Off late I am seeing lot of spam SMS in my inbox asking me to take advantage of the enhanced income tax 80 C limit in the latest budget to Rs. 150000/- . On a recent visit to bank I was again reminded of the enhanced 80C limits by my relationship manager. Before you respond to such messages take a pause before you invest more towards Income tax 80C deduction. Why am I asking you to do this? You may just not need more investment.
Many a times people do not know all the options available under section 80C hence are easy targets for brokers in financial sector. Remember a bank employee is also a broker. So what was the pause that I was talking about? I had asked you to take a pause to fill in the table below. Once you have filled in the table sum total all your investments and see if you really need more. You may be surprised to see list of many available instruments under section 80C but that’s how it is. You have plenty of choice available to invest under section 80C, so go ahead get spoilt for a choice.
Pause before you invest more towards Income tax 80C deduction
STEP 1: Fill up the table below then sum total the total amount
|* Make sure to include amount that you pay for your dependent
(spouse & child) as well
Total Amount Invested
|Employee Provident Fund (EPF)||Include only your contribution not employer’s contribution. While 12% of basic is a mandatory deduction, you can voluntarily contribute more towards your provident fund.|
|Voluntary Provident Fund (VPF)||While 12% of basic is a mandatory deduction, you can voluntarily contribute more towards your provident fund.|
|Public Provident Fund (PPF)|
|Life Insurance Premium||Include term plan, endowment plan and ULIPs. Policy should give you 10 times life cover of the annual premium.|
|ELSS Mutual Fund|
|Bank Tax Saving FD||This is a special product with a 5 year lock-in|
|5-Yr Post Office time deposit (POTD) scheme||This is a special product with a 5 year lock-in, similar to bank FD|
|Tuition Fees||Tuition fees to any college or school for self or dependent. Maximum of two children allowed.|
|Senior Citizen Savings Scheme||only for a senior citizen|
|Pension Funds (sec 80CCC)||For Example NPS, LIC Jeevan Nidhi, other pension plans etc.|
|National Savings Certificate(NSC)||Note: Not only new NSC qualify but, interest generated every year from your previous NSC is also eligible for 80C exemption.|
|Stamp Duty and Registration Charges paid while registering a home||Stamp duty paid at registration is also eligible under section 80C|
|Home Loan Principal Repayment||This is principle component of the EMI, ask your bank for breakup of principle and interest.|
STEP 2: See if you are really falling short of Rs. 150000/- limit
- Sum total all values in column “Total Amount Invested”
- If you are falling short invest in a financial product depending on your life goals. Call up an advisor that you can trust to talk about multiple options.
- If you are not falling short you do not need to invest for saving income tax under section 80C. You should still invest for other reasons, make sure you have a financial plan in place that takes care of your life goals.