Simple Guide to Section 80c of the Income Tax Act
Taxpaying citizens are eligible for certain deductions on tax, under Section 80c of Income Tax Act of India. Find out how it can help you.
- First Things First: What is Tax Deduction?
- Tax Deductions Under Section 80c of the Indian Income Tax Act
- Subsections of 80c Section on Income Tax Act
Taxes are important for our country’s economy, and it is the duty of every Indian citizen to pay tax if their income falls under the taxpaying slab. However, the Indian Income Tax Act provides tax deduction schemes; you can actually use these to help you save on tax.
First Things First: What is Tax Deduction?
Tax deduction is a facility offered by the government of India under the Income Tax act that helps people to save their taxable income. However, the amount of tax deduction differs based on the type of tax deduction you have claimed.
Expenses like medical bills, tuition fees, travel allowance, and charitable contributions are eligible for tax deductions. You can even save tax by making investments in avenues like life insurance, PPF (Public Provident Fund), NSC (National Saving Certificate), and retirement savings schemes.
Tax Deductions Under Section 80c of the Indian Income Tax Act
Section 80c, one of the most commonly known sections of the Income Tax Act of India, lets you enjoy tax benefits on certain payments. This is very helpful, especially for people who find it difficult to run their family on a limited income.
Under this section of Income Tax law, taxpayers who are eligible for tax deduction can save an amount of Rs.1.5 lakh in a financial year.
Here, we take a look at a few payments that are eligible for tax deduction, according to 80c of Income Tax Act.
1. Payments on Home Loan
If you have a Home Loan, you can exempt yourself from paying tax on the principal amount of instalment you need to pay.
2. Home Purchases: Registration Fee and Stamp Duty Fee
When you purchase a house, you need to spend a good amount of money on things like house registration and stamp duty. However, these expenses fall in the category of tax benefit.
3. Investments made on Life insurance Policies
Life insurance policies are eligible for tax benefits, no matter the policy is in your name, your spouse or your child. The maximum limit of tax deduction regarding life insurance policy is Rs.1.5 lakh.
4. Investments made on Health Insurance
If you have a health insurance policy, you become eligible for tax deductions on the premium you have paid for the health insurance.
5. Public Provident Fund (PPF)
Investing in different types of provident funds can certainly help you save money. You can save by opening a PPF that matures at 15 years, on a maximum investment of Rs.1.5 lakh in a financial year.
6. Fixed Deposits
Generally, most banks have Fixed Deposit schemes that offer tax benefits on the amount of money you invest.
Subsections of 80c Section on Income Tax Act
As there are different types of tax deduction facilities, you may find tax planning a bit confusing. In order to make people understand all the tax exemption factors, section 80c is divided into different subsections.
These are the subsections of 80c that you need to aware of:
1. Section 80 CCC: Under this subsection, you can have tax benefits on pension schemes, with a maximum tax deduction of Rs.1.5 lakh.
2. Section 80 CCD: This section encourages people to save funds by investing on pension schemes. If the saving you have made is less than 10% of your total salary, you will be eligible for tax benefits.
3. Section 80 CCF: Under this subsection, you become eligible for maximum of Rs.20,000 when you buy long term infrastructure bonds. It doesn’t matter if you are an individual or an undivided family.
4. Section 80 CCG: This subsection of 80c helps you claim a maximum tax deduction of Rs.25,000 on equity funds.
Hope you find this guide to 80c of the Income Tax Act useful and utilize it to save your taxes!