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Avoid Last Minute Tax Planning To Claim Deduction Under Section 80C?


Last 3 months of the financial year 2012-13 are left, soon most of the salaried people will start investing there funds into different financial products to claim section 80C deductions. This section offers income tax deduction upto Rs 1 lac to the tax payers who invest there funds in any of the investment option which falls u/s 80C on the income tax act 1961. You can plan to invest your funds in any of the investment options to save tax throughout the financial year. But if you don’t plan properly and invest Rs 1 lac in one of the investment avenues just to save tax then you may end up buying wrong financial product which do not fulfill your financial need.

Investment is no doubt a good practice, but last minute investing to save tax sometimes makes us invest our hard earned money in such financial products which may not suit our requirement. It is some how Indian’s tendency to wait and act when deadline approaches. In other words, income tax act clearly specifies that investing Rs 1 lac will offer section 80C deduction but still we do the same mistake every year. So if you have invested till now then you can plan and invest wisely as you still have 3 months to choose and invest your funds as per your financial need.

Section 80C Deductions


Lets have a look how you can plan and what are the investment options to save tax:-

STEP 1 :- It is very necessary for you to first check what all investment have you done in this financial year and out of all what all investments will offer you tax benefits u/s 80C. For Example: If you have done total investment of Rs 2.50 lac and out of which Rs 50,000 investment towards those financial products which offers tax benefit u/s 80C then you can plan to invest rest Rs 50,000 to get the maximum tax benefit.

STEP 2 :- Check what all investment schemes are covered under section 80C deductions.

  • Public Provident Fund (PPF) : You can invest in a PPF scheme to save some funds for your retirement. Investment under PPF will offer you tax free maturity amount including interest earned apart from tax benefit under section 80C.
  • National Savings Certificate (NSC) : You can invest in NSC to claim section 80C deductions. It is medium term investment which matures after 6 years. Investment under NSC will offer you decent interest rate whereas interest earned on NSC will be taxable.
  • Equity linked Saving Scheme (ELSS) : You can invest in ELSS scheme to get tax section 80C deductions. Investing under this scheme will lock your money for 3 complete years. Investing under ELSS will offer you tax deduction for one year only and your fund will remain locked for 3 years. Apart from this once DTC will replace Income tax act, ELSS will loose its tax benefit feature which is one of the most attractive feature of this investment avenue as of now.
  • Life Insurance Premium :- You can buy a term plan (if you don’t have one), as it offers pure insurance and gives protection to your family in case of some unfortunate event.
  • Home Loan Principal Repayment :  Repayment of principal amount of Home Loan gives income tax benefit upto Rs 1 lac to the borrower u/s 80C.
  • 5 Year post office time deposit (POTD) scheme : Investment under this scheme also offers income tax section 80C deductions however interest income from this investment is not tax free. Any Indian resident can invest in this scheme at there nearest post office.
  • Unit Link Insurance Plan (ULIP) :Investing under ULIP will also offer you tax benefit u/s 80C. ULIP is an investment cum insurance plan which offers insurance cover along with investment benefits in one single plan. Although financial experts don’t suggest to mix insurance with investment but if your reasonably covered under a term plan and need additional plan then you can consider this option also.
  • Tax saving FD’s : Investing any amount upto Rs 1 lac will offer income tax deduction of the same amount u/s 80C. The amount invested under this will be locked for a period of 5 years and withdrawal will be restricted.
  • Senior Citizen Savings Scheme 2004 (SCSS) : Investment scheme especially designed for senior citizens offers income tax deduction upto Ra 1 lac u/s 80C. It is a small saving scheme which offers decent interest rate of i.e around 9% p.a. The interest income earned on this scheme is taxable.
  • NABARD Rural Bonds : Bonds issued by NABARD comes under tax saving investment. Investment made under these bonds also offers tax benefit u/s 80C. However, the income earned as interest would not be tax-free.
  • Children School Fee : Parents paying tuition fee at the school or college of there child can also claim income tax deduction u/s 80C. This deduction is allowed on the tuition fees paid for upto two children only.
  • Pension Funds : Investment under Pension Funds also offers tax deduction but tax benefit on pension funds comes under section 80CCC.
  • Stamp Duty & Registration Charges For A Flat/ House

So here we have listed all the possible tax saving investment options for you with a brief. You can click on the title to read the detail about that particular investment scheme. I hope this will help you choose the best investment option that suits your need and help you save tax.

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