Income Tax Saving - Best Investment Options under Section 80C

Making investments in instruments that offer tax benefits under this section of the Income Tax Act will lower your taxable income, which in turn will lower your tax liability. The following are the best investment options under Section 80C of the Income Tax Act:

Tax Saving Options Apart from under Section 80C of the Income Tax Act

While Section 80C of the Income Tax Act is the most popular section in terms of deductions, there are other sections that can help you save on tax. Availing a home loan or purchasing health insurance could also help you save a considerable amount of money that would otherwise be spent on taxes. Here are some things you could do to claim tax deductions beyond Section 80C of the Income Tax Act, 1961:

1. If you purchase medical insurance, not only will you be financially covered in times of emergencies, but you will also be eligible for tax deductions to the extent of Rs.25,000. The deduction limit for senior citizens is Rs.50,000. The section under which this deduction can be claimed is Section 80D of the Income Tax Act, 1961.
2. If you have availed a home loan, you can claim deductions on the interest component of the loan. The maximum amount that can be claimed is Rs.50,000, and the section under which this deduction can be claimed is Section 80EE of the Income Tax Act, 1961.
3. Home loans can also come in handy with regard to lowering your taxable income. The principal amount of the loan is eligible for deductions under Section 80C of the Income Tax Act, and the maximum amount that can be claimed under this section is Rs.1.5 lakh. The interest portion of the loan, on the other hand, is eligible for deduction under the head 'Income from House Property'.

Planning for Tax-Saving Instruments

Some of the steps that can help in planning to save money under Section 80C are mentioned below:

1. Monitor Regularly: Regularly review the investments that you have made to make sure your goals are met or if any changes need to be made.

1. Full-Limit Utilisation: Investments can be planned in such a way that the limit of Rs.1.5 lakh can be utilised under Section 80C.

1. Lock-In Periods: Check the lock-in periods as they are different depending the scheme.

1. Existing Investments: Check your current investments and check if they are in the limit under Section 80C.

1. Choose the Investments: Choose the type of investments you wish to make as per the risk tolerance.

1. Different Investments: Choose different investments and will balance returns and risks.

Effective Income Tax Saving for FY 2024-25

Here are some additional ways you can save on income tax under various sections of the Income Tax Act, 1961, for the financial year 2024-25:

1. Under Section 10 (1): Any income from agriculture, be it from the sale of agricultural products, rent from agricultural land, or income from farm buildings, is exempt from tax.
2. Under Section 10 (2) : An amount that is received as the income or family estate of a Hindu Undivided Family (HUF) is not subject to tax obligations. An individual can also deposit any secondary income into an HUF account which will not have any tax liabilities.
3. Under Section 10 (16): The total sum received for an educational award or scholarship is exempt from tax without any ceiling on it.
4. Under Section 24: You can avail a tax deduction of up to Rs.2 lakh on the interest component of your home loan.
5. Under Section 80: Interest paid on an education loan can be claimed as tax deduction under this section.
6. Under Section 80C:
   1. Insurance: Traditional insurance plans which are either moneyback or whole-life insurance plans provide tax benefit for premiums paid which comes under Section 80C. The value is also tax-free on maturity or in the case of the policyholder's demise.
   2. Home loans: You can claim a tax deduction of up to Rs.1.5 lakh on the principal amount paid on a home loan in a financial year.
   3. Public Provident Fund (PPF): The interest accumulated on the balance in a PPF account is exempt from tax if the contribution is below Rs.1.5 lakh in a financial year.
   4. Unit-linked Insurance Plan (ULIP): This not only provides life insurance but also makes investments in market-linked assets that are a mixture of fund options ranging from equity to debt offerings. There is a lock-in period of five years after which the amount can be enjoyed tax-free or tax-free at maturity. The tax benefit is up to Rs.1.5 lakh per year.
7. Under Section 80E: There is no limit on the tax deduction for the interest component paid on education loans for higher education for anyone in India.
8. Under Section 80EE: First time homebuyers can get a tax benefit of up to Rs.50,000 on their home loan under this section. Also, you can get tax deduction, without any limit, on your second home loan if you reside in the residence bought with your first home loan.
9. Under Section 80G: Under this section, you can avail 50% to 100% tax deduction on voluntary donations made in cheque or cash as contribution to the National Relief Fund or other organizations specified by the Ministry of Finance as being eligible for tax deduction for contributions.
10. Under Section 80RRB: You can claim tax deductions for income that is earned from any patents or royalties. Up to Rs.3 lakh in income tax can be saved for patents that are registered under the Patent Act, 1970.
11. Under Section 80TTA: You can claim tax deductions for interest earned on savings accounts with a cap of Rs.10,000. Any interest amounts exceeding Rs.10,000 will be taxable income.
12. Under Section 80U: Under this section, tax deduction can be claimed for disability with a disability certificate as proof so that up to Rs.1 lakh can be exempt from tax.

1. Section 80CCD: You can invest in NPS and claim deductions under Section 80CCD. The section is divided further into two subsections: 

1. Section 80CCD (1): Under this section, you can claim tax deductions for investments in NPS. Individuals aged between 18 years and 60 years may invest in NPS and take advantage of this tax break. Even NRIs are eligible for this benefit. Under this section, 10% of your compensation is the maximum deduction you may take advantage of under this rule. 20% of a person's gross annual income is the cap for self-employed people. Additionally, the maximum reward under this section is Rs.1.5 lakh. 
2. Section 80CCD (1b): People investing in NPS can avail of an additional deduction of Rs.50,000 under this section which is up and over the Rs.1.5 lakh you can avail. This means you can claim a deduction of up to Rs.2 lakh under this section. 

1. Section 80D: Under this section you can claim deductions of up to Rs.1 lakh on the premiums paid for your health insurance. The benefits under this section can be availed by both individuals and Hindu Unified Families (HUFs). Additionally, you can claim deductions if you fulfill the following conditions mentioned below: 
   (i) You can claim a deduction of up to Rs.25,000 for yourself and the members of your family on the premiums paid for you medical insurance.
   (ii) Senior citizens can claim a deduction of up to Rs.50,000.
   (iii) You can claim a deduction of up to Rs.25,000 if you purchased a health insurance policy for your parents who are aged below 60 years.
   (iv) If you and your parents are above the age of 60 years, then the maximum deduction you can claim is Rs.1 lakh under Section 80D.

Additional Benefits that you can avail beyond Section 80C 

You can invest in the National Pension Scheme or the Atal Pension Yojana where under Section 80CCD(1B), you can save up to Rs.15,600. Also, under Section 80D, you can claim deductions over the premiums paid for health insurance.  

Overall, under these two sections, you can save up to Rs.78,000. Given below is the table which provides a detail of the amount you can save from being taxed:

Following these simple pointers will help you understand how much money you should invest if you want to save tax. If you haven't started planning on your tax-saving strategies, it is best you start immediately as waiting for the end of the financial year will only make it difficult for you to meet your financial goals.