A taxpayer is required to spend money on the identical monetary 12 months to assert tax advantages
To encourage financial savings and investments by taxpayers, the federal government has supplied varied deductions underneath the Income Tax Act, 1961. Among the preferred of them is Section 80C. It covers varied investments and bills that particular person taxpayers and Hindu Undivided Families (HUFs) can declare for deductions as much as Rs. 1.5 lakh in a monetary 12 months. Companies, partnership companies, LLPs can not avail the good thing about this part. To avail of deductions underneath this provision, a person should go for the outdated tax regime. The new concessional tax regime doesn’t enable deductions underneath this part.
Let’s take a look at how Section 80C can profit taxpayers.
1. By claiming deductions underneath 80C, a person or an HUF can cut back their taxable revenue by Rs 1.5 lakh in a monetary 12 months. Those within the highest tax slab of 30 per cent can save as much as Rs 46,800 (inclusive of cess at 4 per cent) by utilising this provision in full.
2. A taxpayer is required to spend money on eligible funding devices in the identical monetary 12 months to assert the tax profit. The taxpayer can make investments as much as Rs 1.5 lakh in any of the eligible funding devices reminiscent of Employees’ Provident Fund, Public Provident Fund, Equity-linked Savings Scheme mutual funds, Sukanya Samriddhi Savings Scheme, National Savings Certificate, five-year tax-saving mounted deposits with a financial institution, and/or put up workplace, National Pension Scheme and Senior Citizen Savings Scheme.
3. Each of those eligible funding schemes has its personal funding restrict, price of return and tax therapy on its returns. An particular person can use a number of devices to achieve the higher funding restrict.
4. The taxpayer may also declare deductions underneath Section 80C for bills on the life insurance coverage premiums, reimbursement of principal of house loans, kids’s college charges.
5. You may also declare a deduction for stamp responsibility/charge to switch home property to your self.
Both resident Indians and NRIs can declare tax deductions underneath this part.
