Saving money is essential these days but parking your money at the right investment scheme is more important. There are several ways to pick a scheme depending on the risk associated with it, your expectations, returns, and taxability of that return amount. However, one of the most popular motives behind savings is to avail income tax benefits. The benefits are provided under Section 80C of the Income Tax Act.
Readers, please note that you get deductions on investments under Section 80C of Income Tax. The PPF, ELSS, FD, NPS, NSC, and ULIP are among a few Income Tax savings schemes under Section 80C of Income Tax Act.
PPF: Public Provident Fund or PPF is a long-term investment option for which you can avail income tax benefits under Section 80C of the Income Tax Act. Under the PPF, one can invest money for 15 years which is the lock-in period. PPF provides 7.1 per cent interest rate per annum on returns. Under the PPF scheme, both principal and interest amounts eligible for income tax deductions under section 80C of the Income Tax Act. Moreover, the interest earned is free of income tax, according to details provided by Paisabazar.
ELSS: Equity Linked Saving Scheme or ELSS is another viable income tax saving scheme. ELSS has a lock-in period of 3 years. ELSS scheme has three categories of average return. For one year, interest rate is 33.48 per cent per annum, for three years, interest rate is 10.42 per cent annum, and for five years, the interest rate is 15.42 per cent annum. Under the ELSS, one can get income tax deductions under Section 80C for the principal amount. However, there will be 10 per cent of Long-term capital gains (LTCG) tax levied if the gains amount to over 1 lakh in a financial year.
NSC: National Saving Certificate (NSC) has a lock in period of five years. Under NSC scheme, one can avail 6.80 per cent of interest returns per annum. Investors will be able to avail income tax deductions under section 80C under Income Tax Act on the principal amount and interest. However, interest received in the final year is taxable.
Unit Linked Insurance Plan: Unit Linked Insurance Plan has a lock in period of 5 years. The plan has three categories of returns. The one-year returns can fetch you interest rates between 3.73 per cent to 38.86 per cent. The three-year return will help you earn 4.63 per cent to 11.70 per cent. The five-year returns will fetch you 5.28 per cent to 15.53 per cent of tax returns per annum.
Bank Fixed Deposits: Bank Fixed Deposits or Bank FD is one of the most popular income tax saving investment schemes. Once can get 3.40 per cent to 7.25 per cent of rate of interests per annum depending on the tenure you pick.
You can avail tax deduction under Section 80C on the Principal amount. Interest earned under the scheme is tax free.
National Pension Scheme: National Pension Scheme or NPS come with a lock in period of up to retirement. NPS has tier 1 equity of 32.92 per cent to 36.28 per cent for one year return. NPS has tier 1 government bond of 6.09 per cent to 6.75 per cent for one year return. NPS has Tier 1 corporate bond of 7.13 pe cent to 9.51 per cent interest per annum for one year return.
For three-year tenure, the NPS has tier 1 equity of 10.76 per cent to 13.75 pe cent interest, tier 1 government bond of 10.84 per cent to 12.38 per cent interest, and tier 1 corporate bond of 8.64 per cent to 10.37 per cent rate of returns.
For five-year tenure, the NPS has tier 1 equity of 13.99 per cent to 16.66 pe cent interest, tier 1 government bond of 9.59 per cent to 11.17 per cent interest, and tier 1 corporate bond of 8.87 per cent to 9.86 per cent rate of returns, the Paisabazar.com says.
One can avail income tax deduction on Principal amount under section 80C. Interest earned during the scheme tenure is not taxable, according to figures provided by Paisabazar.