As three months remain for tax-related investments, salaried individuals should look at various provisions under Section 80C of the Income Tax Act, 1961. Section 80C entitles an employee to certain deductions from the gross total income, up to a maximum limit of Rs 1.5 lakh.
Investments for saving tax
Investments in Public Provident Fund (PPF), national savings certificates (NSCs), employee’s contribution to provident fund (PF), tax-saving mutual funds, five-year fixed deposits in banks or post office and premiums paid for life insurance products all come under the purview of Section 80C. Section 80C also offers market-linked investment options, such as equity-linked savings schemes (ELSS) and unit-linked insurance plans (Ulips). ELSS, which come with a three-year lock-in period, are routed to the equity market through mutual fund houses. Ulips, which come with a five-year lock-in, are routed through insurance companies.
Deduction on stamp duty
An individual who has taken a home loan can avail of deduction towards principal repayment in the financial year. Under Section 80C, taxpayers can claim deduction on the amount paid as stamp duty for property registration in his own name. This is over and above the principal payment that qualifies under Section 80C. However, for deduction under Section 80C for total amount, including principal loan repayment, stamp duty and registration charges, the total amount cannot be over Rs 1.5 lakh. Under Section 24, the tax payer can claim deduction of Rs 2 lakh on the interest amount paid for the housing loan, provided it is taken from a bank or an housing finance company.
Rajiv Gandhi Equity Savings Scheme
Under Section 80CCG, a new retail investor can put money in Rajiv Gandhi Equity Savings Scheme (RGESS). Here, one can invest in one or more financial years in a block of three consecutive financial years beginning with the initial year in which the deduction has to be claimed. This tax exemption is available over and above the exemption available under Section 80C. The investor can invest in shares of BSE 100 or CNX 100, stocks of public sector
enterprises, units of exchange-traded funds and mutual funds. A new retail investor with gross income of up to Rs 12 lakh can avail of benefits under this scheme, with a permissible investment of Rs 50,000. The exemption is available for Rs 25,000, i.e., 50% of the invested amount. The scheme comes with a lock-in period of three years.
Tuition fees for two children
Tuition fees paid for two children will be deducted from your income under Section 80C. The law states that the deduction will be on the actual payment of fee and not on books, bus fare, etc. Tuition fees include money paid whether at the time of admission or thereafter, to any university, college, school or other educational institution in India, for the purpose of full-time education of any two children of the salaried employee. Full-time education includes any educational course offered by a university, college, school or other institution to a student who is enrolled in a full-time course. Money paid as development fees or donation or capitation fees or payment of similar nature will not be eligible for deduction. The law clearly mentions that full-time education includes play-school activities, pre-nursery and nursery classes. Salaried employees, however, cannot claim tax exemption under tuition fees if their child is studying abroad.