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Income Tax Deduction Under Section 80C

Take a help in filing your tax

An outline of income tax

Are you wondering what income tax is? Income tax is a tax paid by an individual that depends on earning during their financial year. The earnings may be either notional or actual. This was decided by the Government of India based on income tax slabs and the rate of income tax in which the individuals are paying tax.

In some cases, the government offers income tax rebates that are very beneficial for the public in the lower-income group. Tax planning is a very much important feature of financial planning. Numerous sections are available under the income tax act that can be an advantage in saving our outgo of tax.

Many people are unaware of these options and pay without checking that their existing investments have reached the maximum limit that they can avail of this section.

This results in investing more in this category, and this would not help you meet your financial goals. This can be overcome through Section 80C of the Income Tax Act of India.

Save your tax amount with section 80C

This's the fundamental reason why people choose any insurance type and rightfully so. The death on the breadwinner on the family or some other earning member can transform the remaining family members' lives upside down. In such a circumstance, managing taking care and household expenses of the household's fundamental requirements turns into an incredibly tough job. Term life insurance offers complete sum sure at the time of death and will make the other family much more comfortable, albeit financially.

Section 80C is only applicable for Hindu Undivided Families and individual taxpayers. Other than that, partnership firms, corporate bodies, and other businesses can not avail of this tax deduction under Section 80C.

If you invest in Tax Saving + Term Insurance, it will be very beneficial to get a tax deduction amount. If you have invested in LIC, Mediclaim, PPF, or paid tuition fees for your children but missed claiming a deduction and have paid excess tax amount, you can claim while filing your Income Tax Return.

Further, by applying these schemes, you can reduce your tax and save you a tax benefit. In day to day life, it has become one of the main reasons that lie behind the investments.

Eligible investments for tax exemptions

There are many ways to invest to gain a tax deduction, but which one becomes the best option? In which area you should invest in getting a tax deduction? These are all the questions that were raised among many income tax-paying individuals.

Tax Saving + Term Insurance is one of the best policies to invest in. Let's check out the best option available for you to save your investments.

Invest in provident funds to save your tax liability

EPF stands for Employees Provident Fund, and this was enacted in 1952. The main aim of the act was to promote retirement saving for employees all over India. Employees Provident Fund is some funds that were paid regularly in monthly contributions gained by an employee and his or her employer.

The invested individual can make use of this account at the time of resignation. The amount deposited in this account is tax-free when you withdraw it after five years that is at maturity tenure. In general, the interest rate is 8.50%, and the invested money can be deducted in the taxable amount.

The Public Provident Fund was started by the Ministry of Finance in 1968. In this tax-saving method, the investors can save a maximum number of large amounts of about Rs 1, 50,000. PPF has a lock period of about 15 years.

The rate of interest differs every year, and on average, there was an 8% interest per year. The best thing is that at the time of withdrawal, you can get an amount tax-free. Voluntary Provident Fund is the voluntary contribution done by the employees towards his or her provident fund account.

This is an extension of EPF. This contribution can be made after 12% of the contribution was done by the employee in his EPF. The maximum contribution can be made up to 100% based on his or her basic salary. Interest is the same as the EPF.

Save your valuable money by investing in life insurance premium

Payments paid to life insurance are qualified to receive tax benefits as per Section 80C limit. These deductions are only available when these policies are detained by self, dependent children, spouse, etc.

No deduction will be allowed for these policies in case of siblings, parents-in-law, or any other relatives. Hindu Undivided Family members can gain a sustainable benefit from these HRA tax exemptions.

It was a better idea to invest in a Tax Saving + Term Insurance; for this, you can approach a good assured insurance company. Any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy is upto 10% of the actual capital sum assured is tax free under section 10(10D) of Income Tax Act. Policy issued on or before 31st day of March, 2012 if premium payable is upto 20% of the actual capital sum assured, proceeds are tax free under section 10(10D) of Income Tax Act.

Capitalize in Equity Linked Saving Schemes

This follows the same concept, which was followed by mutual funds. In these accounts, the money can be invested in monthly contributions via lump sum or SIP. The lock period in Equity linked saving schemes was about three years; this means that you can withdraw your money only after three years either you paid it as a lump sum or SIP.

The average return is maybe up to 15-18% that depends upon the equity market. Sometimes in positive cases, it will even reach up to 25-30%. Hence, if you are a smart investor, then you can save your taxes.

Save Tax By Approaching Unit Linked Insurance Plan

Unit Linked Insurance Plan is a mixture of investment and insurance. A portion of the money financed in ULIP is used to deliver insurance, and the balance is capitalized in the stock market.

In this ULIP, you are fit to save your income tax under Section 80C, and it was up to Rs1,50,000. But in ULIP, they do not provide any guaranteed returns since they are equity market-linked products.

The main drawback of ULIP was that they do not clearly explain in which area the investment has been made and what amount of rupee has been taken for the commission and other expenditures. But in the case of Tax Saving + Term Insurance, it is intellectual ideas to invest.

Invest in principle sum of home loan

The income tax-paying individuals are eligible for deduction under Principal Repayment Section 80C for Home Loan. If you have taken a house loan to build a new house, you can use this advantage in Section 80C.

The monthly installment or EMI of the home loan consists of two constituents: interest and principal. But you will get a deduction under Section 80C in the portion of the principal. The interest portion was also fit for deduction in income tax, but it does not come under Section 80C.

Hence you can save the income tax amount with the possibilities which were mentioned above under Section 80C. When comparing to capitalizing your money in other policies, Tax Saving + Term Insurance is a greater idea to save your income tax. The main thing that matters a lot in the investment is your smartness by which you can save your income tax and make a fortune over it.

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