Investment schemes that provide monthly income and Section 80C tax benefits

Tax Saving Tips: Getting a return on an investment and taking a tax deduction on deposits under Section 80C of the Income Tax Act can be a great combination. While it ensures that you get some income from your investment, it also provides you with income tax relief of up to Rs 1.50 lakh in a financial year. For people seeking a monthly income from their investments, there are many investment schemes with different lock-in periods that provide income monthly and tax benefits under Section 80C. In this write-up, we will discuss four such schemes.

National Pension System (NPS)

The market-linked scheme is aimed at providing a lump sum at retirement age and a monthly pension after that to NPS account holders.

Both public and private sector employees can participate in the NPS scheme.

One can contribute a lump sum amount or monthly in the form of SIP in NPS.

Contributions up to Rs 1.50 lakh in a financial year in a Tier-I account are tax-exempt under Section 80CCE.

Not just that, tax deductions up to Rs 50,000 under Section 80 CCD(1B) over and above the overall ceiling of Rs 1.50 lakh.
  

EPF/EPS

Another retirement scheme that provides a lump sum amount under Employees' Provident Fund (EPF) and a monthly pension under Employee Pension System (EPS) also comes under Section 80C.

In fact, EPF is one of the few categories that fall under the exempt-exempt-exempt (EEE) category, where deposits up to Rs 1.50 lakh in a financial year, the interest earned, and the maturity amount are tax-free.

The annual compound interest rate in the scheme is 8.25 per cent.

One can contribute up to 12 per cent of their basic pay and dearness allowance (DA) into their EPF account.

The employer also matches the same amount and deposit in the employee's EPF account. 
   

Post Office Senior Citizens Savings Scheme Account (SCSS)

Under this scheme, senior citizens can make a one-time deposit up to a maximum of Rs 30 lakh and get quarterly payments in the form of interest rate.

The scheme offers the joint best interest rate at 8.20 per cent annually.

The scheme has a 5-year lock-in period, along with the option of a three-year extension.

After the maturity period, senior citizens can get the maturity amount back.

Deposits up to Rs 1.50 lakh in a financial year in SCSS fall under Section 80C.

Fixed Deposit (FD)

A fixed deposit doesn't provide a monthly income directly, but the policyholders can request that the bank pay them monthly interest.

Banks offer FDs with different durations and different interest rates.

Not all FDs provide tax benefits, but only five-year FDs offer Section 80C exemption.

The maximum FD amount in a financial year to get tax exemption is Rs 1.50 lakh.