All About New Pension System (NPS)

All About New Pension System/Scheme (NPS)
The New Pension Scheme also known as NPS is effective from 1st April 2009.
Under this scheme, any Indian citizen can open the account with the government of India to save for his/her retirement. Well, let me tell you that this scheme is not only for government employees but this scheme is also for the Non-Government employees who work in the private sector companies.

What is the Purpose of NPS?

Let us understand this in layman’s language. Well, purpose of anyone in this world working as an employee is the peaceful retirement. I mean people work hard during their active life so that they can save enough on which they can live after their retirement.

The retirement age in India is 60 years (In very special cases it is 65) but because of the advancing medical facilities, the life expectancy has been increased. Previously people used to live up to the age of 70 years only but now because of the advanced medical services, people live well above 80 years.
And that’s why now the post-retirement life is increased.

Now, the government employees get the life time pension. Well, but what about the non-government employees who work in private sector? Well, they will have to build their retirement corpus by their own and that’s why NPS is the pension scheme for those people who want to build their retirement corpus by their own so that they can live happily on this corpus after their retirement.

Highlights of NPS -

The NPS would be administered by the Pension Fund Regulatory Development Authority (PFRDA).
A Central Recordkeeping Agency (CRA) would maintain all the records (like account balances) related to the NPS. National Security Depository Limited (NSDL) has been selected as the nationwide CRA for the New Pension System.

There would be six Pension Fund Managers (PFMs). The PFM would be responsible for investing your funds and generating returns from them.

There are also entities called Points of Presence (PoPs). The PoP would be responsible for the sales and marketing of the NPS. (These are similar to the distributors for mutual funds).

How to Open New Pension Sscheme (NPS) Account with ICICI Direct?

As all of you know that the New Pension Scheme (NPS) was launched in India in the year 2009 and up to now, it has attracted only 30,000 customers from all over the India. NPS has proved total disaster.
However, recently, PFRDA plans another push for a “Struggling’ NPS. It has taken several measures to boost the sales of New Pension System. One such measure is, tied up with ICICI Securities. Thus, now onwards you can open NPS account with ICICIDirect.com online.
And ICICI bank will get Rs.40 per every new account opened via ICICIDirect.com

Here are the key features of “How to pension Scheme account with ICICI?”




All you have to do is, logon to ICICIDirect.com with your login id and password and you will see the NPS option.

Once you will click the NPS option, you will have the subscribe NPS option from which you can subscribe it.

Let me tell you few things about NPS here.

- You can open an online NPS Tier 1 account by logging onto your ICICIdirect.com trading / investment account and visiting the “Subscribe NPS” link on the NPS page. Right now you can not open Tier – 2 types of accounts with ICICIDirect.com

- You can start a SIP in NPS through ICICIdirect.com

- Minimum annual contribution to NPS (Tier 1) is Rs.6000 per annum and can be started with as low as Rs.500 per month.

Monthly Income Plans : A detailed guide on MIP’s

Monthly Income Plans, When you hear it for the first time, you get a feel that it’s some kind of assured and non-risky product which will deliver you uninterrupted monthly income, but it’s not exactly that way. Do you have a lot of cash which you want to park somewhere with expectation of better returns than a Fixed Deposit? Are you looking for some kind of instrument which will give you regular income with decent returns with moderate or low risk?  If yes, welcome to the world of Monthly Income Plans, which are also known as MIP’s  .

What are Monthly Income Plans ?

An MIP is nothing, but a debt oriented mutual fund which gives you income,  in the form of dividends – simple as that. As MIPs are debt oriented mutual funds, they invest heavily in debt instruments like debentures , corporate bonds, government securities etc. It generally has 75-80% of its money in debt and rest in equity and cash . The income you can get from Monthly income plans is not limited to the monthly option. You can also choose to receive income quarterly, half-yearly or annually. Just like any other mutual fund, the MIP too, comes with two options.

1. MIP with Dividend option : Monthly income plans with dividend option provides you an income in form of dividends. There is an option to receive this income monthly, quarterly, half-yearly and yearly. So you have to choose the option at the time of buying the MIP . Note that while the dividend from MIPs are tax-free in the hands of investors, the company has to pay a dividend distribution tax of around 14% on the dividend before it reaches your hand. So  your returns reduce by that much.

For example , If company declares a dividend of Rs 3 per unit, they have to pay 42 paisa (14%) as Dividend Distribution Tax and you will only get remaining amount in your hand , on which you don’t have to pay any tax. I hope you know, that the NAV of your MIP will come down by Rs 3 after dividend is declared and given to you. So don’t shout your excitement to all the world when you get dividends, it’s just your own money which you got!

How do Highest NAV Guarantee Plans work

Now a days, we are seeing a new “Innovative” product in the market. They’re called Highest NAV Guaranteed Plans .These products have come in, after the recent crash in the market, and companies are taking advantage of the fact that Investors are looking for some kind of a safe investment equity product. Hence, they’ve launched these Highest NAV Return ULIP’s which confuse investors and make them (the investors ), believe that they are going to get the highest return from the Stock market in long run – generally the tenure is 7 yrs, for these plans .
In this article, we look at how Highest NAV Guarantee ULIP’s work, and you will understand, how any Guarantee product can be created by simple methods . The simple catch, here is that these schemes, are structured in such a manner, that the collected funds can be invested either in equities, debt instruments or in money-market instruments in proportions varying from zero to 100%

How Highest NAV Guarantee Policy Works ?

These plans use strategies like Dynamic Hedging and CPPI (Constant proportion portfolio insurance), which are advanced strategies used in Derivatives world. But, let me explain a simplified version of the whole process.
Supposing a policy starts today and is guaranteed to give highest NAV in next 7 yrs  and we can control how money moves to debt and equity, its pretty simple.
In the beginning, let’s assume a NAV of Rs 10, and the Asset allocation is 100% in equity and 0% in debt . Now suppose, the market moves up and NAV goes upto Rs 15 by the end of the first year, at this point, try to understand what Insurance company has to provide – they have to make sure, that they provide at least Rs 15 as the return after 6 yrs . Now in order to achieve this, all they have to do is keep X amount in debt instruments which will mature in next 6 years and provide Rs 15 at the end of 6 yrs, so assuming the debt return at 7%, they need to put around Rs 10 in Bonds , so that the maturity of the bond is Rs 15 at the end of 6 yrs .

=>  10 * (1.07)^6
=>  15.007

They can now invest the rest Rs 5 in Equity as Rs 10 is allocated to Debt . So, now they’ve made sure that whatever happens to the market, they get Rs 15 for sure at the end of 6 yrs. Now, there are two possibilities

Case 1 : Market Goes down : If market goes down, the NAV will go down correspondingly, but as per the strategy, the maturity value will be at least Rs 15.

Case 2 : Market Goes up again : If market goes up at this point and the NAV rises above 15, for example say to Rs. 18, now again they will pull out money from Equity and allocate such an amount to debt, that the maturity at the end of total 7 yrs would be Rs 18 and so on…

Note :

• These highest guaranteed schemes do not provide wide range of product categories, such as equity-oriented growth funds, balance funds and debt funds.
• Guarantee on highest NAV is available only if you survive the term. If you die during the term, your nominees will get the prevailing value of the fund. This is inferior to even a regular debt product because of the high cost structure involved.

Following is a pictorial description of how the Guaranteed NAV plan works with assumption of a 7 year tenure.

How Investors get Confused

You have to read in between the lines; Investors need to understand that these schemes guarantee the “Highest NAV”,  READ AGAIN! , it’s Highest NAV and not “Highest Returns” .  Normal Investors don’t give much thought before buying these products and normally assume that the returns will be linked to the Equity Markets .

Returns from Highest NAV Guarantee Plans

So, what are the return expectations of these funds? We know, that long-term equity returns, are normally in the 12-15% range while, debt returns turn out to be 6-7%. So, considering the fact, that these products will shift most of their money to debt, by the end of the tenure , we can expect the returns to be in range of 9-10%. We do get some equity upside in these products, but that will be limited. After a point, this product will turn into a debt oriented fund with a major portion in debt . Also if you factor in costs, like premium allocation charges , fund management charges and other yearly charges, the returns will not be what you actually expect.
You will be amazed to know, that the returns expected from these schemes, may be lower than the returns offered by equity-oriented Ulips. The reason being, that the basic objective of protecting the previous high NAV of the fund, may constrain the fund manager’s ability to take risks while allocating funds. So if the market has fallen down, the fund manager can’t take the risk of shifting the money from Debt to Equity to gain from the potential upsides in future , because they have to provide the “Guarantee.”

What is MIP

What are Monthly Income Plans ?

An MIP is nothing, but a debt oriented mutual fund which gives you income,  in the form of dividends – simple as that. As MIPs are debt oriented mutual funds, they invest heavily in debt instruments like debentures , corporate bonds, government securities etc. It generally has 75-80% of its money in debt and rest in equity and cash . The income you can get from Monthly income plans is not limited to the monthly option. You can also choose to receive income quarterly, half-yearly or annually. Just like any other mutual fund, the MIP too, comes with two options.

1. MIP with Dividend option : Monthly income plans with dividend option provides you an income in form of dividends. There is an option to receive this income monthly, quarterly, half-yearly and yearly. So you have to choose the option at the time of buying the MIP . Note that while the dividend from MIPs are tax-free in the hands of investors, the company has to pay a dividend distribution tax of around 14% on the dividend before it reaches your hand. So  your returns reduce by that much.

For example , If company declares a dividend of Rs 3 per unit, they have to pay 42 paisa (14%) as Dividend Distribution Tax and you will only get remaining amount in your hand , on which you don’t have to pay any tax. I hope you know, that the NAV of your MIP will come down by Rs 3 after dividend is declared and given to you. So don’t shout your excitement to all the world when you get dividends, it’s just your own money which you got!

2. MIP with Growth Option : Here, the money is not paid out to you in forms of dividends, instead it keeps growing in the mutual funds. Hence your money is just growing inside the fund itself and you can reap all the benefits at the time of redeeming the funds in future. In this option, you have nothing to do with dividends. Note that you get power of compounding in growth option because your returns also earn in future. Here is an article on difference between dividend vs growth option in mutual funds to give you a better idea of what I am talking about.

Features of Monthly Income Plans

1. Dividends can be declared only from the profits and not from Capital
Regulations demand that dividend can be paid only from surpluses and not from the capital investment. What it actually means is that dividends can be declared from earned income only. If your initial NAV was Rs 10 and after a month the NAV rose to Rs 10.2 , The dividend can only be given out of this 0.2 and not from the initial capital value . This makes sure that Company can not show to the world that they are constantly giving income in case they have not done well.
2. No guarantee of Regular Income
The biggest myth about Monthly income plans is that they provide guaranteed monthly income, which is not true (See this question asked by Krishna on our Forum).  While the aim of MIPs is to regularly declare dividends, it might happen at times, that they do not declare any dividends because of bad performance. To top that, there is no regulation or oversight on the MIP’s part to declare regular dividends. So take it on the chin, if you don’t get your income once in a while .

Even a bad SIP is a good bet

Wouldn’t you pity someone who invested in the Taurus Discovery Fund 10 years ago? It has been the worst-performing equity fund since January 2001, moving lethargically when other equity funds have whizzed past and created wealth for investors. Well, save your pity for those who chose not to invest in equities 10 years ago.

Despite being the worst-performing equity fund in the past 10 years, Taurus Discovery has churned out 8.99% returns, which is higher than what a debt instrument would have earned during the same period.

The difference becomes stark when we look at SIP returns. The 10-year SIP returns of Taurus Discovery are over 15% (see table), much higher than what a debt instrument can offer. We looked at 10-year SIP returns of equity funds during different time frames and found that except for one instance, even the worst-performing equity fund had given significantly higher returns than monthly investments in debt options (fixed deposits, NSCs, PPF).

Most investors already know that in the long term, equities have the potential to churn out the best returns among all asset classes. But many don’t realise that in the long run, SIP investments work best for them. “SIPs are an excellent tool for investors starting off in the age group 21-35 years as that is a wealth creation period,” says Partha Iyengar, founder, Accretus Solutions. During the early phase, individuals do not have too much to invest.

What is Gratuity and how you benefit from it

In this day and age of job hopping, many of us don’t know what gratuity is. This article explains gratuity in detail, who is eligible for it, how much can you get through it, etc. It also explains what the recent change in the gratuity limit - from Rs. 3.5 Lakhs to Rs. 10 Lakhs - means to you.

You might have heard about gratuity. It might also form a part of your CTC package. (Read “Cost To Company or CTC salary: Understanding and Calculation” for more on CTC).

But do you know what gratuity is? How can it help you? Whether you are eligible for it? How much do you get as gratuity, and when? Let’s find out.

What is Gratuity?
Gratuity is intended to be a retirement benefit, just like Provident Fund (PF).
(Please read “Provident Fund (PF) and Voluntary Provident Fund (VPF)” for more on PF)
However, you need not wait till retirement to get this money.



When do you get the gratuity amount?
You get the gratuity amount at the time of retirement or resignation, provided you have completed at least 5 years of service in the organization.
In case of an employee’s death, the gratuity amount is payable even if he or she has not completed 5 years of service in the organization.

MIPs, income funds, short-term funds and liquid funds

MIPs have an equity component (sometimes as high as 20-25%) and hence is the riskiest of the lot.

Income funds have some capital risk, but generally give better returns compared with fixed deposits over three-five years. 


Short-term funds have less capital risk and are meant to be held for six months to a year. Liquid funds are the safest of the lot with returns comparable to savings account returns.

These, however, are typically used less as investment vehicles and more as source funds for systematic transfer plans to equity funds.

Difference between ETF and MF

What are the differences between Nifty exchange-traded fund (ETF) and any equity mutual fund? Could you also highlight the pros and cons of both?


ETFs are passively managed funds. The portfolio of an ETF fund is determined by an algorithm and quantitative details about the companies listed in the market. No human judgement enters the decision-making process regarding which stock the fund will hold and in what percentage. General equity mutual funds, on the other hand, are actively managed. These have a fund manager and a team making decisions about all aspects of the portfolio, including what stocks to hold, how much and when to buy/sell.


The advantages of an ETF is transparency and cost. Since there is no active management involved, the costs are lower than actively managed funds. The disadvantage is that due to a specific mandate, there is lack of flexibility in terms of reacting to market conditions or opportunities. In general, actively managed funds have better manoeuvrability since they can make a judgement based on what they observe.

A to Z of Life Insurance

Who should buy life insurance?

If you have anyone who relies on you for their expenses, you should buy life insurance. That is, if you have any dependent, you should buy life insurance.

The dependent(s) can be your parents, spouse, kids - anyone who can be in trouble financially if you are not around.

Types of Life Insurance Policies

There are three popular forms of life insurance policies:

1.     Endowment Plans

2.     Unit Linked Insurance Plans (ULIPs)

3.     Term Insurance Plans

Let's discuss each in detail.

IT Rates in India

Rate of Income Tax

As we saw, the income we earn is subject to income tax by the government.

The rate of income tax is different for different income levels, and thus, the income tax that you pay depends on your total earnings in a given year. These slabs are also different for men, women and senior citizens.

Following are the income tax slabs for men for FY 2010-11:

Income less than 1,60,000 : 0%

Income from 1,60,001 to 5,00,000 : 10%

Income from 5,00,001 to 8,00,000 : 20%

Income above  8,00,001: 30%

Following are the income tax slabs for women for FY 2010-11:

Income less than 1,90,000 : 0%

Income from 1,90,001 to 5,00,000 : 10%

Income from 5,00,001 to 8,00,000 : 20%

Income above 8,00,001: 30%

Following are the income tax slabs for Senior Citizens for FY 2010-11:

Income less than 2,40,000 : 0%

Income from 2,40,001 to 5,00,000 : 10%

Income from 5,00,001 to 8,00,000 : 20%

Income above 8,00,001: 30%

Apart from this, there is an educational cess of 3%. This is to be added to the total income tax liability after computation of income tax.

For more details and to know the latest income tax slabs, please read "Income Tax Slabs / Brackets and rates".

(To know more about filling income tax return, please read "How to fill Income Tax Return Form 1 (ITR1) - Instructions and Video Tutorial")

How to Save Income Tax - Deductions Under Section 80C

No one likes to pay tax - after all, it is our hard earned money! But there are different ways in which we can reduce our income tax liability.

The most important of these are deductions permitted under section 80C of the income tax act.

The government encourages certain types of savings - mostly, long term savings for your retirement - and therefore, offers you tax breaks on such savings. Sec 80C of the Income Tax Act is the section that deals with these tax breaks.

It states that qualifying investments, up to a maximum of Rs. 1 Lakh per year, are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1 Lakh), and you end up paying no tax on it at all! 

This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1 Lakh, you save tax of Rs. 30,000. Isn't this great?

Some of the the qualifying investments u/s 80C are:

- Provident Fund (PF)

- Voluntary Provident Fund (VPF)

- Public Provident Fund (PPF)

- Life Insurance Premiums

- Investments in Equity Linked Savings Scheme (ELSS) of mutual funds

- Home Loan Principal Repayment

(To know more about saving income tax using sec 80C, please read "Saving Income Tax - Understanding Section 80C Deductions")

How to Save Income Tax Using a Home Loan

Income Tax can also be saved if you have taken a home loan. The EMI that you pay towards your home loan consists of two portions - the principal amount, and the interest for the home loan.

Although both these components help you save tax, the tax treatment of these two is different.

Income Tax treatment of Principal Repayment: The Principal Repayment for home loans is included in Section 80C of the Income Tax Act as one of the permissible investments.

This means that principal repayment up to Rs. 1 Lakh is totally deductible from your income if you have not made any other investments under section 80C.

There is only one condition here - principal repayment can be considered as a valid investment under section 80C only if it is made for a self occupied house. That is, you should be living in the house for which you are making the principal repayment. The only exclusion is if the house is not in the city in which you are working - in which case you can claim the principal repayment as an investment under sec 80C even if you are not living in the house.

Income Tax treatment of Interest Payment: The interest you pay as the part of your EMI is considered an expense under the head "Income from House Property", and is deductible up to a maximum of Rs. 1.5 Lakhs under Section 24 of the Income Tax Act. 

The interest amount would appear as a negative amount under the head "Income from House Property", and would thus be deductible from your total income under Sec 24. 

The best part is that there is no restriction of "self occupied property" for claiming the tax break on interest paid under sec 24. In fact, if you have rented out the house, and the rent you receive is more than Rs. 1.5 Lakhs per year, ALL interest paid (even if it is more than Rs. 1.5 Lakhs) is deductible from the rent received - provided that the interest paid is not more than the rent received. 

(To know more about saving income tax using a home loan, please read "Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage")

Filing of Income Tax Returns - Which Income Tax Return (ITR) Form To Use

Form ITR1

ITR-1 is for individuals having income from: 

- Salary / Pension / Family Pension 

- Interest 

Thus, it is for people having a salary (or pension) and having savings bank accounts, fixed deposits, National Savings Certificates (NSCs), or other interest bearing instruments. 

ITR1 is not for you if: 

- You are filing on behalf of a Hindu Undivided Family (HUF) 

- You have sold shares / mutual funds in the past year

- You have sold house / land in the past year

- You have paid EMI for your house to repay your home loan 

- You have rented out your house 

- You have income from your business or profession 

Form ITR2 

ITR2 is for you if: 

- You have income from salary or pension 

- You have savings bank accounts, fixed deposits, National Savings Certificates (NSCs), or other interest bearing instruments 

- You have sold shares / mutual funds in the past year

- You have sold house / land in the past year

- You have paid EMI for your house to repay your home loan 

- You have rented out your house 

- You are filing on behalf of a Hindu Undivided Family (HUF) that doesn't have income from business or profession 

ITR2 is not for you if: 

- You have income from your business or profession

Form ITR3 

ITR3 is for you if: 

- You are a partner in a firm 

- You are filing on behalf of an HUF that is a partner in a firm 

ITR3 is not for you if: 

- You have a proprietary business 

- You are filing on behalf of an HUF, and it has a proprietary business 

- You or your HUF are not a partner in any firm 

Form ITR4 

ITR4 is for you if: 

- You have a proprietary business 

- You are filing on behalf of an HUF, and it has a proprietary business 

ITR4 is not for you if: 

- You or your HUF do not have a proprietary business

All You wanted to know about Direct Tax Code (DTC)

• The cabinet recently approved the Direct Tax Code (DTC) bill that is going to replace the Income Tax Act, 1961 and the Wealth Tax Act, 1957
• The Direct Tax Code will come into effect from FY 2012-13 starting from 1st April, 2012. You would file your first income tax return under the DTC after 31st March, 2013.  

• Exemptions (Currently available under Section 80C)

  upto Rs. 1,50,000 (up from the current Rs. 1,00,000

  However, the limit of Rs. 1,50,000 would have 2 sub-limits: 

  • Rs. 1,00,000 for approved long term savings (geared towards retirement) like the new pension scheme (NPS), provident fund (PF), superannuation, gratuity, etc.
  • Rs. 50,000 for some other investments, like pure life insurance (term insurance) and health insurance premiums, children's tuition fees, etc.
  
  
  

  Income Tax Benefit of a Home Loan

  The income tax benefit for the interest component of a home loan has been retained, and the limit for it remains Rs. 1,50,000.

  However, no income tax benefit would be available for the principal component of the home loan – principal repayment would not result in any tax saving.
  

   

  Long Term and Short Term Capital Gains

  n a very welcome relief to real investors (read: long term investors), the long term capital gains from shares and equity mutual funds (MFs) would remain to be completely tax free – there would be no tax on long term capital gains (LTCG)

   

  Wealth Tax

  A wealth tax would be levied at a rate of 1% on net wealth of a person over Rs. 1,00,00,000 (Rs. 1 Crore). Net wealth is defined as all assets less any debt.
  (Currently, wealth tax is levied on assets over Rs. 15,00,000 or Rs. 15 Lakhs)
  “Assets” for the purpose of calculating wealth tax would include jewellery, urban land, buildings, automobiles, bank deposits outside India, share in foreign trusts, shares held in foreign companies, watches over Rs. 50,000 in value, works of art and cash-in-hand over Rs. 2,00,000.
  

    

• Income Tax (IT) Slabs / Brackets

  This is the topic that is of most interest to everyone!
  Here are the proposed income tax slabs for individuals:
  
  Men and women under 65 years of age
  
  

  Income	Income Tax (IT) Rate
  Up to Rs. 2,00,000	0%
  Rs. 2,00,001 to Rs. 5,00,000	10%
  Rs. 5,00,001 to Rs. 10,00,000	20%
  Above Rs. 10,00,001	30%

  
  Men and women over 65 years of age
  
  

  Income	Income Tax (IT) Rate
  Up to Rs. 2,50,000	0%
  Rs. 2,50,001 to Rs. 5,00,000	10%
  Rs. 5,00,001 to Rs. 10,00,000	20%
  Above Rs. 10,00,001	30%

  
  

Section 80 C Deductions under Income Tax

Sec 80C of the Income Tax Act is the section that deals with these tax breaks. It states that qualifying investments, up to a maximum of Rs. 1 Lakh, are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1 Lakh), and you end up paying no tax on it at all! 

This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1 Lakh, you save tax of Rs. 30,000. Isn’t this great?

Qualifying Investments

• Provident Fund (PF): The payments that you make to your PF are counted towards Sec 80C investments. For most of you who are salaried, this amount gets automatically deducted from your salary every month. Thus, it’s not just compulsory savings for your future, but also immediate tax savings! 
  
  
• Voluntary Provident Fund (VPF): If you increase your PF contribution over and above the statutory limit (as deducted compulsorily by your employer), even this amount qualifies for deduction under section 80C. 
•  
• Public Provident Fund (PPF): If you have a PPF account, and invest in it, that amount can be included in Sec 80C deduction. The minimum and maximum allowed investments in PPF are Rs. 500 and Rs. 70,000 per year respectively.
  
  
• Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. 
•   Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C.
  If you are paying premium for more than one insurance policy, all the premiums can be included.
  It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here. 
  
  
• Equity Linked Savings Scheme (ELSS): There are some MF schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C. 
  
• Home Loan Principal Repayment: The EMI that you pay every month to repay your home loan consists of two components – Principal and Interest. 
•   The principal component of the EMI qualifies for deduction under Sec 80C. 
  
  
  • Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act.
  • Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house. 
  •  
  • National Savings Certificate (NSC): The amount that you invest in National Savings Certificate (NSC) can be included in Sec 80C deductions.
  • Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions. 
  •  
  • Pension Funds – Section 80CCC: This section – Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C - it maeans that the total deduction available for 80CCC and 80C is Rs. 1 Lakh. 
  •   This also means that your investment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh. 
    
    
  • Bank Fixed Deposits: This is a newly introduced investment class under Section 80C. Bank fixed deposits (also called term deposits) having a maturity of 5 years or more can be included in your Sec 80C investment.
    
    
  • Senior Citizen Savings Scheme (SCSS): SCSS is a deposit scheme specially meant for elderly citizens.
    
    
  • Post Office Time Deposit Account: This is the fixed / term deposits offered by the Department of Posts (Government of India) through the post offices in India. 
  •   If the time deposit is opened for a duration of 5 years or more, the amount invested is qualified for deduction under section 80C.
    
    
    
  • Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.