How to save income tax in 2019-20 without big investment; Easy options explained here

Income tax saving: The Section 80C under Income Tax Act of India offers a working individual or a taxpayer of the country an opportunity to save his/her taxes. Any individual can save his/her annual tax by declaring investments into some instruments included in the section. There are a number of investment options which can help you save a tax up-tp Rs 1.50 lakh per year.

Tax Expert, Himanshu Kumar, told Zee Busines TV, "A person should not only worry about his/her tax savings only but also return on investments is even more important when it comes to investing into any instrument. ELSS is one such category that offers you good returns with tax saving option. While NPS gives you an edge to save Rs 50,000 more making your tax saving up-to Rs 2 lakh. Also, there are a number of options to invest and can be chosen wisely."

You can claim a deduction of Rs 1.5 lakh pf your total income under section 80C or, in simple terms, you can reduce up to Rs 1,50,000 from your total taxable income. It is available for individuals and HUFs filing their Income Tax Return. The Income Tax Department refunds the excess money to the bank accounts of taxpayers. 

Here are some investment instruments under Section 80c, which can help you save on taxes. 

1. PPF:

PPF (Public Provident Fund) is a long term investment backed by the government of India. The deposits made in a PPF account are eligible for tax deductions under Section 80C. PPF account has a lock-in period of 15 years, but can be further extended by 5 years, while partial withdrawals are allowed after 7 years. The current interest rate on PPF is 8.0% p.a.

2. ELSS:

The investment in ELSS Fund or Tax Saving Mutual Fund is considered as the best tax saving option as they give you the dual benefit of saving taxes and getting higher returns on investment. Investing in ELSS and save up to Rs 46,800 in taxes and it also has the lowest locking period of 3 years. 

3. EPF:

EPF is a retirement benefits scheme for all salaried employees or working class taxpayers. This amounts to 12% of basic salary + DA, that is deducted by an employer and deposited in the EPF or any other recognised provident fund. 

4. 5-year FD:

Investments in Tax-saving FDs are liable for a tax deduction. It is like regular fixed deposits but comes with a lock-in period of 5 years and tax break under Section 80C on investments up to Rs 1.5 lakh. However, the interest earned on this FD is taxable and the minimum investment limit is Rs 1,000. FD interest rates across different banks range from 5.5% to 7.75% depending upon bank to bank. 

5. Unit-linked insurance plan:

ULIPs are a mix of insurance and investment. One part of the amount invested in ULIPs is used to provide insurance, while another part is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C.  An investor can buy ULIP for self or spouse or child. The return rate on the ULIP varies between 12% – 14%. Investment and withdrawals & maturity amount are tax-free

6. National Pension Scheme:

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. Investments of up to Rs 1.5 lakh (additional tax saving of Rs 50,000) can be used to avail tax deductions under Section 80C. Returns rate on the NPS varies between 12% to 14%. The NPS account can be opened by every Indian citizen between the age of 18 and 60. 

7. Sukanya Samridhi Yojna:

Sukanya Samriddhi Yojana/Scheme is one of the most popular schemes by the Government of India. The scheme is aimed at girl child development in the country. The parents/guardians can open the account in the name of a girl child, till she attains the age of 10 years. Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years. The interest rate on Sukanya Samriddhi Yojana is 8.5%. 

8. NSC:

NSCs are eligible for tax saving for the financial year in which they are bought. Investments up to Rs 1.5 lakh in NSCs can be made to save taxes under Section 80C and easily available at post offices. It comes with a lock-in period of 5 years and the interest is compounded annually but taxable. The current interest rate for FY 2018-19 on NSC is 8.0%