If you regularly file your ITR, you might be aware of tax deduction under section 80C of Income-tax. If you are going to file your ITR for the first time, you need to have certain vital information about it.
In any case, I am sure this piece of information will help you understand various deductions under section 80C.
To begin with, let’s first understand what the tax deduction is!
As per the law, any individual below 60 years of age with the annual income above 2.50 lakh has to pay income tax. But, if that individual invests in specific instruments specified in section 80C of the Income-tax law, he/she will not have to pay income tax for the income up to 4.00 lakh.
Let’s say you have an annual income of 4.00 lakh. So as per law, you will have to pay tax on the income above 2.50 lakh. But if you invest 1.50 lakh in various exemptions under section 80C, your tax liability will be zero!
Now, let’s take a look at various exemption u/s 80C of Income Tax.
Exemptions u/s 80C of Income Tax Act 1961
Investment of up to 1.50 lakh made in any Provident Fund (PF) is exempted from income tax. You can invest in multiple provident funds like Public Provident Fund (PPF), Employee Provident Fund (EPF), and Voluntary Provident Fund (VPF).
National Pension scheme of post office
Investment up to 1.50 lakh under this pension scheme operated by the post office is exempted under section 80C. There is also a provision of the tax deduction on the additional investment of up to 50,000 under 80CCD. This scheme can prove extremely helpful for creating a secure pension fund for yourself and offers a tax deduction.
Tuition fees for the schools
This is the most crucial exemption provided under section 80C.
To encourage parents to send their children to school and promote education, Income Tax Act 1961 exempts “Tuition Fees” for the individual itself or his/her children under section 80C of Income Tax Act 1961.
The deduction can be claimed on the fees paid before, during, or after the student’s admission.
One crucial fact that you should note is that any donation paid for a student can not be deducted under section 80C.
Senior Citizen Saving Scheme
An investment made under this scheme by the citizen above the age of 60 is exempted under 80C of the Income Tax Act 1961. This scheme is specially designed to help senior citizens and currently fetches a 7.40% annual return.
Investment in ELSS and ULSS
All the investments up to 1.50 lakh, made under the Equity Linked Saving Scheme and Unit Linked Saving Scheme, are exempted under section 80C of Income Tax Act 1961.
National Saving Certificate of the post office
Investments in NSC (National Saving Certificate) of up to 1.50 lakh are exempted under section 80C of the Income Tax Act 1961. For the June to September quarter, the interest rate for NSC is 6.80% per annum.
Sukanya Samriddhi Yojna
As the name suggests, this scheme was launched by the Central Government to help and support a girl child under “Beti Bachao, Beti Padhao Abhiyan.” The savings and investments done in these accounts are exempted under section 80C of the Income Tax Act 1961.
Life Insurance Policies
Premium paid on the life insurance policy for you, your spouse or your children are exempted under this section. This benefit is provided to ensure the financial security of your family. The maximum amount of tax deduction for the payment of premium is 1.50 lakh.
Tax Saving Fixed Deposits
These are the special fixed deposits made with post office or banks with a minimum investment period of 5 years.
You can take advantage of tax deduction of up to 1.50 lakh on these deposits under section 80C of the Income Tax Act 1961.
Premiums of home loan
To help families get their own home, India’s Government offers tax deduction of up to 1.50 lakh on the premium paid for the home loan. These deductions can greatly help middle-class families to realize their dream of home.
When you take a look at all the exemptions under section 80C of the Indian Income Tax Act 1961, you will notice that all these schemes are designed to secure individuals’ financial freedom.
The Government wants people to invest in safe assets that can help them in the future, and thus, they offer exemptions!
If you, too, haven’t availed these exemptions’ benefit, it’s the right time!
File your income tax return on time and avail the benefits of these exemptions!
For any assistance on ITR filing, talk to our experts today!