Tax Planning is something that most of us find difficult to do every financial year. Understanding the section and investment alternatives under Section 80C investments will help you save as much money in taxes as possible while investing. 80C investment consists of various tax savings options. As Indian citizens, we use the country’s public infrastructure and services, and income tax is a significant source of money for the government.
What is Section 80C of Income Tax Act, 1961?
To understand where individuals can apply for tax deductions with investments under 80c, it is crucial to understand what is 80c and how it works. Section 80c investments is famous amongst taxpayers for its benefits and it allows people to save on taxable income. These benefits are made through incurring eligible expenses or making tax-saving investments.
Maximum deduction of Rs. 1.5 lakh is witnessed and can be availed annually from the taxpayer’s income.
Its important to note that only individuals and HUFs can avail this benefit. Partnership firms, companies, and LLPs do not fall under the category to avail of this benefit.
Moreover, It’s important to know that maximum claimable deductions can only reach Rs. 1.5 lakh. Except for certain cases, an additional deduction of Rs. 50,000 is allowed under Section 80CCD(1b).
What Do Tax Saving 80C Section Investments Mean?
80c investment options is a popular way to claim an income tax deduction. It provides for a Rs 1,50,000 deduction and is available to salaried persons and other taxpayers, regardless of their source of revenue. Certain 80c investment options products qualify for the tax deduction. Individual or multiple investment instruments might be claimed for the deductions.
Key Takeaways
- Investment and other qualified expenses are available to reduce tax liability.
- Read the latest notifications and amendments before claiming deductions and ensure eligibility and compliance before availing deductions.
- Investment should be in a recognized or approved scheme under the umbrella of 80C investments.
- A deduction should always be made in Gross total income by aggregating all incomes.
- The government revises these investment eligibility and benefits limits in each financial year in the finance budget.
Also Read about: Tax Calculator in India
What are the Eligibility Criteria for Section 80C Investment?
Section 80C covers individuals and Hindu Undivided Families under section of the Internal Revenue Code (HUF). Furthermore, this clause applies to both Indian residents and non-resident Indians.
On the other hand, partners, firms, and other corporate organisations are not eligible for the 80C investment tax deduction. You must file an income tax return by July 31st to be eligible for tax deductions under this provision.
File your taxes on time to get the most out of your 80c investment possibilities. Remember that delaying till the last moment to do your tax preparation will frequently result in “tax saving” rather than “tax planning,” which is, in our opinion, a sub-optimal approach.
“Tax saving,” is describes ad saving by investing in tax-saving instruments or goods. Whereas, “tax planning” considers a person’s whole financial strategy after taking into account their age, financial goals, tolerance for risk, and investment objective (including nearness to financial goals). By adopting this type of “tax planning,” you secure not just long-term wealth-building but also capital protection. As a result, remember to start your “tax planning” process far ahead of time by combining it with your total investment strategy. But before we go into tax planning, let’s define what a tax-deductible is:
What Does a Tax Deduction Entail?
Tax deduction reduces your taxable income by the amount of the deduction. So, by taking advantage of that deduction, you may lower your income tax liability by lowering your taxable income.
For example, if your gross taxable income for the financial year is Rs. 2,50,000, you invest Rs. 70,000 in a PPF and Rs. 30,000 in an Equity Linked Savings Scheme, your taxable income is Rs. 1,50,000 in taxable income.
How Can You Reduce Your Income Tax Payout with 80C Investments?
Individuals can take advantage of various tax deductions under various sections of the IT Act. The deduction limit under 80c investment options, for example, is Rs. 1.5 lakh per year. You can save tax by investing in these products and taking advantage of the many deductions you have under various parts of the IT Act.
80c investment options for Individuals.
Whether you’re self-employed or on a salary, it’s crucial to think about your choices for tax reduction. The tax deduction allowed for investment under 80C investments options is the one that is used the most.
Moreover, the good news is that the market offers a number of 80C investment options that function as tax-saving tools. Let’s examine the top 80c investment options.
| Section | Investment Under 80C | Tax Benefits Under Section 80C Investments |
|---|---|---|
| Section | Life insurance | – Tax deduction limit- 1,20,000 – Income on maturity is tax free |
| Section 80C | PPF | Tax deduction limit is 1,50,000 |
| Section 80C | EPF | Tax deduction limit is 1,50,000 Interest is tax exempted |
| Section 80C | ELSS | Tax deduction limit is 1,50,000 |
| Section 80C | ULIP | Tax deduction limit is 1,50,000 |
| Section 80C | Fixed deposit | Tax deduction limit is 1,50,000 Interest is taxed at applicable slab rates |
| Section 80C | Home loan principle payment | Tax deduction limit is 1,50,000 |
| Section 80C | SSY (Sukanya Samridhi Yojana) | – Tax deduction limit is 1,50,000 – Amount earned on maturity is exempted from taxes. |
| Section 80C | NSC (National Saving Scheme) | Tax deduction limit is 1,50,000 |
| Section 80C | NPS (National Pension Scheme) | Tax deduction limit is 1,50,000 |
| Section 80C | SSC (Senior Citizen Scheme) | Tax deduction limit is 1,50,000 |
Investment Options Under Section 80C
As a result, if you engage in any or all of the abovementioned instruments, you would be eligible for a deduction under this section up to Rs 1.50 lakh per year. However, we believe that, in addition to investing in these tax-saving products, you may also utilise them for wise tax planning.
What Expenses Qualify for Tax Deductions Under Section 80C?
Aside from the investments described above, the Internal Revenue Service identifies a few costs for which you can claim a deduction under Section 80C. The following is a breakdown of the costs.
Expenses withheld from government employees’ income for obtaining deferred annuities or making provisions for their wives/children up to 20% of their compensation.
Tuition costs are paid to any university, college, school, or other educational institution in India for the full-time education of up to two children. (excluding development fees, gifts to educational institutes, and so on).
Payments are paid for overhead costs, stamp duty, and registration when buying or building a home.
If you have a home loan from a public sector company, you can deduct the principal payments as an expense towards these initiatives. Home loan is eligible for deduction under section 80C.
Also Read: Types of Taxes
Words To Remember
Hindu Undivided Family (HUF)
Under the hindu law, Hindu undivided family can be defined as family which consists of directly descendants of common ancestor and includes their wives and unmarried daughters.
Stamp duty
State governments apply a charge known as stamp duty on the purchase and sale of real estate. It is payable under Section 3 of the Indian Stamp Act of 1899.
Conclusion
A deduction from an Income Tax point of view is the benefit given for the investment made, which helps reduce the tax payable. Therefore, We should avail the benefits in a fair and legalised manner as per the provisions, and compliance requirements specified deductions. The most well-known tax-saving option for taxpayers is Section 80C of the Income Tax Act. However, in the pursuit of providing the best possible public services, there are times when the tax imposed is excessive, depriving citizens of discretionary cash to spend on personal and recreational activities.
Frequently Asked Questions
Yes, presently there are no legal restrictions concerning the amount invested in Section 80C. However, deduction under Section 80C is limited to Rs. 1.5 lakh only.
Unit Linked Insurance Plans (ULIPs) are a good option to make an investment for fund generation with an exemption of up to Rs. 1.5 lakh under premium plans.
Additional deduction of (maximum) Rs. 50,000 can be made for people who are self employed or employed taxpayers.
Section 80C of the income tax code allows a resident person or Hindu Undivided Family to obtain a tax deduction. Furthermore, NRIs are entitled to tax benefits under this clause.
Yes, section 80C of the Internal Revenue Code includes all forms of life insurance premiums, including personal accident insurance and those paid in the event of an accident.
The only form of mutual fund covered under section 80C of the tax code is the equity-linked saving plan, generally known as ELSS. If you invest in an ELSS, you may claim a tax deduction of Rs 1,50,000 every year.
Companies, partnerships, and corporate entities are not eligible for the section 80C tax exemption.
While many tax-saving techniques are available, an individual may only claim a maximum of INR 1,50,000 every financial year.
Tax Savings FD allows a fixed deposits account which offers tax deduction under Section 80C. Yes, it comes under Section 80C.
ULIP provides tax benefits under section 80C. ULIP has a period of 5 years where you can withdraw at any given point.
Yes, deductions of up to Rs 1.5 lakh can be made on the prior investments in national savings certificate.
Sukanya Samriddhi Yojana comes under many tax benefits, one of them being Section 80C. 50% of the total corpus can be withdrawn for the purpose of girl’s marriage or higher education. Other withdrawals are not permitted.
Deduction under chapter VI A consists of life insurance premium, provident fund contribution with maximum deduction of Rs. 1,50,000.
Also read about Income Tax Return on Investment Simplified.
