I-T Act: Everything to know about Section 80C
What's the story
India's Income Tax Act offers numerous sections under which taxpayers can claim deductions to save on taxes, with Section 80C being the most utilized.
It permits deductions up to ₹1.5 lakh per annum on specific investments and expenses, effectively lowering your taxable income.
Learning how to maximize these benefits can translate into significant savings.
PPF investment
Invest in Public Provident Fund (PPF)
The Public Provident Fund (PPF) is a popular choice for a Section 80C investment due to its tax-free maturity and the security of government backing.
It provides a decent seven to eight percent interest rate over the course of 15 years.
And, with a minimum annual investment of only ₹500, it's affordable for almost everyone. It is a great option for long-term savings.
ELSS funds
Opt for Equity Linked Savings Scheme (ELSS)
Equity Linked Savings Schemes (ELSS) are mutual funds that provide the dual advantage of deduction under Section 80C and the potential for higher returns associated with equity markets.
They have a lock-in period of three years, significantly shorter than other tax-saving investments such as the Public Provident Fund or National Savings Certificate.
That said, since they are market-linked, they come with higher risks compared to fixed-income instruments.
Life insurance
Purchase a life insurance policy
The premiums you pay for life insurance policies for yourself, your spouse, and your children qualify for a deduction under Section 80C up to ₹150,000 per year.
This applies to premiums for both conventional life insurance policies and Unit Linked Insurance Plans.
Besides providing financial security to your family in the event of unfortunate circumstances, it helps lower your taxable income.
Home loan repayment
Pay toward home loan principal repayment
The principal amount you repay on a home loan is eligible for deduction under Section 80C.
This means purchasing a home isn't just an investment in property, but also a smart way to save on taxes.
However, you can claim the deduction only if you do not sell the house property within five years from the end of the financial year in which you took possession.
Education expenses
Contribute toward children's tuition fees
Tuition fees paid for the full-time education of two children in India can be claimed as deductions under this section.
This includes fees paid to any school, college, university, or other educational institution situated within India.
Notably, it does not cover payments made toward development fees, donations, or late fees.