With the fiscal year coming to an end, you begin thinking of plans that would help you to save tax. Well, it is always better to plan earlier, however it still is not too late. There is always the advantage of investing in the regular investment options that come under Section 80C, nevertheless this year you can opt to invest in options that give additional deductions under Section 80CCF, 80E and 80D too.

Before deciding to invest in any of the available options you have to you have to make sure you have gone through factors such as

  • Risk involved in the plan
  • the returns you are expected to get
  • Tax implication after maturity
  • Liquidity factor
  • How much you are needed to invest and how often
  • Is the matured sum exempted from taxation process
  • Money left with you for your expenses after you invest

Investment Options under Section 80C

This section is considered to be most significant when it comes to saving tax. However you are bound by the 1 lakh upper limit here, thus you would be able to choose only a limited investment options.

Let us now go over the opportunities that are included under Section 80C of the income tax act. The investment options open under this section can be grouped into three

  1. Fixed Income Investments
  2. Market Linked Investments
  3. Insurance Investments

Fixed Income Investments

This option is the most popular among people mainly because it is risk free. This includes PPF (public provident fund), EPF (employee provident fund) and NSC (national savings certificate), Fixed Deposits and Senior citizens savings scheme.

Among these PPF and EPF fall under the EEE (Exempted-exempted-exempted) category, that is the amount you invest, interest and the amount you get on maturity all three are exempted from tax. Thus you would be able to save up to Rs 70,000 in PPF or Rs 1 lakh per year in EPF without having to pay tax.

You also have very good compounded interest of 8% in PPF and 8.5 to9.5% in EPF.  These funds have a minimum period of 15 years within which you might not be able to liquidate the money.

The NSC on the other hand is very handy in terms of liquidity factor. This is because the term for NSC is 6 years and the rate of interest is 8%. One disadvantage over the other fixed income schemes are that the amount that you get on maturity of NSC is taxable.

Tax Saving Fixed Deposits

This again is special type of fixed deposits available in various banks which would give you 8% to 9%interest and comes under 80C.  The lock in period of five years gives you more liquidity too.

The investment here is safe and you do not have to worry about tax on interest.

Senior Citizen Saving Scheme

This scheme is for investors who are above 60 years and those who have taken voluntary retirement after 55 years of age. This scheme gives you an interest of 8% and is secure. However, you would be required to pay tax on the interest gained.