Section 80C of the Income Tax Act of India is a section that points to numerous costs and investments that are exempted from income tax. It lets in for a deduction of as much as Rs 1.5 lakh every year from a person’s general taxable income.
Tax exemptions for investment under 80C are relevant and most effective for individual taxpayers and Hindu Undivided Families. Corporate bodies, partnership companies, and different organisations are not qualified to avail of tax exemptions under Section 80C.
Table of Contents
What is Section 80C of the Income Tax Act?
Section 80C of the Income Tax Act is an income tax deduction that facilitates you reducing your taxable salary slip and therefore enables to lower the tax return. It covers specific investment and fee options that could reduce your taxable salary by an amount of as much as Rs 1.5 lakhs. Although the deduction is said whilst filing your income tax return, the investment needs to be made all through the relevant financial year.
For instance, For FY 2023-24, i.e., AY 2024-25, you need to make investments in the unique options under section 80C of the Income Tax Act between 1 April 2023 and 31 March 2024. The benefit may be claimed at the time of filing your income tax return.
Also Read:- Standard Deduction for Salaried Individuals in New & Old Tax Regime 2024 | Income tax Allowances and Deductions
Who is Eligible for Sec 80C of the Income Tax Act
Here are the categories of which candidates are eligible for Sec 80C of the Income Tax Act
- Individuals
Individuals, both Indian residents and Non-Resident Indians (NRIs), are eligible to make a deduction under Section 80C of The Income Tax Act, 1961. This category covers salaried individuals and self-hired specialists such as businesspersons and doctors.
- HUFs (Hindu Undivided Families)
HUFs are considered as separate accessible entities under The Income Tax Act, 1961 and can avail benefits under Section 80C deduction limit of ₹ 1.5 lakh per economic year. HUFs have the ability to spend money on numerous systems including life insurance, tax-saving Fixed Deposits (FDs) and Equity Linked Savings Schemes (ELSS) to assert deductions under this section.
- Senior Citizens and Others
Senior residents are individuals aged 60 and above. These people can benefit from section 80C under income tax. They can use all of the investments mentioned in the Section 80C deduction listing as well as detailed investment options just like the Senior Citizen Savings Scheme (SCSS) to claim deductions.
Section 80C Deductions List
There are over a dozen options that taxpayers could use (See: Section 80C umbrella for Assessment Year 2020-21 (FY 2019-20)) to save tax under Section 80C, which can be mentioned under 3 large heads – financial savings, investments, and prices. Here are various deductions under section 80C
- ELSS finances
Investments in fairness-related savings schemes qualify for tax deduction under section 80C of the Income Tax Act. Now, a critical point to be stated about equity-linked financial savings schemes is that they have a lock-in period of 3 years from the date of investment. If you’re thinking about making an investment in this scheme, ensure to make investments for longer intervals like 5 to 7 years as they may be equity schemes. Equity schemes are an excellent choice for wealth creation over a protracted time.
- National Pension Scheme
The National Pension Scheme is a government-subsidised financial savings scheme for employees of private, public, and unorganised sectors. It can’t be used for investment by the military. It has a lock period of up to 60 years.
- ULIPs
These insurance plans offer coverage to the policyholder and provide vast returns in the long time. One of the main reasons why those plans have become so famous these days is the fact that they not only help in saving cash, but also offer tax Benefits under Section 80C.
- Tax-saving fixed deposits
These fixed deposits forms give the tax benefits to students under 80 C. It has a lock in period up to 5 years. Fixed deposits provide fixed returns.
- Public Provident Fund
PPF or Public Provident Fund can help the taxpayer be given reasonable returns and act as a tax-saving tool. PPF investments are exempted at the investment level and also exempted at the accrual level. Hence, the taxpayer need not pay any tax each time the interest is credited and on the time while the predominant amount is withdrawn. Deduction under Section 80C for PPF may be claimed for investments in the name of a partner or children.
- Senior Citizen Savings Scheme
Senior citizen savings scheme is available in the deduction list of Section 80 C. Individuals over the age of 60 years or above on the date of the beginning of the account or someone who reaches at age of 55 years or more and who has retired under a Voluntary Resignation Scheme (VRS) is eligible for the deduction. Deposits made in the Post Office Senior Citizen Savings account that have been opened on or after 8 December 2007 are eligible for section 80C deduction. Senior Citizen Savings Scheme accounts can be closed after an expiry of 5 years from the date of starting the account and can be prolonged for some other 3 years.
- Sukanya Samriddhi Yojana
Individuals can open a Sukanya Samriddhi account for a woman child every time from the date of her date of birth when she turns 10 years old. The minimum amount that you may make investments in the Sukanya Samriddhi scheme is Rs.1,000, and the most are confined to Rs.1.5 lakh in an economic year. The interest in this account is calculated on an annual foundation and compounded on an annual basis too.
Must Read:- How To Save Income Tax For Salary Above 20 Lakhs? | Deductions From House Property Income: Section 24
How Much Can Be Claimed Under Section 80C?
There are limits to the amounts that may be claimed for extraordinary activities and the total that may be claimed under these activities.
The overall amount that may be claimed under Sections 80C, 80CCC and 80CCD(1) mixed is 150,000/-. There is an option to increase the whole deduction by a further `50,000/- under Section 80CCD. Here’s how it works:
- 80 CCD(1) and 80 CCD(2) apply for contributions by worker and organisation respectively.
- Note that the deduction of `50,000/- is available on NPS over and above 150,000/- deduction available under Sections 80C, 80CCC & 80CCD(1).
Conclusion
Section 80C is one of the most interesting a number of the Income Tax Act sections. This section addresses tax deductions for investments, pension plans, and other life-centric activities. You can make large tax financial savings every year in case you spend wisely on these categories.
Just like every other deduction created by the government, you can not claim a deduction unless you are eligible to get the claim. This article presents a top-level view of the guidelines surrounding Section 80C that will help you plan your spending activities and economic investments as a result.
FAQ’s:-
1. When can taxpayers get an 80C tax deduction?
Taxpayers can make claims for the Income Tax Act Section 80C deduction while submitting their income tax return before the close of the Assessment Year.
2. Is it possible to search for a Section 80C tax deduction for life insurance rates paid to any private coverage issuer?
Yes, life coverage premium amounts paid to any life coverage issuer legal by the Insurance Regulatory and Development Authority are deductible under Income Tax Section 80c.
3. Are donations qualified for Section 80C tax breaks?
Donations given to targeted institutions and finances are exempt from taxes under Section 80C of the Income Tax Act.
4. Can taxpayers enroll in various investment policies and claim the Rs. 1.5 lakh deduction for every?
No, taxpayers are permitted a complete tax deduction of Rs. 1,50,000 for all capital invested in devices covered by the Income Tax Act Section 80C.
5. Can agencies be eligible for an Income Tax Act Section 80C tax deduction?
No. Companies are not eligible for an Income Tax Act Section 80C tax deduction. Only Hindu Undivided Families and individual taxpayers can use it.