Tax Benefits under Section 80C of Income Tax Act

 

Section 80C of Income Tax Act, 1961 talks about deductions of tax. The Section 80C directly reduces the taxable income because of the section 80C the tax liability comes down drastically. Most of the person enjoys the fruits of section 80 C directly or indirectly. The maximum rebate of Tax is up to Rupees 1.5 Lakh. Presently an individual who is less than 60 years and his income is Rupees 2.5 lakh or less is exempted from paying tax but through section 80C exemptions can be increased up to 4 lakhs. However, there are several conditions also on section 80C. Exemptions of tax helps an individual to improve his/her financial status, provide incentive for education, on investing money of different Governmental schemes etc.

WHAT IS TAX DEDUCTION?

Tax deduction helps in reducing the taxable income; it decreases your overall tax liabilities and helps you save tax, however, depending on the type of tax deduction you claim, the amount of deduction varies. In other words, it could be said that it is subtracting the tax liability or increasing the exemptions. However, these may be subject to the restrictions of the provisions of law.

 MOST BENIFICIAL EXEMPTIONS U/S 80C OF THE INCOME TAX ACT

• All types of Provident Fund (PF): It includes Public Provident Fund (PPF), Voluntary Provident Fund (VPF) and Employee Provident Fund (EPF). On provident funds there is exemption of tax up to Rupees 1.5 lakh on single fiscal year.
• Tax saving Fix deposits:  Investments made under tax saving fixed deposits like 5 years post office time deposits, 5 years tax saving bank deposits etc. are entitled to take advantage of rebate up to Rupees 1.5 lakh under sec 80C of Income Tax Act, 1961.
• National Pension System: It is a postal saving scheme. It is of fixed duration (5 or 10 years). The investments done in NPS are entitled to tax exemptions of Rupees 1.5 Lakh under Section 80C, apart from this, one can invest Rupees 50,000 additionally under the subsection 80CCD (1B).
• Sukanya Samridhhi Scheme: It is an important initiative by the government under “Beti Bachao Beti Padhao Abhiyan” so the accounts opened under Sukanya Samridhhi Scheme are exempted from tax under section 80C of Income Tax Act, 1961.
• Senior Citizenship Saving Scheme (SCSS): An individual above 60 years of age can avail this scheme. Under this scheme senior citizens are exempted from tax up to Rupees 1.5 lakh under Section 80C of Indian Tax act, 1961.
• Life Insurance Policies: Investments made on life insurance policies for you, for your Spouse, for your children etc. are exempted from tax under section 80C of income tax act, 1961. The maximum exemption is Rupees 1.5 lakh.
• Education: It is also included in the section 80C of Income Tax Act, 1961. Higher tuition fees are exempted from tax. Tuition fees can be of a person or his/her children. According to the income tax act 1961, any kind of tuition paid for children whether before admission or at the time of admission or after admission is exempted from tax. The maximum exemption is Rupees 1.5 Lakh. It is considered as one of the most beneficial exemption as it helps the parents in saving money and it also promote education. However, donations are not a ground to avail deductions.
• Investment for wealth Building and Goal: All Equity Linked Saving Scheme (ELSS), Unit Linked Saving Scheme (ULSS), etc. can be used to avail section 80C of income tax act 1961. For rebating tax up to Rupees 1.5 Lakh.
• National Saving Certificate: Investments made under this included in Section 80C of Income Tax Act, 1861.
• Home loan: Through section 80C of Income Tax Act, 1961 an individual can avail the exemption from tax on Home loans. This can provide relief on paying EMI etc.