Save tax through these methods, invest for higher returns

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Most of us invest in guaranteed-return tax savings instruments every year. However, if the Rs 1.5 lakh limit provided by section 80C of the Income Tax Act is exhausted by other means such as housing loans, children’s education or provident fund balance, one can invest an equivalent amount in other instruments that offer higher returns, says investment advisers.

Every year most of us put our money in government-guaranteed fixed-return instruments such as PPF and NSC and try to cover as much of the Rs 1.5 lakh limit as possible. However, there are other avenues to get tax saving benefits under section 80C as well. Have a look.

PF balance Your provident fund contribution in a year might add up to a sizeable amount. Just like PPF, this contribution will also come under the Rs 1.5 lakh limit for tax benefits.

Purchase of property If you buy a house expenses related to stamp duty and registration charges of a house can be deducted under Section 80C.

Home loan Check your home loan interest certificate for EMI payment details. The interest component of the EMI added during the year can give you tax breaks.

Tuition fee The tuition fee for your children can also help you reduce your tax burden under 80C. Playschool and preschool fees can also be added under the clause.

Life insurance premium You can claim tax deduction for the premium that you pay for life insurance under this section. The only condition is the premium must be less than 10% of the sum assured.

Experts take “If the cumulative amount of these five instruments is less than Rs 1.5 lakh then you still have some room for investing in tax saving instruments under section 80C. Otherwise, you can opt for any other instrument that might fetch you higher returns. But the choice of the instrument is obviously dependent on the risk appetite of the individual,” says Narayan Jain, Income Tax expert.

“Under section 80C there are several instruments that forces one to save. However, someone in his thirties and can easily take some risk and continue till he reaches 45 years,” says Nilotpal Banerjee, investment adviser.

Banerjee said he advises his clients to invest a maximum share of 10%-15% of the total annual investment corpus in conventional instruments such as NPS, SSS, NSC etc. “But one must take risk if one is looking for higher returns,” says Banerjee, who has more than 1,000 clients.

Guaranteed return instruments The guaranteed return instruments that millions opt for under 80C are PPF, NSC, NPS, tax saver FDs, post office term deposit, ELSS, ULIP, Senior Citizens Savings Scheme, Sukanya Samriddhi Scheme etc.