Tax Benefits Under Section 80C Of Income Tax Act, 1961

Section 80C of Income Tax Act, 1961 has been structured specifically to state all about the deductions of tax. This particular section of the IT act reduces the taxable income. Due to this reduction, under Section 80C, the tax liability comes down drastically. A major group of taxpayers enjoy the benefit of the section 80 C directly or indirectly. The maximum rebate of tax is up to INR 1.5 lac. As per the current norms, an individual less than 60 years of age with an income of INR 2.5 lac or less is exempted from paying tax. However, they can extend the tax relaxation window further through section 80C and the exemption value can go up to INR 4 lacs. However, there are several conditions also on section 80C. Such exemptions give the impetus to an individual who are looking to improve their financial well being or are willing to save some money for rainy days. They can also provide incentive for education, on investing money of different Governmental schemes etc.

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WHAT IS TAX DEDUCTION?

Tax deduction is very helpful and effective in reducing your taxable income; as such the burden of overall tax liabilities is reduced and helps in  tax saving. One thing to note is that the amount of deduction varies depending on the type of tax deduction claimed. In other words, it could be said that it is reducing the tax liability by increasing the exemptions. However, these may be subject to the restrictions of the provisions of law.

Let us take a look at the most beneficial exemptions under the section 80C of The Income Tax Act, 1961.

  • All types of Provident Fund (PF): This includes major provident funds such as Public Provident Fund (PPF), Voluntary Provident Fund (VPF) and Employee Provident Fund (EPF) and lesser ones too. In a single fiscal year, the exemption of tax is up to INR 1.5 lac.
  • Tax saving Fix Deposits:  Investments made under tax saving fixed deposits like 5 years post office time deposits, 5 years tax saving bank deposits etc are entitled to take advantage of rebate up to INR 1.5 lac under sec 80C of Income Tax Act, 1961.
  • National Pension System: Also known as postal saving scheme, it is of fixed duration i.e. the period is 5 or 10 years. The investments done in NPS are entitled to tax exemptions of INR 1.5 lac under Section 80C, apart from this, one can invest Rupees 50,000 additionally under the subsection 80CCD (1B).
  • Sukanya Samridhhi Scheme: One of the landmark schemes which has been initiated by the government under “Beti Bachao Beti Padhao Abhiyan”, this is considered to be a scheme which was long due for females. The scheme exempts from tax under section 80C of Income Tax Act, 1961 at the time of opening the account and any further deposits.
  • Senior Citizenship Saving Scheme (SCSS): This scheme is up for grabs for citizens aging 60 and above. It provides a tax exemption of up to INR 1.5 lac under Section 80C of Indian Tax act, 1961.
  • Life Insurance Policies: Investments made on life insurance policies for self, for  Spouse, for  children etc. receive tax exemption as per the section 80C of income tax act, 1961. The maximum exemption is INR 1.5 lac.
  • Education: Education of certain type or degree can be expensive. Therefore, the section 80C of Income Tax Act, 1961 has foreseen tax exemption in education as well. . Tuition fees can be of a person or his/her children. The act ensures an exemption of tax on any Tuition fees paid to Schools, Colleges or any university (Whether before of after Admission) can be claimed. The maximum exemption is INR 1.5 Lakh. It is considered as one of the most beneficial exemption as it helps the parents in saving money and it also promote education. However, donations or any development fee are not a ground to avail such deductions.
  • Investment for wealth Building and Goal: All Equity Linked Saving Scheme (ELSS), Unit Linked Saving Scheme (ULSS), etc. can be utilized/claimed to avail section 80C of income tax act 1961. For rebating tax up to Rupees 1.5 Lakh.
  • National Saving Certificate: A common and much preferred saving scheme, all investments made under NSC are included in Section 80C of Income Tax Act, 1861.
  • Home loan: Home loans can be a long-term obligation to fill and some home loans can go beyond ten years or so. Therefore, to give a long term benefit, the section 80C of Income Tax Act, 1961 allows an individual can avail the exemption from tax on Home loans. Thus, one can get the sought after relief on paying EMI etc, however the interest paid with EMIs are not covered by the section In other words only principal amount paid can be claimed as tax deduction under this section. And interest to be considered under Incomes from house property.

This content is meant for information only and should not be considered as an advice or legal  opinion, or otherwise. AKGVG & Associates does not intend to advertise its services through this.

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