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A tax deduction helps to reduce the tax on annual income by investing the money at any other place. Under section 80C of the income tax, if an individual invests money up to a maximum of Rs 1 lac then, certain investments are deductible from income. An individual can save their tax by investing in various loans, child insurance plans and any other investment in property. Several lending institutions or banks provide different investment plan. Individual can save tax, get tax benefits and receive a profit from these plans.


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The Section 80C of the Income Tax Act allows the person a deduction on:

  1. Investment in a residential/commercial house property.
  2. Investment up to a maximum of Rs 1 lakh.
  3. Investment up to Rs.10,000/- in a medical claim popularly known as medi-claim Policy.

Some terms involve in tax saving planning are as follows:

Public Provident Fund (PPF)

  1. Beneficial retirement tool
  2. It has a lock-in period of 15 years..
  3. Interest earned is not taxed.
  4. Current return is 8.8% p.a.
  5. Investment limit of Rs 1 lakh p.a.

National Savings Certificate (NSC)

  1. Unlimited investment.
  2. 10-year NSC offers 8.9% and 5-year NSC delivers 8.6%.
  3. Interest earned is subject to tax.

Fixed deposits (FD)

  1. Fixed deposit cannot be pledged to get a loan.
  2. The maximum limit an individual can invest is Rs 1 lakh.
  3. Interest earned is taxed.
  4. The tenure period of the FD is for 5 years.
  5. Early withdrawals are not allowed.

Equity Linked Savings Scheme (ELSS)

  1. Profit earned is tax free.
  2. Maximum lock-in period of 3 years.
  3. It has the only tax-saving tool that has a stock market exposure.

Senior Citizen Saving Scheme (SCSS)

  1. Interest earned is taxed.
  2. The maximum investment can be Rs 15 lakh but only Rs 1 lakh will get the profit under Section 80C.
  3. This scheme is open to senior citizens.
  4. Interest obtainable is 9%.

Unit Linked Insurance Plan (ULIP)

  1. These schemes offer an investment option as well as an insurance cover.
  2. Premium paid towards these schemes qualifies for a deduction under Section 80C.
  3. They are partially exposed to the stock market, depending on the investment mandate.

Employee Provident Fund (EPF)

  1. The required deduction qualifies for a deduction under Section 80C.
  2. The return offered is 8.25%.
  3. This is not an investment, but a deduction that an employer makes from an employee’s salary towards the provident fund.
  4. Minimum 12% of an employee’s salary is deducted.

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