Numerous tools are available under Section 80C that can help you save a significant amount of money overall on taxes. You would be able to save up to (1,50,000 + 50,000) from various schemes with the deductions allowed by Section 80C.
The Income Tax Act of 1961’s Section 80C
The tax Deductions Under section 80C are only available to individuals and members of the Hindu Undivided Family. Companies, partnerships, and other corporate organisations are not permitted to use them.
The Most Effective Investing Plan Under Section 80C
According to Section 80C, investing in an ELSS fund or a tax-saving mutual fund is the simplest way to reduce your tax liability. These funds were created specifically to help you save on taxes while also generating greater investment returns.
- Invest in ELSS to avoid paying taxes up to ₹46,800
- minimal 3-year lockup period
- delivered historically greater returns compared to FD, PPF, or NPS
- Earned interest is partially taxed.
All About Deductions Under section 80C
According to the Indian Constitution, the government may impose taxes in accordance with the rules under the Income Tax Act, 1961, on any income earned in India (apart from agricultural income).
The income earned by individuals, Hindu Undivided Families, businesses, companies, LLPs, groups of individuals, associations of individuals, or other artificial juridical persons is subject to this tax.
The Income Tax Act also includes some tax exemption clauses that might help people save a significant amount on their income tax payments in order to lower their tax obligations.
Deductions Under Section 80C, 80CCC, and 80CCD
The Deductions Under Section 80C for this category is permitted by Sections 80C, 80CCC, and 80CCD. Mutual funds, Provident Fund Registration, insurance premium tax-saving FDs, and other programs are included in Section 80C. Section 80CCC governs payments made to a specific insurer that provides a pension or annuity. Contributions to India’s National Pension System are covered by 80CCD (NPS)
Click here to know more about: https://incometaxindia.gov.in/Pages/tools/deduction-under-section-80c.aspx
Limits of 80C
EPF under Section 80C allows for a maximum tax savings of ₹1.5 lahks. There is no set minimum.
Vakilsearch offers a retirement planning calculator which can assist you in estimating the amount of funds you’ll require to secure your post-retirement life, manage your expenses, and achieve your desired lifestyle.
Scheme 80C
- Investment Programs: Unit Linked Insurance Policies and ELSS Mutual Funds (ULIPs)
- Term insurance and endowment insurance are insurance programs
- Three retirement savings programs are Public Provident Fund, Employees Provident Fund, and National Pension System (NPS)
- Fixed Income Programs: Sukanya Samriddhi Yojana, Senior Citizens Savings Program, and National Savings Certificate (NSC)
- Miscellaneous: Repayment of a mortgage and payment of tuition.
Eligibility for Deductions Under Section 80C
Deductions Under Section 80C, a person or HUF may claim a deduction. Businesses, limited liability partnerships, and other entities are not eligible for this deduction.
Under This Provision, the Following Deductions Are Permitted
1) The cost of your or your loved ones’ life insurance premiums. However, if it is a single premium policy, the insurance coverage cannot be canceled within two years after its start date. You must pay the premiums for at least two years if the coverage has multiple premiums. The deductions under section 80C will be reversed if you don’t accomplish it. Deductions Under Section 80C of the tax code, unit-linked life insurance policies, also known as ULIPs, are tax deductible.
Tax on Returns: According to Section 10(10)(D) of the Income Tax Act, life insurance contracts with policy covers that are at least ten times the annual premium are exempt from filing tax returns.
2) ELSS mutual fund investment. 80 percent of the assets under management of ELSS mutual funds are invested in stocks, with a three-year lock-in period (stocks).
Tax on Profits: Long-term capital gains tax is levied at a rate of 10% on ELSS returns over ₹1 lakh.
3) Public Provident Fund (PPF): This government savings programme has an interest rate that is managed by the government. Most banks and post offices provide investment opportunities in it. It has a fifteen-year term.
Tax on Returns: There is no tax due on PPF returns. You must, however, report PPF results in your yearly income tax return.
Employee contributions to the EPF account are Deductions Under Section 80C.
4) Employees’ Provident Fund (EPF) While employer contributions are likewise tax-free, they are not deductible under Section 80C.
Tax on Returns: The interest rate on an EPF is not taxed. However, it turns into taxable income after you stop working for an EPF-registered business.If EPF is withdrawn before 5 years of service with an EPF-registered company, the interest also becomes taxable.
Utilize Vakilsearch’s EPF calculator Online to estimate how much money you will have in your account upon retirement.
5) Fixed deposits at banks and post offices that are held for five years are tax deductible.
Returns Tax: The interest earned on these fixed deposits is entirely taxable.
6) National Pension System (NPS): The NPS deduction is permissible under both Section 80CCD (1) and (2).
Under Section 80C, contributions to the NPS from both employers and employees are tax deductible. To get the benefits of this section, however, the employer’s payments cannot be greater than 10% of your base wage plus the dearness allowance.Self-employed individuals can also benefit from this benefit by making a contribution of up to 20% of their gross income. In addition, above and beyond the ₹ 1.5 lakh under Section 80 C, voluntary donations to the NPS up to ₹ 50,000 are exempt. These free-will donations are exempt from taxation under Section 80CCD (1B).
Tax on Returns: Up to maturity, NPS returns are tax-free. When it matures, 40% of the corpus will be tax-free.
To know more click here: How to apply PF online?
7) National Savings Certificate: With a five-year term, National Savings Certificates are a government-backed savings vehicle. These certificates’ interest may be deducted from taxes in accordance with Section 80C.
Tax on Returns: Section 80C of the tax code allows for a tax deduction for returns on NSCs.
8) Senior Citizens’ Savings Scheme (SCSS): This government-guaranteed savings programme has a 5-year term that may be extended for a further 3-year period.
Tax on Returns: Your slab rate applies to the full taxation of SCSS returns.
9) Sukanya Samriddhi Yojana: This is a government-sponsored programme that encourages female students to save money. Parents of girls who are younger than ten years old can access it. When a girl child marries after turning 18 years old, the programme ends after 21 years.Sukanya Samriddhi Scheme returns are exempt from tax.
10) Tuition for up to two children at any school, college, or institution.
11) Repayment of a mortgage
12) Stamp duty or other fees for transferring real estate to yourself
13) Investing in a five-year fixed deposit to save on taxes
Empower your financial decisions – our Salary Tax Calculator is the tool you can rely on.
Other Tax Exemptions Besides Section 80C
You may also be eligible for tax exemption under a number of additional Section 80 sub-sections in addition to Section 80C. For instance:
The premiums you pay for health insurance coverage for yourself, your spouse, your children, and your parents may qualify you for tax deductions under Section 80D. The exemption allowed by this provision may total one lakh rupees.
Donations to numerous organisations and social purposes are covered by Section 80G. Depending on the purpose you choose to donate to, these donations are eligible for exemptions of up to 50% or 100%, without limitations.
Donations given to any political party are covered by Section 80GGC. Only payments made in ways other than cash are eligible for these exemptions.
To Conclude With
- Deductions Under Section 80C allows contributions to provident funds that are recognized by the Income-tax law to be deducted
- Contributions to provident funds come in two flavors. Either an employer or an employee is a person
- You may write off the amount deducted from your salary as your contribution to the government
- The employer will be able to claim his payment as a business expense (subject to fulfillment of certain conditions)
- Please be aware that the government has set a specific percentage for the employer’s PF contribution. Any overpayment will be subject to salary tax if there is any.
Contact our Vakilsearch experts to learn more about programs like PF, withdrawal, and others. We assist you in contacting reputable experts and working with them to meet all of your legal needs.
