This is the period of the year that tax payers would be looking out for various income tax saving options. While choosing an investment plan, one should consider the risk appetite and tenure. Here is a list of tax saving options available in India in 2019 to save tax under 80C and beyond that.
- Public Provident Fund
PPF offers many good features and it is still one of the best investment plans to save tax u/s 80C in 2019. PPF is suitable for low risk investors who are looking for tax savings and to accumulate funds for retirement, education of children or marriage.
PPF account has a lock-in period of 15 years and the interest received is tax-free at maturity. It offers an interest of 8% per annum and Government of India would keep updating this each quarter. You can invest up to 1.5 Lacs to be eligible for income tax rate u/s 80C. Withdrawal is permitted from the 6th financial year. You can invest in PPF before 5th April to get interest for the entire financial year, that can maximize your returns over the 15-year period.
- Unit Linked Investment Plan (ULIP)
ULIP policies provide dual benefits of life insurance and investment. After the 2010 IRDA guidelines, Insurance companies have reduced the ULIP charges and the policies have lower policy/administration charges. Many companies are also coming up with zero allocation charges. It provides returns between 5% to 12% depending on the scheme. To see good returns, you should hold ULIP for 10 to 12 years. This could be an alternative to investing in mutual funds or stock markets.
- Tax Saver FD Schemes
FD scheme is one of the traditional ways to invest money under section 80C of IT act. After the increase in interest rates, FD schemes provide 4.5% to 7.5 % per annum interest. Post Office tax saving scheme offers 8% interest rate per annum. Tax saver FD scheme has a 5-year lock-in period and some of the best tax saving schemes offered are: IDFC – 8.25%, DCB Bank – 7.75%, Lakshmi Vilas Bank – 7.5%.
- Life Insurance Plans
Life insurance is considered as the first step towards financial planning and one should prefer taking term insurance with low premium and high-risk coverage. They come with no maturity value and are designed for risk coverage and not for money saving purpose. To secure your family and save income tax, you should consider adequate life insurance coverage based on 10 – 15 years income and expenses.
- Voluntary Provident Fund (VPF)
Voluntary provident fund is the contribution from an employee to his provident fund account and this investment is exempted from tax u/s 80c. This is over and above the employee EPF contribution of 12%. However, there is no compulsion from employer to contribute to this VPF. The maximum amount one can contribute is 100% of Basic and DA. This scheme has lock-in period same as EPF i.e. on resignation or within 2 months of unemployment. Maturity returns are tax free.
The best time to start planning tax saving investments is at the beginning of the financial year. That way, you can make investments that can help you fulfill your long-term goals. Tax-saving investments should be looked at as a way to build wealth and not just to save tax.