#FinancialBytes: How to save Income Tax under Section 80C
What's the story
Every individual, who earns more than a certain amount, is required to pay taxes in accordance to the Income Tax Act. If you don't plan well, this may seem like a hefty payment.
But, the good news is that there are a lot of tax-saving options, using which you can save your hard-earned money.
Here, we decode the tax-deduction options available (both expenses and investments) under Section 80C.
80C
Who can claim tax deductions under 80C and how much?
If you are an individual or a Hindu Undivided Family (HUF), you can easily make use of this Section to save your taxes.
Under this Section, tax-saving claims can be made on both expenses and investments with a maximum limit of Rs. 1,50,000.
Individuals and HUFs can also avail exemptions available under various sub-sections of Section 80C, namely 80CCC, 80CCD, 80CCF and 80CCG.
Definition
First off, what does tax deduction mean?
In simple terms, tax deduction refers to the amount of money that can be subtracted from your income in order to calculate your taxable income. Tax deduction can be claimed for the amount spent on medical expenses, education of children, investments, charitable contributions, etc.
Expenses
Tax-saving expenses which you can claim under Section 80C
Under Section 80C, you can save your taxes by claiming the following expenses:
Repayment of the principal amount of a home loan.
Stamp duty, registration charges and other expenses incurred on the purchase of a house.
Tuition fees paid for the purpose of full-time education for a maximum of two children.
Premium payments made on life insurance policies.
Investments
Tax-saving investment options available under Section 80C
You can make investments in the following instruments to save your taxes:
Employee Provident Fund
Voluntary Provident Fund
Public Provident Fund
Equity Linked Saving Schemes
Infrastructure Bonds
Unit Linked Insurance Plan
National Savings Certificate
Senior Citizens Savings Scheme
5-Year Tax Saving Bank Fixed Deposit
5-Year Post Office Time Deposit
Sukanya Samriddhi Scheme
NABARD Rural Bonds
Sub-sections
Sub-sections of 80C: Section 80CCC and Section 80CCD
Section 80CCC: It offers rebate on investments in pension funds offered by regulated providers up to a limit of Rs. 1,50,000.
Section 80CCD: It deals with investments in pension schemes notified by the Central Government. Contributions by both an individual and his/her employer up to 10% of the basic salary are eligible as exemptions.
Both 80CCC and 80CCD are meant only for individuals.
Sub-sections
Sub-sections of 80C: Section 80CCF and Section 80CCG
Section 80CCF: It provides exemptions on investments made in long-term infrastructure bonds notified by the government. The exemptions under this Section can be claimed by both individuals and HUFs subject to a limit of Rs. 20,000.
Section 80CCG: This section allows any resident individual to deduct an amount up to Rs. 25,000 or 50% of money invested in government-notified equity schemes.
Information
Other tax-saving options besides Section 80C
Besides, Section 80C, you can use various other sections of the Income Tax Act to reduce your taxable income. For instance, you can claim an exemption for the payment of medical insurance premium under Section 80D or for home loan interest payment under Section 80EE.