Undivided Families (HUFs) can claim tax benefits under Section 80C (under old tax regime). Companies, Limited Liability Partnerships (LLPs), or other business organisations cannot claim this benefit. It is mainly designed to help individuals and families lower their taxable income through smart savings and investments.

Is personal accident insurance covered under Section 80C of the Income Tax Act, 1961?

No, personal accident insurance premiums are not eligible for tax benefits under Section 80C. Even if you buy accident insurance for yourself or your family, you cannot claim a deduction. Only specific savings and investment options mentioned under Section 80C qualify for tax-saving benefits.

Is term insurance premium included under 80C deduction?

A term insurance policy premium qualifies under Section 80C tax benefit provisions (under old tax regime). Individuals are entitled to deduct ₹1.5 lakh worth of premium payments each year when purchasing term insurance. The provision of term insurance remains essential because it gives financial stability to your loved ones during your absence.

Can I claim both 80C and 80D?

You have the opportunity to receive tax deductions for your interest payments on Housing Loan, Medical Protection, and Healthcare Expenditures. Section 80C covers savings and investments like life insurance and PPF. Health insurance premiums, which you cover for yourself and your family members, are excluded under Section 80D . The combination of these sections (under old tax regime) enables you to decrease the amount you need to pay in taxes.