This is a continuation of the Investments to Save Tax. We are now discussing of options that give you tax exemption under section 80C.
Market Linked Investments
These plans usually are risky because they tend to either increase or decrease in value according to the market growth. Thus you would get an amount a lot more than what you have invested or sometimes very less too. Some schemes that come under this are ELSS and ULIP.
Equity Linked Savings Scheme (ELSS)
These mutual funds have an embedded market risk and hence you have to know in detail about the shares your money is invested on, or what sort of shares are being invested on and then choose the plan. This would work well if you have some knowledge about share market and its functioning.
Most ELSS has a 3 year lock-in-period, their returns tax free and equities generate good returns.
Unit Linked Plans (ULIP)
ULIPs are insurance schemes which give you the advantages of both life insurance and also equity type of investment which is dependent on the market. These schemes at present have been found to be highly popular among the investors, because the premium though large is mostly one-time payment and when done on a yearly basis works out to be easy.
Life Insurance Policies that are paid in LIC or any other private insurance corporations have a sealing of up to Rs 1 lakh and comes under 80C.
Options under Section 80CCF
Finance Bill 2010-11 has given a new 80CCf option. This gives you an additional deduction of Rs 20,000 if you invest in infrastructure bonds of organisations.
The advantage here is that, this deduction does not come under the sealing of Rs 1 lakh of 80C, thus you could invest for a limit of 1 Lakh in options of 80 C and Rs 20,000 in infrastructure bonds, which give you 8% interest with a five year lock in period.
Health insurance is covered in 80D. If you have paid an up to Rs 15000 for yourself in any of the health insurance schemes you could claim deduction in 80D, for your parent’s and additional amount of Rs 15000 is also included. And if your parents are above 60 years you could pay Rs 20,000, which is not taxable.
This is the most attractive and widely popularised section by bankers. Section 80E includes investment that is done as home loans.
If you are paying an EMI on your housing loan, you could claim tax deduction on the interest amount paid. This section also includes tax deduction on the repayment of education loans too.
Thus, using all the above described tax saving options if you plan ahead and invest in each of the sections keeping in mind the higher limits you would be able to save a lot of hard earned money that you would be paying as tax.