Tax-saving guide: In order to claim the section 80C deduction, a taxpayer must invest the specified amount in eligible investment instruments or spend it on designated expenses within the same financial year

How section 80C of the Income-tax Act can help you save tax

Section 80C of the Income-tax Act, 1961 stands as one of the frequently utilized deductions. Whether you can avail the section 80C tax benefit depend on the tax regime you choose. This tax benefit is only available to those who select the old tax regime; those who opt for the new tax regime cannot avail this tax benefit.

Here is a look at how you can use section 80C of the income tax Act can help you save tax.

Also read: Income tax deductions available under section 80C in India

1. Section 80C allows individuals or Hindu Undivided Families (HUFs) to claim a maximum deduction of up to Rs 1.5 in a financial year, effectively diminishing their net taxable income and the corresponding tax liability. Leveraging this deduction to its fullest extent can result in savings of up to Rs 46,800, accounting for cess at 4%, particularly beneficial for those falling within the highest tax bracket of 30%.

2. In order to claim this deduction, a taxpayer must invest the specified amount in eligible investment instruments or spend it on designated expenses within the same financial year. Taxpayers can avail tax benefits under this section by investing or spending up to Rs 1.5 lakh in the specified avenues outlined within this section.

3. Eligible investment instruments include Employees' Provident Fund (EPF), Public Provident Fund (PPF), Equity-linked savings scheme (ELSS) mutual funds, Sukanya Samriddhi Savings Scheme, National Savings Certificate (NSC), five-year tax-saving fixed deposits with a bank and/or post office, National Pension System (NPS), and Senior Citizen Savings Scheme (SCSS).

4. It's important to note that each eligible investment avenue under Section 80C comes with its own investment limit, rate of return, liquidity, and tax treatment on its returns. These factors vary across different investment options, allowing taxpayers to choose the options that best suit their financial goals and preferences.

5. Expenses permitted under this section encompass various categories such as life insurance premiums, repayment of home loan principal, children's school fees, among others.

Important FAQs on section 80C of the income-tax Act.

What is section 80C?

Section 80C serves as a tax deduction aimed at lowering taxable income and subsequently reducing tax liabilities. This provision encompasses specific investment and payment avenues capable of decreasing taxable income by up to Rs 1.5 lakhs.

Who is eligible for 80C benefit?

Individuals and Hindu Undivided Families (HUFs) have the opportunity to save on their taxes through various tax-saving options provided under section 80C. This provision extends to both Indian residents and non-resident Indians. However, companies, partnerships, and other corporate entities are not eligible for this deduction. Further, only those who opt for the old tax regime can avail of this tax benefit. Those who choose the new tax regime do not get this tax benefit.

How much can be claimed under Section 80C?

Under Section 80C, individuals can claim a maximum deduction of up to Rs. 1.5 lakh from their total income.

This story originally appeared on: India Times - Author:Faqs of Insurances