Where to Invest U/s 80C

Where to Invest U/s 80C

Where to invest for tax benefit U/s 80C

The most popular tax saving option under Income Tax Act 1961 is 80C. It allows deduction up to Rs. 1,50,000 currently under this section. There are several investments eligible for deduction under this section. The common ones are:

1.Life Insurance Premium
2.Provident Fund (PPF, EPF, VPF)
3.Mutual Fund (ELSS)
4.Fixed Deposit (FD)
5.National Savings Certificate (NSC)

Now, the question arises, where to invest out of these options. While most people invest a major chunk of their investment for 80C in Life Insurance Premium, it’s not a wise thing to do. The next favorite is FD. FD for 80C eligibility has to be locked in for minimum 5 years and interest on FD is taxable at the regular tax rate applicable to you. So, if you are in 20-30% tax bracket, FD does not seem attractive either. Same goes for NSC. Minimum lock-in 5 years and interest taxable.

Now the only options left are mutual funds and provident funds. PPF gives you the fixed returns and that too tax free but when in long run you compare it with ELSS mutual fund you would find ELSS fund are giving far better return than any other asset class.

ELSS fund has following benefits:
  • ELSS - an opportunity of save tax and create wealth
  • Long term capital gain are tax free
  • Short lock in period of 3 years
  • Invest systematically through SIPs to bring discipline to your tax planning 

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