Risk-averse investors have several tax-saving options to choose from under Section 80C. Let's look at some of them:
Public Provident Fund (PPF):
The PPF is a good investment option and offers an interest rate of 8.70% per annum. You can open a PPF account in a post office or a bank. PPF comes with a 15-year lock-in period, which can be extended in blocks of five years each. You can invest Rs 1.5 lakh as a lump sum or as instalments on any working day of the year. Just make sure you invest the minimum Rs 500 in your PPF account in a year, otherwise you will be slapped with a nominal penalty of Rs 50. The PPF is useful for risk-averse investors, self-employed professionals and those not covered by the EPF.
Senior Citizens Savings Scheme (SCSS):
The SCSS is meant for those who want a regular source of income in the later years of their life. SCSS currently offers 9.2% interest per annum and is fully taxable. The interest rate is 100 basis points above the five year government bond yield. The maximum investment limit is Rs 15 lakh. The interest is paid on the last date of every quarter of a financial year, irrespective of when you start investing.
National Savings Certificate (NCS):
The NCS is a small savings tool that combines tax savings with guaranteed returns. These are issued for five and ten year maturities and can be pledged to banks as collateral for loans. Currently, the interest rate on NCS is at 8.50% on the five-year option and 8.80% on the 10year option. The interest earned is fully taxable and, hence, NCS is not an attractive investment.
National pension scheme (NPS):
A low-cost structure, flexibility and other investor-friendly features make the NPS an ideal investment vehicle for retirement planning. The scheme scores high on flexibility. The minimum investment of Rs 6,000 can be invested as a lump sum or in instalments of at least Rs 500. There is no limit. The investor also decides the allocation to equity, corporate bonds and gilts. But be ready for a lot of legwork before you can buy NPS.
Bank fixed deposits:
Don't get misled by the high interest rates offered on the five-year bank fixed deposits because interest income from these instruments is fully taxable. So the post-tax yield may not be as high as you think. In the 20% and 30% income tax brackets, it is not as attractive as the yield of the tax-free PPF.
Pension plans:
The charges of pension plans offered by life insurers are significantly higher than those of the NPS. The difference can snowball into a wide gap over the long term. The other problem is that annuity income is still not tax-free, which makes pension plans rather unattractive for retirees.
1.ICICI Prudential Tax Plan
2.Reliance Tax Saver (ELSS) Fund
3.HDFC TaxSaver
4.DSP BlackRock Tax Saver Fund
5.Religare Tax Plan
6.Franklin India TaxShield
7.Canara Robeco Equity Tax Saver
8.IDFC Tax Advantage (ELSS) Fund
9.Axis Tax Saver Fund
10.BNP Paribas Long Term Equity Fund
You can invest Rs 1,50,000 and Save Tax under Section 80C by investing in Mutual Funds
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