How to Save Tax Under Section 80C of Income Tax Act?
Published On Apr 15, 2021 12:00 AM By InsuranceDekho
Table of Contents
- Saving Tax Under Section 80 C
Tax exemptions provide people with a way to minimise their tax burden. Most citizens tend to claim a tax deduction under Section 80C of the IT Act, 1961, from the numerous tax-saving options. For certain payments and investments, Section 80C permits HUFs and individuals to claim a tax deduction of up to INR 1.50 lakhs from their gross net income.
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Saving Tax Under Section 80 C
The following investments are eligible for deduction under Section 80C of the IT Act 1961.
1. Life Insurance
To protect ourselves and our families, most of us buy life insurance plans. Under Section 80C, premiums paid for all life insurance plans are eligible for tax benefits.
2. Equity Linked Savings Scheme (ELSS)
Under section 80C, contributions in ELSS are eligible for a tax deduction. However, a statutory lock-in duration of 3 from the date of the purchase in ELSS is mandatory to claim the deduction.
3. Five-Year Bank Deposit
Interest on term deposits with any scheduled bank is eligible for tax deductions under Section 80C can be claimed. The condition related to fixed deposits is that they must come with a five-year lock-in term.
4. Public Provident Fund (PPF)
Contributions to PPF are eligible under Section 80C for tax deductions. PPF has a cumulative deposit cap of INR 1.5 lakhs per year, so any contributions made to the PPF account is claimed as deductions under Section 80C.
5. National Savings Certificate
Under Section 80C, investments in NSC can be claimed as a tax deduction. Interest gained on NSC is taxable. If this interest is reinvested, however, it would be eligible under Section 80C for a deduction.
6. Home Loan Principal Repayment
Under Section 80C, the money that goes into repaying the interest of a home loan is eligible for deduction. Construction of the house should be completed to claim this tax advantage. No tax incentives will be granted if you sell the property by the end of 5 years after the year in which you took ownership of it. Furthermore, in the year in which the property is sold, the balance claimed as a deduction in the preceding years will become taxable.
7. Senior Citizens Savings Scheme (SCSS)
Investment in the SCSS is eligible for deduction under Section 80C. The tenure of this scheme is 5 years. Any person needs to be at least 60 years of age to take part in the SCSS. Those who have taken VRS can opt for it after the age of 55.
8. Five-Year Post Office Time Deposit (POTD)
POTDs are equivalent to fixed deposits from a bank. They are available for various periods, such as one, two, three, and five years, but under section 80C only five-year POTD counts for tax savings.
9. Sukanya Samriddhi Account
You can open in your minor daughter's name in this scheme until the age of 10. Under Section 80C, any money invested in this account will be eligible for a tax deduction.
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How to Make the Most of Tax Benefits from Life Insurance, Health Insurance and Pension Schemes?
Under Section 80C of the IT Act, 1961, taxpayers of different age groups and income tax slabs can claim deductions to reduce their tax burden. This section gives many different ways to save taxes up to INR 1.5 lakh in a financial year. Individuals and HUFs will benefit from contributions to investments that qualify for deductions under this provision.