Most salaried people wait till the last moment to do their tax planning and end up paying higher income tax or frantically investing in tax saving instruments that may not be appropriate for them.

By planning and spending time in researching various tax saving options, they can make better investment decisions and also save on income tax. Section 80c of income tax act specifies the investments that can help you save tax. The amount that you invest in these tax-saving instruments can be deducted from your taxable income at the time of calculating your tax amount for the year. The maximum deduction allowed under this Section is Rs.1.5 lakh per year.

It is important to know the various investments that fall under Section 80C in order to take informed decisions at the time of tax planning:

1) Provident Fund and Voluntary Provident Fund

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The amount that is deducted from your salary as your contribution towards PF is eligible as deduction at the time of calculating your income tax. You have the option of enhancing the contribution that you make to your Provident Fund. This is called Voluntary Provident Fund and is eligible for income tax deduction under section 80C. Interest earned up to 9.5% is tax-free.

2) Public Provident Fund

This is a scheme offered by the government. You can invest any amount from Rs.500 to R.1,50,000 in a year, under this scheme. Your contribution to the Public Provident Fund is eligible for income tax deduction. The current interest rate in PPF is 9.5% and the interest is tax free as well.

3) Life Insurance Premiums

Any life insurance premium that you pay towards policies in your name, your spouse’s name or your children’s name are eligible for income tax exemptions under 80C. Premiums paid towards unit-linked policies are also eligible for tax deduction.

4) Equity Linked Savings Schemes

These are specially created mutual fund schemes that are meant for tax saving and gives you market-related returns. Any amount that you invest in ELSS funds is eligible for tax deduction.

5) Home Loan Principal Repayment

The EMI that you pay consists of two parts – the interest and the capital repayment. The amount that goes towards principal repayment qualifies for income tax deduction under sec 80C.

6) National Savings Scheme

This is a tax saving scheme with tenor of 5 years. Any contribution to NSC qualifies for sec 80C. The interest from NSC is compounded half-yearly and is taxable.

7) Infrastructure Bonds

Infrastructure bonds issued by infrastructure companies are eligible for income tax deduction.

8) Five-Year Bank FD

Any amount deposited as FD in a scheduled bank, for a period of at least 5 years is eligible for section 80C of income tax.

9) Term Deposits with Post Office

Term deposits with Post Office with tenor of 5 years is eligible for tax deduction.

10) NABARD Rural Bonds

Investing in NABARD rural bonds gives you tax relief under Section 80C.

11) Tuition Fee

The amount that you pay as tuition fee for your children, for a maximum of 2 children, is eligible for income tax deduction.