Saving On Income Tax Expenses Through Deduction Under Section 80C

The purpose of tax planning to bring to down the tax liabilities of individuals and HUFs. Under the Income Tax At 1961, there are sections and subsections under which an individual/HUF can claim for saving on income tax expenses through deductions Under section 80C to bring down the tax liabilities. Under section 80C an individual and HUF can claim tax deduction of up to Rs. 1,50,000 from their gross total income for certain investments and payments.

Eligible Deductions Under Section 80C

Under Section 80C of the Income Tax Act, 1961, these are the following investments and payments which are eligible for deduction:

Life Insurance Premiums: Any payment towards for the life insurance premiums are eligible for income tax through deduction under Section 80C. This deduction can be claimed for payments for the life insurance premiums towards insuring self, spouse, dependent children and any member of Hindu Undivided Family. This amount can be maximum up to Rs. 1,50,000.

Sukanya Samriddhi Yojana: Investments made for girl child under saving scheme of Sukanya Samriddhi Yojana are eligible for income tax through deduction under Section 80C of the Income Tax Act, 1961. A parent or legal guardian of a girl child can claim deduction for two girl children. This amount can be maximum up to Rs. 1,50,000.

Public Provident Fund (PPF): Contribution made towards Public Provident Fund (PPF) are eligible for income tax deductions under Section 80C. This amount can be maximum up to Rs. 1,50,000. However the money invested into a PPF account will be locked-in for a period of 15 years. Partial withdrawals are permitted after 7 years.

Equity Linked Saving Scheme (ELSS): Investments in equity linked savings scheme (mutual funds) qualify for income tax deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000. These investments have a mandatory lock-in period of three years from the date of investment. Investments in ELSS are recommended for those who are investing for wealth creation over long period of time.

Fixed Deposit or Bank Deposit: Banks offer fixed deposits with fixed interest rates which offer opportunity for saving on income tax through deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000. Tax saver fixed deposits have lock-in period of 5 years and premature withdrawal is not allowed and interest earned on tax saver fixed deposits, are taxable and deducted at source.

Stamp Duty and Registration Charges: Taxpayers can save on income tax expenses through deduction under Section 80C of the Income Tax Act 1961 on payment of stamp duty and registration charges up to maximum Rs. 1,50,000. The deduction can only be claimed once the property construction is complete and you have legal possession of the house.

Senior Citizens Savings Scheme: Investments in Senior Citizens Saving Scheme also offer tax relief to individuals of age of 60 years and above. An individual can save on income tax expenses through deduction under Section 80C of the Income Tax Act 1961 on an investment of maximum up to Rs. 1,50,000. This scheme has a tenure of 5 years.

National Savings Certificate (NSC): Investments in national saving certificate qualify for income tax deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000. These investments have a mandatory lock-in period of five years from the date of investment and the interest is taxable.

Home Loan Principal Repayment: The amount that goes into repaying the principal on a home loan is eligible for deduction under Section 80C. To claim this tax benefit, construction of the property should be complete.

Payments in Children’s Tuition Fees: An individual can claim for deduction on payment on the tuition fee paid for the education of two children under Section 80C of up to Rs 1.5 lakh to any school, college, university or educational institute situated in India for a full-time course only.

Unit Linked Insurance Plan (ULIP): Investments in ULIP qualify for income tax deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000.

Employee Provident Fund (EPF): Investments in EPF are also eligible for income tax deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000 and should be equal to 12% of salary that is deducted by an employer and deposited in the EPF or other recognised provident fund.

National Pension Scheme (NPS): Investments in NPS by employees from unorganized sectors are also eligible for income tax deduction under section 80C of the Income Tax Act 1961. This amount can be maximum up to Rs. 1,50,000. An additional Rs 50,000 can also be invested in the NPS for tax deductions under Section 80CCD(1B).

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