What are the Different Deductions Available Under Section 80C?

Section 80C of the Income Tax Act allows you to claim tax benefits under a variety of investments. These are:

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1. Tax-Saving Fixed Deposits or FDs

Fixed deposits are one-time-investment instruments that offer a sufficient level of yield (interest rate of 7% or 8%) depending on the lock-in period. However, you can enjoy tax deduction by choosing 5-yr fixed deposits as per the Section 80C.

Note: The tax benefit is only allowed for 5-yr fixed deposits on a maximum investment of Rs. 1.5 lakhs.

2. National Pension System (NPS)

Investments up to Rs. 1.5 lakh qualify for tax relief under Section 80C. However, you can also invest additional Rs. 50,000 in NPS for tax deductions under Section 80CCD(1B) by choosing voluntary deduction from your salary with your employer’s help.

3. National Saving Certificates (NSC)

National Saving Certificates worth up to Rs. 1.5 lakh can be used for tax from benefits under Section 80C. You can buy these at a lock-in period of 5 years from select post offices. The usual interest rate provided on them is about 8%.

4. Employee Provident Fund Investments

As an employee in a registered company, your contribution towards Employee Provident Fund (EPF) is also entitled to tax benefits up to Rs. 1.5 lakh. The investment amount is 12% of your salary which is deposited in your EPF account by your employer. The interest rate gained is 8.8%.

5. Unit Linked Insurance Plans(ULIP)

ULIP is not only great for insurance purposes but for tax benefits as well. In these, a portion of your investment is put in stock markets while the rest is used to provide an insurance cover. You can claim tax benefits for investments up to Rs. 1.5 lakh.

Unlike fixed deposits or EPF investments, ULIPs don’t offer guaranteed returns. So, invest wisely.

Apart from the investment options discussed above, tax benefits are also available in Sukanya Samriddhi Yojana and Senior Citizens Savings Scheme.