Why Is 80C The Best Tax Saving Instrument?

Let us begin with stressing on the importance of personal financial planning in the modern world. There are no guarantees in market share, output, and growth, especially for those committed to the keeping some of their financial eggs in the market.

This is why having a sound financial plan could help you save a lot. A key part of this process is having an effective tax planning, which could also you save on unwanted tax outgo in the long term. And having an effective tax return plan by at least the end of April is a good way to start, for the last-minute hassles of filing IT returns can be a pain to many.

Tax Options Play a Major Role

In order to have such succession of plans that help maintain a stable financial cycle, tax-saving instruments come into play. Some options for the same are:

  1. ELSS (Equity Linked Saving Scheme)
  2. ULIPs (Unit Linked Insurance Plan)
  3. Public Provident Fund
  4. NPS (National Pension System)
  5. VPF (Voluntary Provident Fund)
  6. SCSS (Senior Citizens’ Saving Scheme)

These tax saving instruments fulfill some of the most important parameters like safety, liquidity, costs, returns, taxability of income, transparency, flexibility, and ease of investment. Making use of whichever of these options suits your tax plan the best can help you a lot in the short and long term.

An Introduction To 80C

Section 80C is one of the many options made available by the law for those planning to file a return on income tax. It allows you to claim a deduction of Rs 1,50,000 from your total income. This means that under Section 80C, from your total taxable income, Rs 1,50,000 can be reduced. Such a deduction is permitted on individuals and the Hindu Undivided Family (HUF). This amount is the maximum you can claim in any fiscal year for which you are filing returns.

It is often considered the strongest weapon in your armor due to the high amount you can claim for deduction. But for this to come into play, you should have invested in the above-mentioned tax-saving instruments, and many others.


A Look at What How Much Deduction Some Instruments Bring

  1. Provident Fund (PF) and VPF
    While PF is deducted from your salary, it can be added as a deduction under Section 80C
  1. Public Provident Fund
    This has a deduction limit of Rs 500-1,50,000, depending on how much has been taken away from you over the financial year
  1. ELSS
    It is a mutual fund scheme that is aimed at helping save on taxes, make sure to invest in ELSS mutual funds while investing in regular mutual funds to help make use of this option.
  1. Fixed Deposits
    These are financial instruments that provide you higher rates of interests than a normal savings account until a pre-fixed maturity date. Having FD’s with lock-in periods of at least five years can help gain deductions on taxes under Section 80C.
  1. ULIP
    These are stable forms of investment, apart from providing insurance cover. Since money invested in ULIPs go into shares, and you can choose how much of your money can be invested in shares, it brings with it the advantage of a tax deduction.

Why Choose Instruments Under Section 80C?

Most tax saving instruments under this section bring with them mutual fund investments, and this is as safe a way of using your finance as possible. It helps you make the get the most out of the equity market’s potential. These options give you an opportunity to not only grow your business or entity but also make succession plans for your family’s financial future, while also playing a key role in saving as much money as possible out of tax deductions, as already discussed above.

However, you have to remember that no single tax saving instrument is better or more likely to bring in money and deductions than the other, and each has its own characteristics. To bring it down to a basic level, the primary objective to invest in these instruments is to accumulate money for your various needs and objectives, while savings on tax are just an added bonus. Each also has its own risks, but that is what investment and share market are all about.

There are other Sections like 80CCD, 80CCG, and 80CD, which have their own benefits, but Section 80C is the one with the most tax-saving instruments to choose from, and it also guarantees the biggest deduction on tax. Choosing the best plan wisely is key to establishing a clear path as to how you can go about making filling up your IT returns form.

Plan with Many Aims in Mind

Your planning should such that it includes returns on tax and while also helping achieve whatever goals or aims have been drawn up.

If you have any questions, please ask below!