BEFORE CLAIMING SECTION 80C INCOME TAX DEDUCTIONS, BE AWARE OF THESE CONDITIONS

BEFORE CLAIMING SECTION 80C INCOME TAX DEDUCTIONS, BE AWARE OF THESE CONDITIONS

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Earning gives you the much-needed self-confidence and helps to tackle several situations in life. However, earning comes at a cost – taxes. You have to pay taxes to the government. A part of your income (depending on your income tax slab) is paid in the form of taxes. To avoid paying much of their hard-earned money in the form of taxes, several individuals choose to invest in tax-saving investments that can help them save tax. Although millions of investors use tax-saving investments to diminish their tax burden, not everyone is aware of the complete benefits of these tax-saving investments. Let’s understand these deductions under Section 80C. All Section 80C investments are eligible for tax deduction of up to Rs1.5 lac. Let’s understand the different types of tax-saving investments and conditions to invest in these investments.

  1. ELSS contributions
    Equity Linked Savings Scheme or ELSS funds invest the majority of their portfolio in equity-related securities. These mutual funds are also known as tax saver mutual funds due to the tax-saving opportunities offered by these investment options. ELSS mutual funds have a mandatory lock-in period of three years. These mutual funds offer investors with dual benefits of tax-saving and capital appreciation opportunities.
  2. PPF contributions
    Public Provident Fund, commonly known as PPF is a popular savings scheme introduces by the National Savings Institute of Ministry. These savings schemes have found their place in the homes of most Indian households. These investment options are ideal for investors looking for a stable and guaranteed returns on their investments. PPF accounts have a mandatory lock-in period of fifteen years. Though PPF schemes have an investment duration of fifteen years, it can be extended by five years at a time for n number of times. Note that you cannot contribute more than Rs 1.5 lacs towards your and your child’s PPF account.
  3. Unit Linked Investment Plan (ULIP)
    ULIPs are tax-saving investments that offer investment plus insurance to investors in same investment product. A part of your money is invested in insurance policies that provides life cover and the remaining is invested in a fund that aligns with your investment portfolio. One of the factors that make these investments quite desirable is that an investor can switch their portfolio between equity and debt as and when required. ULIPs have a lock-in period of five years.
  4. Home loan repayment
    An investor can claim tax benefit under Section 80C on the interest amount paid towards the principal amount of the home loan. However, there are certain terms and conditions to avail this loan. The loan must be taken specifically for residential housing property and that from specified entities such as housing finance companies and banks. On the other hand, tax deduction under Section 24(b) is available for interest paid towards loan for renovation of any property (residential or commercial), house repair, etc. This loan can be taken from friends or relatives.

Now that you are aware about the various terms and conditions of different tax-saving investments, you’d be able to make a more informed decision and will ensure better tax planning from your end. Remember, you must not invest in tax-saving investments with the sole purpose of saving tax. Your investment objectives must align with the objectives of the fund. Happy investing!

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