How to Invest in a Tax Saving SIP Under 80C?

What is a Tax Saving SIP?

A Tax-Saving SIP is a Systematic Investment Plan that helps you save taxes while building wealth. It is primarily offered through Equity Linked Savings Schemes (ELSS) or Unit Linked Insurance Plans (ULIPs). These investments qualify for tax deductions of up to ₹1.5 lakh under Section 80C of the Income Tax Act. Tax Saving SIPs are a simple and disciplined way to save taxes and grow your money.

SIP Tax Benefits

The key benefits of investing in tax-saver best SIP plans are listed in the following table:

How to Invest in a Tax Saving SIP under Section 80C?

You can follow the steps mentioned below to learn the process of tax free investments in a SIP:

• Understand Section 80C Benefits: Under Section 80C, you can save tax up to ₹1.5 lakh in a financial year by investing in ELSS or ULIPs.
• Choose Between ELSS and ULIP: Pick ELSS for only market linked returns or ULIP for market linked returns with life insurance and flexible fund options.
• Research and Compare Options: Check ELSS funds for returns and costs, and review ULIPs for charges, fund performance, and insurance cover.
• Decide Investment Amount and Tenure: Decide how much to invest monthly for ELSS or yearly premiums for ULIP based on your tax-saving and financial goals.
• Complete KYC and Account Setup: Submit your PAN, Aadhaar, and address proof to complete KYC and open your mutual fund or insurance account.
• Start Investing: Begin your ELSS SIP or ULIP premium payments by linking your bank account for automatic deductions.
• Track and Review Performance: Regularly check how your investment is performing and adjust if needed to maximize returns and tax savings.

Eligibility Criteria to Invest in Tax Saver SIP Plans

The following criteria must be fulfilled before claiming tax benefits while filing your Income Tax Return (ITR):

• Age Limit: Applicants must be between 18 and 65 years old.
• Indian Residents: Indian citizens, including Non-Resident Indians (NRIs), can invest.
• Taxable Income: Eligible for deductions under Section 80C of the Income Tax Act.

Documents Required to Invest in a Tax Saving SIP under Section 80C

You must provide the following documents to invest in a tax saver SIP plan under Section 80C:

• KYC Documents: Aadhar card, PAN card, Address proof (e.g., utility bill, passport), and Passport-size photo.
• Bank Account Details: Cancelled cheque or Bank passbook or statement
• Income Proof: Salary slip or Income Tax Return (if applicable)

Benefits of Tax Saving SIP Investments

The key benefits of a tax saving SIP are as follows:

• Save Taxes: You can claim up to ₹1.5 lakh deduction under Section 80C by investing in Tax Saving mutual funds or ULIP funds.
• Build Wealth: SIP investments grow your money through compounding over time.
• Good Returns: These SIPs invest in equity or debt funds, which can give high returns in the long term.
• Easy & Flexible: You can invest a fixed amount every month and adjust it whenever needed.
• Lower Risk: SIPs spread your money across sectors, reducing the risk of losses.
• Affordable for All: You can start investing in SIPs with small amounts like ₹500 per month.

Other Investment Options Available under Section 80C

Following are some of the other investment options that offer tax benefits under Section 80C of the Income Tax Act:

Conclusion

Investing in a tax-saving SIP under Section 80C can be done through ELSS funds or ULIPs. ELSS offers high growth potential with a 3-year lock-in, while ULIPs provide dual benefits of insurance and investment with a 5-year lock-in. Both options allow tax deductions of up to ₹1.5 lakh annually. Compare factors like returns, charges, and risk before deciding.