Income tax benefits available under Section 80C are often considered one of the most popular ways to save money among salaried individuals. Section 80C of the Income Tax Act is one of the most popular and simple ways of managing your taxes.
If you have not used your tax benefits well so far, learning about the income tax benefit available under Section 80C laws can be an important first step.
The importance of income tax benefits available under Section 80C is often considered one of the most popular ways to save money among salaried individuals. You can easily reduce up to ₹ 1.5 lakh from your total taxable income making use of Section 80C norms.
Here are some investments and Expenditures which are eligible for claiming income tax benefits under Section 80C:
1. Investments in Tax Saving FDs
Tax-saving FDs are like regular fixed deposits but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh.
Eligibility: Can be opened by Resident Indian individuals.
Liquidity: Fixed Deposits have a lock-in period of 5 years.
Rate of Interest: FD interest rate across different banks ranges from 5.5% to 7.75%
Investment Limit: Minimum investment limit is Rs 1000.
Tax Treatment: Interest earned is taxable.
2. Investments in PPF (Public Provident Fund)
PPF are long-term investments backed by the government of India. Deposits made in a PPF account are eligible for tax deductions under Section 80C.
Eligibility: Can be opened by Resident Indian individuals, salaried and non-salaried individuals. A HUF cannot open a PPF account.
Liquidity: PPF account has a lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years.
Rate of Interest : Current interest rate is 8.0% p.a.
Investment Limit: Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively.
Tax Treatment: Interest earned is tax-free.
3. Investments in EPF (Employee Provident Fund) EPF is a retirement benefits scheme that is available to all salaried employees. This amounts to 12% of basic salary + DA, which is deducted by an employer and deposited in the EPF or other recognized provident funds.
Eligibility: This can be opened by an employee with a basic salary greater than 15,000 /month
Liquidity: Can withdraw PF balance after 2 months of leaving the job and does not take up employment within two months with an employer covered by PF Act
Rate of Interest: The interest rate on the EPF is 8.55%.
Investment Limit: Both employer and employee have to contribute a minimum of 12% of Basic Pay + D.A.
Tax Treatment: Entire PF balance (including interest) is tax-free if withdrawn after continuous service of 5 years
4. Investments in NPS (National Pension System)
The NPS is a pension scheme that has been started by the Indian Government to allow the unorganized sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C
Eligibility: Can be opened by every Indian citizen between the age of 18 and 60
Liquidity: Partial withdrawals are allowed after 15 years but under special conditions
Rate of Returns: Returns rate on the NPS varies between 12% – 14%
Investment Limit: No limit on maximum contribution
Tax Treatment: Employer contributions are tax-free
5. Investments in ULIP (Unit-linked Insurance Plans)
ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C
Eligibility: An investor can buy ULIP for self or spouse or child
Liquidity: Interest rate varies as it is market-linked
Rate of Returns: Return rate on the ULIP varies between 12% – 14%
Investment Limit: No limit on maximum contribution
Tax Treatment: Investment and withdrawals & maturity amount are tax-free
6. Investments in Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana/Scheme is one of the most popular schemes by the Government of India. The scheme is aimed at the betterment of girl child in the country
Eligibility: Parents/guardians can open an account in the name of a girl child till she attains the age of 10 years
Liquidity: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years
Rate of Interest: The interest rate on Sukanya Samriddhi Yojana is 8.5%
Investment Limit: Investment is limited to a maximum of Rs.1,50,000 in a financial year
Tax Treatment: Investment and withdrawals & maturity amount are tax-free
7. Equity Linked Saving Scheme (ELSS)
8. Children Tuition Fees
9. National Saving Certificate (NSC)
10.Senior Citizens Savings Scheme (SCSS)
11. Life Insurance Premium
12. Infrastructure Bond
13. Contribution to the pension plan by insurers
14. Repayment towards the principal of Home Loan
However, there is an additional tax benefit available under this section which is over and above the limit of Rs 1.5 lakh.
As per section 80CCD (1B), an additional deduction of a maximum of Rs 50,000 from gross total income will be allowed to the assessee, if he invests this in the notified pension scheme(s).
Currently, these notified schemes are National Pension System and Atal Pension Yojana.
In addition to that, you can also ask your employer to contribute to your NPS account as per section 80CCD (2). The employer's contribution cannot exceed ten percent of the employee's salary. However, there is no upper limit in monetary terms on the amount of employer's contribution that would be exempt from tax, as per the Income Tax Act.
ความคิดเห็น