Sec 80C of the Income Tax Act, gives you tax benefits that you must avail to the full. If you are a tax payer, you not only save tax but, get to invest in instruments that offer good returns. Here are few of the best tax saving instruments under Sec 80C.
Axis Long Term Equity Fund
This is one of the top funds for investing in an Equity Linked Saving Scheme that qualifies for tax benefits under Sec 80C. This not only gives you a tax benefit of upto Rs 1.5 lakhs, but, also superb returns. In the last 1 year the fund has generated a return of 18 per cent. The three year returns from the fund has been almost 24 per cent on an average each year, in the last three years. So, if you are looking for one of the best investments under Sec 80C this should be it. However, we wish to emphasize that being linked to the stock markets, the returns are not guaranteed and these are highly risky investments.
For risk averse investors there is the highly tax efficient Public Provident Fund or PPF. We say "efficient" because not only do they give you benefits under Sec 80C, but the interest income is also exempt from Income Tax in India. A good scheme to invest in, also because the interest rate of 8.1 per cent is the best in its class at the moment. So, the interest at the moment is kind of win-win for all. There is a limit of Rs 1.5 lakhs that you can invest in the PPF. The one drawback of these investments is the fact that there is a lock-in period of 15 years.
DSP Blackrock Tax Saver
This is another ELSS Tax savings fund that has seen super returns in the last one year. The fund has generated a one year return of close to 36 per cent. DSP Blackrock Tax Saver has invested in many renowned stocks like State Bank of India and Axis Bank. You can invest in the fund through Systematic Investment Plans or also lumpsum with small investments of Rs 500 each. A good fund to invest in keeping a long term perspective in mind. However, as informed earlier these funds are risky and have the potential to even under perform as they are stock market related instruments.
Sukanya Samriddhi Account
You can also invest in the Sukanya Samriddhi Account to save tax under Sec 80C of the Income Tax Act. The total amount you save under the scheme is Rs 1.5 lakhs per annum. The interest at the moment is 8.1 per cent, which is not bad at all. However, you can invest only on behalf of a girl child in the scheme and up to two children only. The interest earned is also exempted from tax, this giving dual benefits.
Bank Tax Saving deposits
These again help you save tax under Sec 80C of the Income Tax. There is a lock-in period of 5 years on these deposits. The interest rates would depend on the bank that you deposit the money in. At best you can expect an interest rate ranging from 7 to 7.75 per cent. Expecting more then this interest would be a little too much. This is not the best tax saving scheme that offers you tax benefits under Sec 80C of the Income Tax Act.
National Savings Certificates
If you are looking at a safe government investment, then the the best way would be the National Savings Certificate. The maturity value of a certificate of Rs 100 would be Rs 146 after 5 years. Investment made up to Rs 1.5 lakhs per annum qualifies for IT Rebate under section 80C of Income Tax. The interest rate at around 8 per cent is not a bad bet at all. Good for the long term. Remember, the lock-in period of the deposits is 5 years.
How much tax do you save under Sec 80C?
The amount of tax that you save under Sec 80C is as follows: Assume that you invest the entire sum of Rs 1.5 lakhs that gives you the maximum tax benefits. In that case if you are in the 10% tax bracket you save Rs 15,000 in taxes. If you are in the 20% tax bracket, you save Rs 30,000 in taxes and Rs 50,000 by way of taxes in the highest tax bracket.