The government of a country receives income from its citizens in the form of taxes. This money is utilised to provide public services. If a person’s yearly income surpasses a specific threshold, they are taxed. This is what is referred to as taxable income. Tax breaks are also available from the government if you invest in specified programmes. Section 80C of the Income-tax Act of 1961 is one of the most important sections under which you can report your savings and receive maximum deductions.
Things we covered for you
+
This article explains how it works and how it might help people save money in the coming fiscal year.
Section 80C of the Income Tax Act, 1961
Section 80 C of the income tax act allows a reduction of tax liability of an individual eligible to pay tax by saving the tax investments or incurring qualified expenses. The maximum deduction under Section 80C is Rs. 1.5 lakhs every year from an individual’s income. The Income-tax Law has specified how a taxpayer can claim deduction benefits on payments, contributions and investments. However, the advantage of this section can be availed only by an individual and HUF (Hindu Undivided Family). Companies, partnership firms, LLPs do not fall under this deduction.
The subsections of section 80C are:
Read: PFMS(Public Financial Management Systems) to Track Your Payments
Book Best Packers & Movers with Best Price, Free Cancellation, Dedicated Move Manager
This is third
This is third
This is fourth
This is fourth
This is fifth
This is fifth
This is six
This is six
This is seven
This is seven
This is eight
This is eight
– Section 80CCC
– Section 80CCD (1)
– Section 80CCD (1b)
– Section 80CCD (2)
All the mentioned subsections allow deduction of a maximum of Rs. 1,50,000 but the section 80CCD (1B) allows an extra deduction of Rs. 50,000.
Let’s discuss a bit about the subsections as mentioned above of section 80C
– SECTION 80CCC: This section states the deduction for the life insurance annuity plan.
– SECTION 80CCD (1): This section deals with the deduction for NPS (National Pension System)
– SECTION 80CCD(1b): This section states the deduction for NPS with an additional deduction of Rs 50,000 for the amount that has been deposited to the NPS account.
– SECTION 80CCD (2): Deduction for NPS, which is the employer’s contribution and is allowed up to 10% of basic salary including the dearness allowance. Only the salaried individuals can take the benefit of this section.
Deductions Under Section 80C
Having understood this far, let us dig deeper as to how exactly you could benefit from Section 80C investments and utilise Rs 1.5 lakh that you can. You have to break that down into the commodities listed as savers under section 80C investments and there are a lot of those commodities. Each of these products is unique, but they have a common objective: to provide tax savings on the income that flows every financial year. These products not only save your tax, they also help you increase your money. Here is a complete list of deductions under Section 80C:
Public Provident Fund
The Public Provident Fund (PPF) is one of India’s oldest tax saving instruments, and this was introduced in the year 1968. This fund is a long-term retirement saving option that functions like a savings cum saving tax medium. You can invest from around Rs.500 to Rs 1.5 lakh in a financial year. The tenure of PPF is a minimum of 15 years. You can claim the amount you deposit in a financial year under Section 80C deductions within the Rs 1.5 lakh limit.
Read: Savings VS Investment in Real Estate: Which is Better for Generating Wealth?
The current interest rate on PPF is 7.1%
Employees Provident Fund (EPF)
An employee’s contribution to the PF deduction under the 80C account is allowed under section 80C of the income tax act. However, the employer’s contribution is at liberty from tax and is not available at 80C speculation.
National Savings Certificate
The National Savings Certificate (NSC) is a guaranteed income investment that can be opened at any post office. The tenure of this scheme is fixed at five years. If you make any investment under the NSC, it can also be claimed under section 80C deductions. The interest accrued for the four years and the investment amount is also eligible for deduction under Sec 80C of the Income Tax Act.
Sukanya Samriddhi Yojna
This scheme is designed to provide a bright future for the girls of our country. The SSY account can be opened at any post office and designated banks for a girl child. A girl needs to be below the age of 10 to open this account. The interest earned in this account is tax-free.
Tax Saver Fixed Deposits
Section 80C also applies to Tax Saver Fixed Deposits (FDs). Any deposit made with a bank for five years is tax-deductible up to the level set out in Section 80C of the Income Tax Act of 1961.
Read: Long-Term Capital Gain Tax: Strategies, Changes, and Impact
Senior Citizens Saving Scheme
This scheme was mainly designed to address the tax savings needs of a senior who are 60 years old or more. A senior citizen who has gone for VRS (Voluntary Retirement Scheme) can avail of this scheme after 55 years. An investment carried out under this scheme is eligible for 80C deductions with a limit of 1.5 lakh rupees only.
Equity Linked Savings Scheme
The ELSS is an equity mutual fund category where investments qualify for tax deductions under Section 80C of the Income Tax Act up to the Rs 1.5 lakh limit. The money in this scheme is invested in equity funds.
National Pension System
This is a voluntary retirement plan that allows you to build a retirement fund or an old-age pension. This scheme is available to all Indian citizens (resident or NRI) between 18 and 65 years. The contribution made under the NPS can be deducted under 80CCD.
Life Insurance Premium
you can buy a life insurance policy for yourself, for your spouse and your children and can claim an 80C deduction.
Home Loan Principal Repayment
There is something for homebuyer servicing and home loans. If you have taken a home loan, you can avail of the deduction under section 80C
Read: How to File an ITR? e-Filing Income Tax Returns Made Easy
Unit Linked Insurance Plan
This insurance plan has a dual benefit with life covers and investment benefits. The advantage of tax deduction can be availed up to 10% of the total sum and annual premiums. You can maximise your savings by investing in ULIP’s.
Eligible Investments Under 80C
The income tax department allows reducing the taxable income of the eligible taxpayer if the individual wants to make certain investments. The eligible tax-saving investments under 80C are:
- PPF
- EPF
- LIC Premium
- Equity Linked saving scheme
- Principal amount payment towards home loan
- Stamp duty
- Registration charges for the purchase of property
- SSY
- NSC
- SCSS
- ULIP
- Tax saving FD
- Infrastructure bonds
Tax Benefits Under Section 80C
As mentioned above, section 80C of the Income Tax Act provides the benefits to a taxpayer on various investments up to Rs. 1.5 lakh per year from the taxable income. And section 80CCC can provide deduction up to Rs. 1.5 lakh per annum on the contribution which an individual makes on pension funds.
Section 80C Applies To
Section 80C of the income tax act applies to individuals and HUF, i.e., undivided Hindu families. These two can avail the benefit of deductions of tax. A maximum deduction of Rs.15lakh every year is allowed from the taxpayer’s income whereas, companies, LLPs and partnership firms don’t fall under these criteria.
As we can see, section 80C of the IT Act is the most helpful provision for the taxpayer. The tax saving is available for the initial stage. And later on, the maturity of the investments falls under section 80C, which is tax-free. The taxpayers can also claim benefits for the deduction on the payments, investments, contributions by the income tax Act. To know more about other areas of tax and their benefits, visit TheNoBrokerTimes. For Any legal issues just click below.
FAQ’s
Q1. Can a firm or a company have the benefit of section 80C?
Ans: Section 80C is only applicable on HUF and or to an individual.
Q2. What is the last date for investing in tax saving purposes?
Ans: March 31 is the deadline for investing in tax savings.
Q3. What is the overall limit, including the subsections of Section 80C, for claiming deduction?
Ans: It is 1.5lakh for all the sections except under section 80CCD(1b) deduction of Rs. 50,000 is allowed.
Q4. How can you maximise tax savings under section 80C?
Ans: You can save tax under section 80C by investing either the whole amount (1.5 lakh), or you can divide it into different instalments.
Q5. Is EPF part of 80C?
Ans: Yes, the employee’s provident fund is a part of this section. Its contribution is tax-free.
