Section 80C Deductions – Party Time for aam aadmi

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) –

  • LTCG
  • 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

Subscribe via Email

Leave a Reply

Your email address will not be published. Required fields are marked *