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Best Tax Saving Investments Under Section 80C

It’s common for people to start their tax planning later in life. However, the key thing to note about tax planning is that the earlier you do it, the more you will save. That’s the approach that experts recommend. As for Section 80C, i.e. a key section of the Online Income Tax Act, there are several tax-saving schemes you can invest in. Let’s take a look at some of the best tax-saving investments under Section 80C:

  • Equity-Linked Saving Scheme Mutual Fund

    The equity-linked saving scheme, or ELSS, is a diversified mutual fund scheme. There are 2 noteworthy things about the ELSS. First, you maximum limit of tax exemption in this scheme is Rs 1.5 lakhs; and second, the scheme has a lock-in period of 3 years. Under this scheme, you can earn interest between 5% and 18%. However, the interest is not fixed and is dependent on the market performance. ELSS is based on market capitalisation and industry exposure. As such, it is ideal for individuals with a high-risk appetite since the scheme offers a high return on long-term investment, in addition to the tax benefit exemptions. At present, ELSS is one of the best long-term mutual funds.

  • National Pension Scheme

    National Pension Scheme is one of the best tax-saving investments. Under this scheme, you can avail of tax exemptions in 3 different categories. First, the contribution of up to Rs 1.5 lakhs can be for tax exemption under the IT Act, Section 80C. Second, you can get additional deduction of Rs 50,000 under Section 80CCD (1b). Third, if 10% of your salary is contributed by your employer to the National Pension Scheme, the contributed amount is not taxed. These 3 benefits have made NPS a popular tax-saving scheme. However, the NPS makes it mandatory to invest 40% of the corpus in the annuity plan to earn monthly income. Additionally, only 40% of the fund is exempted from tax at the time of maturity.

  • Public Provident Fund

    Another beneficial long-term investment tax-saving scheme is the Public Provident Fund (PPF). PPF helps the investors create a financial cushion for themselves for their post-retirement days. A key benefit of investing in PPF is that its interest resets every quarter. Additionally, the investors of PPF enjoy complete tax exemption. This means that your maturity proceeds and the interest earned are all exempted from tax. This is why it is considered one of the best tax-saving schemes. Despite the reset of interest every quarter, the risk factor in the PPF remains stable. The maturity period of PPF is 15 years, which can be further extended for 5 years. Under Section 80C of the Income Tax Act, you can claim tax exemption of up to Rs 1.5 lakhs. PPF is a government-backed scheme and, thus, an ideal and safest option of investment.

  • Sukanya Samriddhi Yojana
    • You can avail of tax exemption of up to Rs 1.5 lakhs under the Section 80C of the Income Tax Act for all investments made in the SSY

    • the interest accrued in the SSY compounds annually and is eligible for tax exemption, and

    • the maturity proceeds and withdrawal amount are also exempted from tax. Under this scheme, an individual can open an account until the girl child turns 10. The account will be operative for 21 years till the girl gets married after the age of 18. The minimum amount for investment is Rs 250 and an individual can invest up to Rs 1.5 lakhs in a financial year.

  • Senior Citizen Saving Scheme

    Like SSY, Senior Citizen Saving Scheme (SCSS) is also a government-backed scheme, except it is targeted towards senior citizens. Only individuals above the age of 60 can invest in SCSS. Under this scheme, an individual can do a one-time investment of a minimum of Rs 1000 and up to Rs 15 lakhs (for a joint holding) or Rs 9 lakh (for a single holding). This makes the SCSS an affordable and flexible scheme. Additionally, it has a lock-in period of 5 years. The highest interest rate offered to investors in this scheme is 7.4% and the investment is exempted from tax up to Rs 1.5 lakhs.

The first step towards tax saving is tax planning. The Government of India offers several tax-saving options. You can invest in schemes or find the best mutual fund to invest in today. Invest in the scheme that fits your goals and start saving. You can start saving with Muthoot Finance. With Muthoot Finance, you can start investing in mutual funds today. Visit our nearest branch and speak to our investment experts to start doing the same.

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