Income Tax Taxation

Tax saving Scheme under section 80C

Tax saving

Tax saving is an integral part of everyone’s life. The tax saving investment can be made to save tax, as there are many deductions are mentioned under section 80C or 80CCC. Taking this into consideration, the significance of these investments increases overtime, and people frequently wish to invest. However, people are quite reluctant to invest due to different risks and low returns associated with various investments.

The tax saving period generally starts from 1st April for both non-salaried and salaried people. The tax saving investments not only help to get exempted from the tax but also help to earn a tax-free income. The tax payers have many choices to invest in saving tax, including NPS, ELSS, ULIPs, and PPF. While NPS, ELSS and ULIPs offering exposure in equity and they stand out as tax saving instruments from the PPF.

Best Tax Saving Instruments under section 80C

There are so many taxes saving investments in the market because of which people often get confused about which investments suit them the most.

 Hence, now we will look at different tax saving investments to save tax under section 80C of the Income Tax act.


Equity Linked Saving Scheme

The equity linked saving scheme is the expanded mutual fund scheme, which has 2 different features- 1st the scheme of Investment, in this scheme people are eligible for the tax exemption only up to the limit of Rs. 1.5 lakh under section 80C of the Income Tax act[1] and second, the Investment made in the ELSS has a period of 3 years as a lock in period. The fund invested in the ELSS offers an interest rate of 15-18%. However, it is an equity link scheme, so the returns are never fixed and vary according to the market performance of the fund.

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National Pension Scheme (NPS)

National Pension Scheme

It is one of the best investments under section 80C to save tax; this national pension scheme facilitates the tax exemption in 3 different ways as mentioned below:

  1. The maximum limit of the contribution is up to Rs. 1.5 lakh can be claimed for the exemption tax under 80C of the Income Tax Act.
  2. Under Section 80CCD one can claim for additional deduction up to Rs 50,000.
  3. If 10% of the salary of an individual is contributed by the employer in the national pension scheme, then that amount is not taxed.

These above mentioned benefits make the national pension scheme a lucrative option to invest. However, under this scheme, only 40% of the fund is exempted at the time of maturity.

United Linked Insurance Plan (ULIP)

United Linked Insurance Plan

ULIPs are tax-saving investment, which not only provide exemptions in the tax but also provide higher gains to the investment over a long period of time. Earlier, ULIP was launched by the insurance company which comes with the zero premium allotment and also with zero admin charges.

The collective benefit of insurance and investment can lead to higher returns on the investment. The returns on investment are also tax exempted under section 80C on the Income Tax Act. It also comes with a lock in period of 5 years and offers ease of investment to the investors.

Public Provident Fund (PPF)

Public Provident Fund

The Public provident fund is the long term tax saving investment. It helps to create financial independence for retirement. The interest rates on the PPF are changed on a quarterly basis. The PPF has earned the status of EEE, i.e., exempt, exempt, and exempt. It means all the money contributed in the PPF, the maturity proceeds, and the interests earned all tax exempted. So, it is generally considered the best tax saving investment.

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The PPF has a very long maturity period of 15 years, and it can be further extended for a period of 5 years. A maximum amount of tax exemption which can be claimed under PPF is Rs. 1.5 Lakh. This is one of the safest and still investments as it is also backed by the government.

Best Tax Saving Methods: ELSS and NPS

Among the all four tax saving investments, the NPS and ELSS stands out comparatively. There is no doubt that PPF is proved to be a bane for the risk-averse tax savers. On the other hand, ULIP allows the amateur to experience equity with investing tax free.

The ELSS, which has a short lock in period and higher quality of exposure, is a favourable choice of investing for a long period of time. The NPS, on the other side, is dedicated to the old-age saving and pension plan. The sustainability of long term with regular savings towards a pension is a key feature which makes this type of tax saving investment very popular. The contributions made towards NPS qualify for the long term tax deduction under Section 80C with a 1.5 Lakh tax limit.


The tax saving schemes under section 80C seems to be straight forward, and simple exercise, but the cons and pros of each investment make it difficult to decide the best scheme. The best tax saving investment totally depends on the individual’s financials needs and what goals a person set before investing. Always remember a good tax saving instrument not only in helping to reduce your tax liability but also helps to achieve your financial goals efficiently.

Read our article:How a Person can Save Tax in India?

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