BLOG

Section 80C of the Income Tax Act provides taxpayers with the opportunity to reduce their taxable income by investing in certain tax-saving instruments or incurring eligible expenses. This section is particularly popular among individuals and Hindu Undivided Families (HUFs) looking to optimize their tax liabilities. However, it's important to note that companies, partnership firms, and Limited Liability Partnerships (LLPs) cannot avail themselves of the benefits offered under Section 80C.

The maximum deduction allowed under Section 80C is Rs 1.5 lakhs annually from the taxpayer's total income. Additionally, an additional deduction of Rs 50,000 is permitted under Section 80CCD(1B). Therefore, the total deduction limit including Sections 80C, 80CCC, and 80CCD(1) is Rs 2 lakhs.

Here's a list of some common investment options eligible for deduction under Section 80C, along with their average interest rates, lock-in periods, and risk factors:

1. ELSS Funds (Equity Linked Saving Schemes):
   - Average Interest: 12% - 15%
   - Lock-in Period: 3 years
   - Risk Factor: High

2. NPS Scheme (National Pension System):
   - Average Interest: 8% - 10%
   - Lock-in Period: Till 60 years of age
   - Risk Factor: High

3. Tax Saving FD (Tax Saving Fixed Deposit):

   - Average Interest: Up to 8.40%
   - Lock-in Period: 5 years
   - Risk Factor: Low

4. PPF (Public Provident Fund):
   - Average Interest: 7.10%
   - Lock-in Period: 15 years
   - Risk Factor: Low

5. Senior Citizen Savings Scheme:
   - Average Interest: 8.20%
   - Lock-in Period: 5 years (can be extended for another 3 years)
   - Risk Factor: Low

6. National Savings Certificate:
   - Average Interest: 7.7%
   - Lock-in Period: 5 years
   - Risk Factor: Low

7. Sukanya Samriddhi Yojana:
   - Average Interest: 8.20%
   - Lock-in Period: Till the girl child reaches 21 years of age (partial withdrawal allowed when she reaches 18 years)
   - Risk Factor: Low

These options provide taxpayers with a range of choices based on their risk appetite, investment horizon, and financial goals. It's advisable to consider one's financial situation and consult with a financial advisor before making investment decisions.