Thanks to the fact that the 80C limit has not been raised for a very long time, and the fact that the section has been crowded with too many deductions, the section has lost glitter. However many young people realize that the only saving/ investment that they are doing is under this section, and …

So many people have asked me for an exhaustive list of expenses / investments eligible for Sec 80 C deductions…so here it is…nothing original, but complete I guess:

There are some payments made which are eligible for section 80C. They are: 

  • Premium on life insurance policies (terms and conditions apply, please see terms and conditions carefully!!)
  • Children’s full-time education fees
  • Principal repayment on home loan (check your EMI break up ONLY PRINCIPAL repaid is eligible)

Employee Provident Fund (EPF)

  • A deduction that an employer makes from an employee’s salary towards the provident fund
  • How much is deducted is subject to Rules and Company policy
  • The return offered is 8.25%, and is a brilliant tax free compounding tool.
  • Highly recommended, try to increase the contribution amount if possible. Must do.

Public Provident Fund (PPF)

  • Good long term SAVINGS plan, government guaranteed.
  • Current return is 8.8% p.a.- subject to change 
  • Investment limit of Rs 1.5 lakh p.a. – including the contribution to minor children’s accounts
  • Tax free compounding is the GREATEST attraction.
  • Highly Recommended.

2 pension plans from the Mutual Fund stable – the Templeton India Pension Plan and the UTI pension plan. However they have about 70% in debt and I would recommend it only for small amounts for younger people. However people above 40 can invest more heavily in this than even in PPF, simply because of the compounding impact of equity.

National Savings Certificate (NSC)

  • 5-year NSC delivers 8.6%, 10-year NSC offers 8.9% (not bad at all) . Rest assured interest rates will ONLY fall from here. 
  • No investment limit, government guaranteed, interest taxable.
  • Pain of dealing with the PO.
  • Not recommended unless you are a senior citizen, are on a zero tax slab, AND have a trustworthy agent.

Fixed deposits (FD)

  • The tenure of the FD must be for 5 years
  • Lock In for the whole period
  • Interest is taxable 
  • Not recommended at all.

Equity Linked Savings Scheme (ELSS)

  • Full equity exposure
  • It has the least lock-in period of 3 years
  • Suitable for young investors willing to hold on longer if markets are not favorable.
  • Tax free compounding,
  • Stick to Templeton or Icici Prudential or Hdfc and take a long term view

Senior Citizen Saving Scheme (SCSS)

  • Only for senior citizens
  • Interest offered is 9%
  • Interest is taxable
  • Only recommended if you are willing to deal with the PO. Interest will be automatically credited to your account.

Bonds – National Bank for Agriculture and Rural Development (NABARD)

  • Lock-in period is 5 years
  • Investment can be made up to Rs 1 lakh to avail of a deduction (not sure if the limits have been raised, but logically they must have)
  • Interest earned is taxable.
  • Not recommended unless you have a good agent who will help you with the process.

Insurance Plans 

  • Any life cover plan.
  • ULIPs can give you an exposure to equities also.
  • NOT RECOMMENDED AT ALL except as Term insurance.

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