A Guide to Tax Savings Under Section 80C

Key Takeaways:

• A maximum deduction of ₹1.5 lakhs is allowed every financial year under Section 80C.
• Section 80C is considered a popular tax saving tool among many Indian taxpayers.

The end of a financial year can be problematic, especially if you don’t understand how to save your income tax. However, Section 80C of the Income Tax Act is an excellent tool for Indian taxpayers who wish to reduce their taxable income and save money. Section 80C offers a wide range of investment options and deductions under certain expenses that you can leverage to avail tax deductions. This article explains the key aspects of Section 80C; keep reading to find suitable investment opportunities to save tax.

Overview of Section 80C

Section 80C of the Income Tax Act is a clause that allows you to claim deductions from your taxable income for specific expenses and investments. With the help of Section 80 C, you can essentially reduce your taxable income by a maximum of ₹1.5 lakhs in every financial year; the maximum limit includes deductions under other subsections like 80CCC and 80CCD(1) as well. In certain cases, additional deduction of ₹50,000 can be claimed under Section 80CCD(1b).

Any individual or Hindu Unified Families can claim deductions under Section 80C. However, companies, partnership firms, and LLPs cannot avail deductions under this section.

How Can You Leverage Section 80C for Savings?

There are numerous investment options under 80C, including the following:

1. Employee Provident Fund (EPF)
2. Equity Linked Savings Schemes (ELSS)
3. National Pension System (NPS)
4. Public Provident Fund (PPF)
5. Senior Citizen Savings Scheme (SCSS)
6. Sukanya Samriddhi Yojana (SSY)

Apart from the investment options mentioned above, you can claim tax deductions for the following expenses as well:

1. Children’s tuition fee for education (up to 2 children)
2. Donations to specified institutions and charities
3. Repayment of principal amount on home loan
4. Premium paid for health insurance covering you, your spouse, your children, and your parents
5. Premium paid for life insurance

Things to Remember While Availing Deductions Under Section 80C

• Keep the maximum investment limit of ₹1.5 lakhs every financial year in mind while choosing investment options.
• Consider the advantages and disadvantages of different investment options available under Section 80C.
• It is advisable to keep your long-term financial goals in mind while making investments to claim tax deductions.
• Although there are numerous secure investment options, some investment opportunities may be slightly risky. Thus, you should invest in those options that align with your risk appetite.

Conclusion

Now that you understand Section 80C, you can choose investment instruments suitable for you and claim deductions to reduce your tax burden.

Although Section 80C serves an excellent tool for taxpayers, you are advised to consider your overall financial goals and risk appetite while making any financial decisions. By planning early, you can maximise your savings.