In order to encourage savings, the Government of India has come up with a lot of initiatives where you can tax breaks on certain financial investments under Section 80C of the Income Tax Act.
Provident Fund and Voluntary Provident Fund:
The Pf or the VPF amount is deducted directly from your salary and contributes towards your tax savings under Section 80C. The interest rates earned on such savings is also tax free.
PPF (Public Provident Fund):
You can open a PPF account with the post office or even any rationalized bank which allows a minimum deposit of Rs 500 per year and a maximum of Rs 70,000. The interest of 8% earned from these investments is tax deductible and the maturity period of these securirites is 15 years.
NSC (National Savings Certificate):
The maturity period for NSCs are 6 years and the interest accrued from these savings are tax deductibles. The interest what you will be entitled to is compounded half yearly at 8%p.
ELSS (Equity Liknked Savings Schemes):
The money invested in ELSS is locked in for a period of 3 years, and basically they are tax saving mutual funds. Although they benefit the account holder from tax benefits they do not guarantee a return, since the money is invested in equities.
Life Insurance Premiums:
Finances which are used to pay 1 or more than 1 insurance policies are added to tax deductions list. Even ULIPs(Unit based Insurance policies) which not only provide investments but also a lot of investment opportunity, enjoy tax deductions.
Home Loan:
Since, we all know that a home loan constitutes of principle amount and the interest amount and under Section 80C, the principle of the loan enjoys tax benefits.
Registration charges and Stamp Duty:
When you purchase you house, the amount you pay for stamp duty or house registration charges are also applicable for a tax deduction in the first year of purchasing the house.
FDs (Fixed Deposits):
If you have FDs in scheduled bank with a lock in period of 5 years, it is entitled to tax deductions.
Education loan:
If you have spent on your child’s future educational requirements, it is also enjoys tax deductions only if the account holder has kept the all the receipts in order to claim the benefit.