Section 80C of the Income Tax Act allows a deduction of up to Rs 1.5 lakh per annum. Under the section, individuals can invest in several savings schemes to claim deductions on their taxable income.
What Is Section 80C?
Section 80C of the Income Tax Act came into force on 1st April 2006. It basically allows certain expenditures and investments to be exempted from tax. If you plan your investments well and spread them wisely across various investments like PPF, NSC, etc., you can claim a deduction of up to Rs 1.5 lakh, which will reduce your tax liability.
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Deductions On Investments Under Section 80C Of Income Tax Act
1- Public Provident Fund
- Public Provident Fund is a well-known investment instrument as it offers guaranteed returns.
- Interest is compounded on a yearly premise and the maturity time of the scheme is 15 years.
- The least you can contribute towards PPF is Rs.500 and the top-level contribution permitted is Rs.1.5 lakh.
- The sum you contribute towards PPF is qualified for tax deductions under Section 80C of the Income Tax Act.
2- Premium installments towards the life Insurance
- If you have bought an Insurance Policy for yourself, your kids or your mate, the premiums you pay towards it are qualified for deductions under Section 80C of the Income Tax Act.
- In the event that you have life insurance policies from various insurance providers, you can club all the premiums and claim deductions up to Rs.1.5 lakh p.a.
3- Equity Linked Savings Scheme (ELSS)
- Certain mutual fund schemes have been designed particularly with the end goal of tax savings.
- Equity Linked Savings Schemes or ELSS as they are generally called, permit investors to claim tax deductions to the extent of Rs.1.5 lakh under Section 80C of the Income Tax Act.
4- National Savings Certificate
- National Savings Certificate or NSC as it is known in its condensed structure, is perhaps the most popular tax saving instrument accessible to Indian residents.
- The maturity period of the scheme is five years and 10 years.
- The interest in this scheme is compounded semi-annually.
- The minimum amount of cash that you can invest into this certificate is Rs.100 and there is no maximum limit on the amount of speculation you can make in NSC.
- The sum you invest into National Savings Certificate is qualified for tax deductions under Section 80C of the Income Tax Act, subject to a limit of Rs.1.5 lakh each monetary year.
5- Sukanya Samriddhi Scheme
- Individuals can open a Sukanya Samriddhi for a girl child whenever from the date of her birth to the day she turns 10 years of age.
- The minimum amount that you can put resources into the Sukanya Samriddhi plot is Rs.1,000 and the most extreme is restricted to Rs.1.5 lakh in a monetary year.
- The interest in this account is determined on an annual basis and compounded on a yearly premise as well.
- The interest you gather through this scheme is qualified for tax deductions under Section 80C of the Income Tax Act.
6- Unit Linked Insurance Plans (ULIPs)
- These insurance plans offer coverage to the policyholder and give significant returns in the long haul.
- One of the principal reasons why these plans have gotten so famous in recent times is the fact that they not only help in saving money, yet additionally, give tax benefits under Section 80C of the Income Tax Act.
7- Reimbursement of home loan principal amount
- The EMI sum that goes towards the repayment of the principal amount on your home loan is likewise qualified for tax deductions under Section 80C of the Income Tax Act.
- The repayment of your home loan sum has two parts, viz. the principal amount and the interest.
- While the interesting part of the repayment can’t be claimed as tax deduction under Section 80C of the Income Tax Act, the repayment of the principal amount absolutely is.
8- Registration charges and stamp duty for a home/property
- If you buy a home or a property and pay for stamp duty and registration, these amounts can be claimed as tax deductions under Section 80C of the Income Tax Act.
9- Infrastructure bonds
- Infra bonds as they are normally called, Infrastructure bonds are given not by the public authority but rather by foundation organizations.
- In case that you invest resources into these bonds, you can claim tax deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
10- NABARD Rural Bonds
- NABARD, or the National Bank for Agriculture and Rural Development, offers two kinds of bonds, viz. Bhavishya Nirman Bonds and NABARD Rural Bonds.
- However, only the latter is eligible for tax deduction under Section 80C of the Income Tax Act, and the maximum amount you can claim as a deduction is Rs 1.5 lakh.
11- Senior Citizen Savings Scheme
- The Senior Citizen Savings Scheme is the most ideal investment scheme for senior residents. The profits are generally lucrative in comparison with other schemes, and the interest is paid on a quarterly premise.
- People who are over 60 years old can invest in this scheme and claim tax benefits up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
12- Five-year Post Office Time Deposit Scheme
- Post office deposit schemes are a ton like fixed deposits offered by banks.
- The duration of these schemes could go from one year to five years, however, only the interest earned on a five-year post office time deposit scheme are qualified for tax deduction under Section 80C of the Income Tax Act.
When Should I Invest To Claim Deductions Under Section 80C Of The Income Tax Act?
Most people start investing at the end of a financial year just to claim the tax deductions. Tax experts suggest that it is best to invest at the beginning of the financial year as doing so will not only mean that you are making a wise decision, but will also ensure that you invest for the entire year from April to March.
FAQ Of Section 80C Deduction
Are 80C and 80CCC are same?
Section 80C provides deduction from your taxable income on various investments up to ₹1.5 lakh per annum. Whereas Section 80CCC provides a deduction of up to ₹ 1.5 lakh per annum for contributions made by an individual towards specified pension funds. Section 80CCE thus limits the total exemption limit to ₹1.5 lakh per annum.
What is the maximum tax exemption under 80C?
Under section 80C. You can claim a deduction of up to a maximum of ₹1.5 lakh from your total income.
Who is eligible for an 80C deduction?
It is available for individuals and Hindu Undivided Families (HUFs).
How much should I invest to save tax?
Invest ₹1.5 lakh under section 80C to save tax. Buy medical insurance and claim a deduction of up to ₹ 25,000 (₹ 50,000 for senior citizens) for medical insurance premium paid under section 80D. Also, investing up to ₹ 50,000 in NPS can help you save additional tax under section 80CCD (1B).