Best Tax Saving Investment Plans Under Section 80C, 80CCD, and 80D

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Tax Saving

Given the opportunity, who wouldn’t want to save their income on taxes and invest it in places that allow you to multiply your wealth? Turns out, the Income Tax Act of 1961 offers several programs taxpayers can use to achieve both goals at the same time. You can invest in mutual funds like ELSS or other policies like ULIP and NPS to accomplish multiple objectives.

Below, we’ve listed how the plans work and which sections they fall under.

Under Section 80C

This is one of the most favorable sections for taxpayers as it allows deductions up to Rs. 1.5 lakh. You can claim the exemption by investing in specific schemes, such as:

1. ELSS Funds

If your goal is to create wealth by combining stable returns with lower taxes, this is a great option for you. Equity-linked savings schemes (ELSS) are essentially equity mutual funds that invest in various equity instruments that are diversified across market capitalizations, sectors, themes, and so on. In this scheme, there’s a mandatory lock-in period of 3 years and no maximum investment tenure. If the income after 3 years is over Rs. 1 lakh, it will be treated as long-term capital gains (LTCG) and taxed at 10%. By investing in these mutual funds, you can save up to Rs. 1.5 lakh on taxes.

2. ULIPs

Unit linked insurance policies (ULIPs) are popular because, in addition to wealth creation and tax saving, they also offer life insurance as part of the plan. When you invest, a portion of the premium goes towards the life cover and the remaining towards investments in equity funds, debt funds, or both. This is ideal for those setting money aside for specific goals such as children’s education or early retirement.

Under Section 80CCD

1. National Pension Scheme

Initiated by the Government of India, the NPS is a pension scheme that encourages employees in any sector to save for retirement. Upon touching 60 years of age, you can withdraw a percentage of the total corpus, with the remaining transferred to your account on a monthly basis. Offering an impressive return potential, the plan allows you to deduct up to Rs. 1.5 lakh for your contribution.

To be more specific, Section 80CCD (1) pertains to employee contribution and allows deductions such as 10% of salary, 20% of total gross income (if self-employed), or Rs. 1.5 lakh, whichever is lower. Section 80CCD (1B) offers an additional deduction of Rs. 50,000 if you invest in the NPS or Atal Pension Yojana (APY).

2. Under Section 80D

This section is reserved for deductions on the premiums you pay for health insurance policies and can be claimed by individuals and HUF. Unlike other schemes, the exemption amount depends on the age of the insured. For instance, you can save up to Rs. 25,000 if the medical insurance is for yourself, a spouse, or children. However, if you insure parents aged less than 60, you can claim an additional Rs. 25,000. Those over 60 years of age can fetch you deductions of up to Rs. 50,000.

Conclusion

It is easy to start investing in various mutual fund schemes through the Tata Capital Moneyfy App, which lets you compare different funds and make an informed choice.

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