Section 80C explained: Did you know that Section 80C, under the Income Tax Act 1961, helps you reduce the tax burden by allowing a deduction from the total taxable income in a financial year? Section 80C is a popular choice if you want an answer to the question: How can I save tax on salary?
Section 80C explained: Did you know that Section 80C, under the Income Tax Act 1961, helps you reduce the tax burden by allowing a deduction from the total taxable income in a financial year? Section 80C is a popular choice if you want an answer to the question: How can I save tax on salary? Under Section 80C of the Income Tax Act 1961, taxpayers can claim deduction benefit on payments, contributions, or investments in a way specified by the Income Tax law. These include payment for life insurance premium, contribution to any recognised provident fund and superannuation fund, subscription to National Savings Certificate, contribution to ULIP, Public Provident Fund (PPF), Sukanya Samriddhi Yojana, 5-year tax-saving fixed deposit plans offered by banks, among others.
What is Section 80C limit?
In one financial year, the maximum amount of deduction under Section 80C or the Section 80C limit is Rs 1.5 lakh. To make the most of the provision, you need to limit your total contribution to specified products eligible for deduction under Section 80C.
What investments are covered under 80C? Does a fixed deposit come under 80C? Deduction list:
Some of the popular investments/payments eligible for tax deductions under Section 80C are:
- Investment in five-year bank fixed deposit, with a maximum deposit limit of Rs 1.5 lakh in a financial year
- Investment in five-year post office time deposit, Senior Citizens Savings Scheme
- Investment in EPF or into voluntary provident fund
- Investment in PPF
- Investment in National Savings Certificates
- Contribution to NPS Tier II account made by Central Government Employees
- Contribution to Sukanya Samriddhi Account
- Payment for Life Insurance Policy (including ULIP) premium of an individual and/or his or spouse or any child
- Contribution to any approved superannuation fund
- Contribution to Unit-linked Insurance Plan (ULIP) 1971 and ULIP of LIC Mutual Fund; Contribution to an approved annuity plan of LIC
- Payment for subscribing to ELSS of a mutual fund; Contribution to notified pension fund set up by mutual fund or UTI
- Repayment of Housing Loan Principal; the amount paid for stamp duty, registration fee etc.
- Payment of tuition fees – For full-time education of his/her children (maximum of two children.) in any university, college, school, or other educational institution located in India.
While Section 80C provides various options through which taxpayers can claim deductions to reduce their tax burden, Section 80CCC specifically provides for deductions against the contribution to certain pension funds. These funds could be set up by LIC or any other insurer under a pension scheme approved by IRDAI. Under Section 80CCC, one can claim deduction up to Rs 1.5 lakh on payments made for continuing an existing plan or buying a new policy in a financial year. However, this deduction limit is clubbed with the limit provided in Section 80C and Section 80CCD. In other words, the amount for which one can claim tax deduction under all three sections (Section 80C, Section 80CCC, Section 80CCD) cannot be more than Rs 1.5 lakh per financial year.
How can I save Tax under 80C?
Section 80C is the most popular provision available in the Income Tax Act 1961 for tax saving. The tax benefit is available at the investment stage; however, the maturity proceeds of not all investments eligible under Section 80C are tax-free. The taxation of Section 80C investments at the investment stage, growth stage, and maturity stage can be primarily denoted as E-E-E or E-E-T, where E and T stand for “exempt” and “taxed,” respectively. One example of an investment that comes under the “EEE” category is PPF. An investment in PPF qualifies for the deduction, and both the interest earned and maturity amount are tax-free for the investor.