Sec 80C - Be smart and Save smart

CA Maneet Pal

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Income Tax Act 1961 Section 80C

Income tax is being made obligatory by the Government of India on taxable incomes of individuals, Hindu Undivided Families (HUFs), companies, firms, Co-operatives societies and trusts. The Income Tax department of India has the authority to charge such taxes on various each of the above. It is governed by the Central Board of Direct Taxes (CBDT) and is a part of Department of revenue under the Ministry of Finance, Government of India.

About Section 80C

The Section 80C came into existence from 1^st April, 2006. This section allows certain incomes and expenditure to avail tax benefit as they can be exempt from the taxable income. It is a merger of section 88 and section 80CCC.

What are the benefits of Section 80C?

The government of India encourages people to invest in various schemes and policies that can enable an individual to receive tax advantage by getting a deduction on it. And getting a deduction basically means that’ll you have to pay less of charge your taxable income.

How can you take advantage of this section?

Paying lesser amount of tax basically means, say your Gross Total Income turns out to be Rs800000, this section allows you invest up to Rs100000 of your income and claim a deduction up to Rs100000. say that you invested your income up to Rs100000 and as above we know that your GTI is Rs800000, now as per this deduction you’ll have to pay tax only on Rs700000 and you get to save the Rs100000 by utilizing the amount and making smart investments and policies for your benefit. It’s like you saved tax on Rs100000 and also made some good investments for yourself!

Also how much you save depends on what bracket of tax liability does your annual income come under. The following slab of the current year will help you deduce the amount:

Income                                                                                Tax Rate

Up to 160000                                                                           0%

Up to 190000 (for women)               

Up to 240000 (senior citizen older than 65years)     

160000-500000                                                                        10%

500000-800000                                                                        20%

Above 800000                                                                          30%

The following few sources will help you save tax and also will serve as valuable saving and investment:

Life Insurance Premiums:

The amount that you pay towards life insurance premiums can be availed as a deduction under section 80C. Any amount you pay as LIC premiums for yourself, spouse or your children can be included here.

Provident Fund and Voluntary Provident Fund:

Provident fund is routinely deducted from your salary; your employers as well as you contribute to it. You can contribute a maximum amount of Rs70000 towards it. The employer’s contribution is exempt from tax and the employee’s contribution is deductible from gross total income.

National Savings Certificate

Compounded half-yearly giving an 8% interest, these are six year saving instruments. The interest accrued here is eligible for deduction under sec 80C.

Education fee of kids

Since education these days means a lot of expenditure, parents spent a lot of money on their kids’ education. You can avail this deduction on the tuition fee only and to the maximum of two children.

Housing Loan

When go for a housing loan there will be two components to it that is the principal and the interest which together is known as the Equated Monthly Installment also known as EMI. The principal amount qualifies for the tax deduction.

Unit linked Insurance Plan

Unit linked insurance plans comes with benefits of life insurance and benefits of equity investments. These have become popular among the people because they provide tax saving benefits and also give excellent return in investments.

These are few investments that’ll reap you immense tax saving benefits. Although it depends on individual to individual what type of investment they’d prefer but some are chosen by almost everybody like PF is compulsorily deducted from a salaried employees pay and LIC plans are adopted by a major population as well.