Under the Section 80(C) of Income Tax, taxpayers can avail of deductions up to Rs. 1,50,000.00 from their taxable income by investing in specified instruments.
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Tax-saving is a crucial aspect of financial planning for every income taxpayer. With the aim to encourage savings and investments, the Indian government has introduced various provisions under the Income Tax Act, and one such provision that has garnered significant attention is Section 80(C).
Under this section, taxpayers can avail of deductions up to Rs. 1,50,000.00 from their taxable income by investing in specified instruments.
This deduction is applicable to the taxpayers who file their return under the old regime of Income Tax rules. However, the new regime, which offers a lower tax rate, doesn’t allow the deduction of Rs. 1,50,000.00 from the taxable income.
Let’s delve deeper into the various investment avenues covered under Section 80(C) to empower taxpayers with the knowledge to make informed decisions regarding their investments.
Life Insurance Premium:
Investing in life insurance not only provides financial security but also offers tax benefits. The premium paid towards life insurance policies for self, spouse, and children is eligible for deduction under Section 80(C). This not only safeguards your family’s future but also reduces your tax liability.
Public Provident Fund (PPF):
PPF is a popular long-term investment scheme backed by the government of India. Contributions made towards PPF accounts are eligible for tax deductions under Section 80(C). With attractive interest rates and tax benefits, PPF serves as an excellent avenue for building a retirement corpus while saving on taxes.
Similarly, contributions made towards Employees Provident Fund (EPF) accounts qualify for deduction under Section 80(C) along with the additional contributions made voluntarily towards the same(known as VPF).
Principal amount against Home Loan:
Homeownership is a dream for many, and the government incentivizes this through tax benefits. The principal repayment of home loan EMI qualifies for deduction under Section 80(C). This encourages individuals to invest in real estate while reducing their tax burden.
Small Savings in Post Offices:
Various small savings schemes offered by post offices such as the National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), and Sukanya Samriddhi Yojana (SSY) are eligible for tax benefits under Section 80(C). These schemes provide assured returns along with tax-saving benefits, making them an attractive investment option.
Tuition Fees of Children:
Education expenses are a significant financial burden for parents. However, under Section 80(C), tuition fees paid for the education of up to two children is eligible for deduction. This not only promotes education but also helps in reducing taxable income.
Other Instruments:
5-Year Tax Saving Fixed Deposit (FD) with a lock-in period of 5 years in eligible banks qualify for deduction. Similarly, Equity Linked Savings Scheme (ELSS) made in mutual funds and
Infrastructure Bonds made in specific bonds are eligible for deduction under the said section of Income Tax in India.
It’s imperative for taxpayers to leverage the benefits offered under Section 80(C) to optimize their tax planning. By investing in these specified instruments, individuals not only secure their financial future but also enjoy tax savings. However, it’s essential to assess the investment options based on factors such as risk tolerance, investment horizon, and financial goals.
Thus, Section 80(C) of the Income Tax Act serves as a powerful tool for taxpayers in India to minimize their tax liabilities while fostering a culture of savings and investment. By exploring the various investment avenues covered under this section, taxpayers can make prudent financial decisions and embark on the journey towards financial prosperity.
The expert advice is that, if you are an income taxpayer don’t wait till closing of the financial year. Instead, explore the provisions under Section 80(C) of Income Tax and plan your investments from the beginning of the financial calendar.
(This article was generated with the assistance of artificial intelligence tools.)