9 Deductions under Section 80C of Income Tax Act 1961

Section 80C of the Income Tax Act, 1961, provides various tax-saving options to individuals. One can save up to Rs. 1.5 lakh per year through investments under Section 80C. These investments not only help in saving taxes but also aid in wealth creation. Let’s look at some of the top investments under Section 80C.

1. Public Provident Fund Scheme The Public Provident Fund or PPF Scheme is a long-term investment plan backed by the Government of India. One can make investments in PPF by opening an account and making a minimum deposit of Rs. 500 to a maximum of Rs. 1.5 lakh. The PPF Scheme has a lock-in period of 15 years, and the current interest rate is 7.1%. Additionally, the contribution, as well as interest amount on PPF, is free from tax.
2. Sukanya Samridhi Yojana Sukanya Samridhi Yojana or SSY is one of the most effective investments under Section 80C. It is a government scheme that aims at the development of the girl child. One can open an SSY account in the post offices as well as certain banks in India for a girl child. The minimum deposit is Rs. 250, and the maximum deposit is Rs. 1.5 lakh. This account is operational till the girl child attains the age of 21 years. However, there is an option of partial withdrawal after the girl turns 18 years to meet the education expenses of the girl child.
3. Life Insurance Premiums Life Insurance Premiums, commonly known as LIC Premiums, are the top-most popular investments under Section 80C. Through life insurance premiums, one can claim a maximum deduction of Rs. 1.5 lakh. However, the amount of deduction depends upon the date of the policy.
4. Employee Provident Fund Scheme Employee Provident Fund or EPF Scheme is a long-term retirement scheme, which is available to individuals having income from salary. Under this scheme, both employer and employee make an equal contribution of 12% of the employee’s basic salary plus dearness allowance. The contribution is tax-exempt under Section 80C.
5. Senior Citizens Savings Scheme The Senior Citizens Savings Scheme is also eligible for deduction under Section 80C. A senior citizen of the age 60 years and above can open this account. The lock-in period of Senior Citizens Savings Scheme is 5 years, and the current rate of interest applicable is 8.30%.
6. 5 Years Tax Savings Fixed Deposits The 5 Years Tax Saving Fixed Deposits are similar to fixed deposits. You can claim a deduction of up to Rs. 1.5 lakh under Section 80C on these tax saver FDs. Apart from this, the tax saver FDs are safe instruments for investing, and the rate of interest on these FDs varies from bank to bank.
7. National Savings Certificate National Savings Certificate or NSC is yet another investment option under Section 80C, which is backed by the government of India. The current rate of interest applicable on NSC is 6.80%, and it has a lock-in period of 5 years.
8. Equity Linked Savings Scheme Equity Linked Savings Scheme or ELSS is a mutual fund scheme that invests at least 80% of the assets in the stock market. These are also known as tax-saving mutual funds because they are eligible for deductions under Section 80C. Additionally, they have a lock-in period of only 3 years, and the returns vary as per the market standards.
9. National Pension Scheme
   The National Pension Scheme, also known as NPS, is a retirement scheme that enables both working professionals and individuals from other sectors to receive pension benefits after retirement. The scheme is available to any Indian citizen between the ages of 18 and 60. Investments of up to Rs. 1.5 lakh in the NPS are eligible for tax deductions under Section 80C of the Income Tax Act. In addition, individuals can avail of an extra tax benefit of up to Rs. 50,000 on investments under Section 80CCD(1B). The NPS has a lock-in period that extends until retirement age, and the current interest rate is 7.10%.