Tax and savings are opposite words, tax brings outflow of funds where as savings restrict outflow of funds and when your savings in normal course of life bring you saving of tax, nothing like it! So, it is so very important to park your money right.
Especially salaried class people for whom tax saving opportunities are like water in desert, absolutely minimal they should make maximum use of governments this gift, i.e section 80C deductions of Income Tax Act, 1961
Let’s get an insight into 80C Deductions –
What is Section 80C
Under Income Tax Act, 1961 enacted by Government of India has laid a section that is meant to promote savings among aam aadmi and give tax saving benefits on those savings. Income Tax deductions under Section 80c are available only to individual or HUF.
How much deductions can be availed under Section 80C?
This section says that if you invest in the list of items (along with limits) then deduction of Rs 1,00,000 is available from Gross Total Income(GTI).
How does it help aam aadmi to save income tax?
The deduction available reflects that if your income exceeds taxable limit by Re 1 to Rs 1,00,000 and you are take advantage of section 80C, you will not have to pay any tax. But, there lies a catch in it. The catch is –
Deductions under Section 80C are not allowed from the following (though they form part of GTI) –
- STCG u/s111A
- Winning from lotteries, crossword puzzles, races etc
Also, deductions under section 80C are available on “paid basis”
What are the items listed under section 80C Deductions ?
Wide range of popular items which get exempted under Section 80C ranging from PPF, Mutual Fund to Home loan. The most popular and beneficial items are
|List Of Items||Comments|
|Life Insurance Premium||Deduction shall be limited to maximum 20% of capital sum assured or premium, whichever is less|
|Public Provident Fund||Investment can be made by himself/spouse/any child|
|Approved Superannuation Fund||Investment should be contributed in capacity of employee only|
|National Saving Scheme, 1992||Investment can be made in name of individual himself|
|National Saving Certificate VIII||Accrued Interest on NSC also is allowed for deduction for first 5 years|
|Units of any Mutual Fund covered u/s 10(23D) or UTI||Investment can be made in name of individual himself|
|ULIP &Dhanraksha Plan of LIC Mutual Fund||Investment can be made by himself/spouse/any child|
|Home Loan account scheme of National housing bank||Investment can be made in name of individual himself|
|Tuition Fee||w.r.t children of individual|
|Term Deposits for 5 years or more with a scheduled bank||Investment can be made in name of individual himself|
|5 year time deposit in an account with Post Office||Investment can be made in name of individual himself|
How does it work?
Let me explain you in steps
Step 1 – Compute Gross total income
Step 2 – Calculate the amount of deductions under section 80C
Step 3 – Step 2 – Step1
Thus, we can say 80C is a section which when drafted was always meant to favor aam aadmi. In every union budget you shall notice a slight change in this section. Also, the vast range of saving options gives you flexibility to choose from. All in all – a must use advantage for every individual and HUF
Post your Comments- Are you investing in anyone of the above instruments to save tax. Do share it with the readers