As the final date for filing advance tax returns inches closer, a lot of us scurry around looking for options to park our money; more importantly in avenues which can either fetch us an exemption or a deduction, against our overall taxable income.

In such times, 80-C and its respective sub-sections serve often as the tax- saving haven for most of the investors. So with a little more than fortnight to go before you file your tax returns, we dissect 80-C for you- breaking down areas where you can place your money (whilst ensuring that you earn some substantial returns along the run).

ELSS funds

ELSS stands for Equity Linked Savings Scheme. These are tax-saving mutual funds that invest at least 65% of their assets in the stock markets.

Investment Rationale:

• The advantage of ELSS funds is that they come with the lowest lock-in among all tax-saving investments –just 3 years.
• ELSS funds are often the best placed to help you earn inflation-beating returns over the long-term.
• Since ELSS funds are equity-oriented funds, all gains on investments held for over one year are tax-free for the investor.

Risk:

• Because of their equity exposure, these tax-saving mutual funds don’t offer guaranteed returns.

Despite that some of the best performing ones have generated 12-15% returns over the long-term through the power of compounding interest. Read More

Public Provident Fund (PPF)

Investment Rationale:

• PPF gives guaranteed interest that is fixed by the Finance Ministry for every financial year.
• The current interest from the PPF for FY2016-17 is set at 8.1% that is compounded annually (which is around the same rate of an FD).
• The account holder can take loans against the corpus in their PPF account.

Risk:

• A PPF has a very long lock in tenure of 15 years, and it doesn’t allow premature withdrawals.

Tax-saving Fixed Deposits (FD)

Investment Rationale:

• Tax-saving FDs are like regular fixed deposits, but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh. Thought at times, different banks will offer different interest on the tax-saving FDs, which range from 7-9%.

Risk:

• The returns are not exponentially higher as compared to other investment options.
• Upon maturity, the interest is added to the investor’s taxable income.

National Pension System (NPS)

The NPS is a pension scheme that has been started by the Indian Government to allow the unorganised sector and working professionals to have a pension after retirement.

Investment Rationale:

• Apart for the basic exemption under 1.5 lacs, an additional Rs 50,000 can also be invested in the NPS for tax deductions under Section 80CCD (1B).
• The NPS offers different plans that the subscriber can choose as per their risk profile. But the highest exposure to equity is capped at 50%.

Risk:

• Proceeds from a NPS scheme are taxable on maturity.

National Savings Certificates (NSC)

Investment Rationale:

• Investments of up to Rs 1.5 lakh in NSCs can be made to save taxes under Section 80C.NSCs are eligible for tax breaks for the financial year in which they are purchased.

Risk:

• The interest is compounded annually but is taxable. The current interest rate for FY2016-17 on NSC is 8.1%.

Unit Linked Insurance Plans (ULIP)

Investment Rationale:

•  ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets

Risk:

• ULIPs have a strong equity exposure and often don’t offer clarity on where the investments are made and how much of the invested amount is deducted for commissions and expenses.

Sukanya Samriddhi Yojana

Deposits made under this scheme generally have to be made for a girl child by the parent or guardian.

Investment Rationale:

• The scheme is quite beneficial in case you intend to separately place funds for your daughter—as it offers interest at 8.6% (almost equivalent to that of an FD).
• Additionally the interest is compounded annually and is fully exempt from tax. The receipts upon maturity are also tax-free.

Risk:

• The Sukanya Samriddhi Yojana account matures 21 years after opening the account. Only a partial withdrawal of up to 50% of the previous year’s balance is allowed after the account holder turns 18.

Senior Citizens Savings Scheme (SCSS)

Investment Rationale & Risk:

• The SCSS is a scheme exclusively for anyone who is over 60 years old or someone over 55 who has opted for retirement. The scheme has a maturity period of 5 years and gives 8.6% per annum.

 Apart from the above list, there are certain other sections under 80C – where you can claim deductions either via payments or investments:

• The annual premium paid for life insurance in the name of the taxpayer, his spouse or children; though the deduction is valid only if the premium is less than 10% of the sum assured.
• The tuition fee paid for the education of two children
• The repayment of the principal of a loan taken to buy or construct a residential
• Contribution to notified LIC annuity plan
• Subscription to notified bonds of National Bank for Agriculture and Rural Development.