Mar 6, 2009

Section 80C Tax Planning - A Complete Guide

March – the last and final month allowed for tax savings – is here again. And, like every year you’ve yet to start with your tax savings. If you’re clueless as to where to begin, don’t worry. The Money Quest is here to help and guide you so that you don’t repeat the same mistakes over again.

I’ve already covered almost every aspect of section 80C tax planning. So, this post has nothing new to write about, but to act as a guide for preparing section 80C TAX PLANNING STRATEGY to minimize your tax outgo.

1. The first step is to find out the optimum way of tax planning. So, understand
how to do section 80C tax planning.

2. Know the
various tax saving options available to you under section 80C of the I.T. Act and also various limitations and restrictions imposed under section 80C.

3. There’s more to tax planning than section 80C. So, look beyond section 80C of the Income Tax Act because there are many
other deductions available to you under section 80 other than 80C.

4. The most crucial part of tax planning is choosing the investment instrument based on various criteria like type of return (fixed vs. variable), risk involved, duration and taxability of returns.

a) The best section 80C investment is ELSS. Before investing, understand how to invest in ELSS.

b) If you are looking for a debt option under section 80C, PPF is considered as best. Know
how PPF stands vis-à-vis NSC and if you decide to invest in it, keep in mind various tips for realizing the full potential of PPF before opening an account.

c) There is yet another mutual fund debt option available under section 80C. Before investing, know the pros and cons of
section 80C mutual fund pension plans.


d) Insurance is a bad choice from section 80C point of view. Nevertheless, if you want to invest in Ulips, understand that
Ulips are better than traditional life insurance plans. Besides, before investing in Ulips also go through and learn the Ulip secrets, top most Ulip factors and the best Ulips based on IRR.


5. At last, please make an INFORMED DECISION. To avoid regretting later, make sure that this time you don’t pick up the wrong investment product under section 80C.

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