Best Tax Savings Options under Section 80C with High Returns

Section 80C of the Indian Income Tax Act offers taxpayers a wide range of allowances to save on tax. Among these, the ELSS (Equity-Linked Saving Scheme) Mutual Funds stand out for their high potential returns and flexible lock-in periods. This article explores the best tax-saving options within Section 80C, with a focus on high-return investments.

Introduction to Section 80C

Section 80C of the Income Tax Act provides an exemption on the amount invested in a variety of schemes, allowing taxpayers to reduce their taxable income. The maximum deduction limit under Section 80C is ?1.5 lakhs in a financial year. Investments under this section include:

Home loan payments Health insurance Life insurance policies Fixed deposits Mutual Fund investments Public Provident Fund (PPF) National Savings Certificates (NSC) Infrastructure Bonds Post office deposits NPS (National Pension System) investments (up to ?50,000)

The Power of ELSS Mutual Funds

Among the numerous options, ELSS Mutual Funds have gained popularity due to their potential for high returns and a shorter lock-in period. The lock-in period for ELSS is just 3 years, which is half the 5-year lock-in period for PPF and more flexible than other options like NSC or Pans.

ELSS Mutual Funds invest in equity-based schemes, offering higher potential returns compared to traditional fixed deposits or PPF, but with a slightly higher risk profile. Over the past three years, many ELSS schemes have delivered impressive returns of 15% to 18% annually. This makes them an attractive option for those looking to maximize their tax savings while growing their wealth.

Benefits of ELSS Mutual Funds

High Returns: Due to the equity-based investment approach, ELSS Mutual Funds have the potential to yield higher returns compared to other tax-saving instruments. Flexibility: The 3-year lock-in period is suitable for investors who need more flexibility in their investment plans. Reinvestment Options: ELSS Mutual Funds offer the option to reinvest gains, which can further enhance returns over time. Early Access to Returns: Longer lock-in periods may offer higher returns but do not allow the reinvestment of gains, while ELSS allows for early access to returns.

How to Invest in ELSS Mutual Funds

Investing in ELSS Mutual Funds can be straightforward and convenient. You can choose to invest:

Inline: Through online platforms like INFINI MF app, which offers the convenience of minimum investments of ?100. Monthly Installments: Through Systematic Investment Plans (SIPs), which allow investors to invest a fixed amount monthly and take advantage of rupee-cost averaging. One-time Investment: For those who prefer a lump-sum investment.

Conclusion

The best high return tax-saving investments under Section 80C include Mutual Funds, Insurance, National Saving Schemes, Public Provident Fund (PPF) etc., but ELSS stands out with its combination of high returns, flexibility, and lower lock-in period. For investors with a risk appetite and interest in the stock market, ELSS Mutual Funds are the ideal choice.

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Key Takeaways:

Section 80C offers tax exemptions on various investments. The best high return options under Section 80C are Mutual Funds, particularly ELSS. Investing in ELSS Mutual Funds provides higher returns and flexibility.