If you’re looking for effective ways to reduce your liability for income tax, section 80C of the Income Tax Act, 1961, is your new best friend. This provision offers tax deductions for specific investments and expenses pertaining to a financial year. Once you know the various deductions under section 80C, you can reduce your tax liability and save more.

What is Section 80C of the Income Tax Act?

Before you know the eligible deductions under section 80C, it is important to understand the finer details of this provision. Here are some essential things you need to know about Section 80C of the Income Tax Act:

• Section 80C offers deductions for certain investment activities and spending activities.
• The maximum amount of deduction you can claim under this section per financial year is Rs. 1,50,000 (a combined limit that includes sections 80CCC and 80CCD(1)).
• The eligible amounts under this section can be deducted from your taxable income, reducing your tax liability.
• The deductions under section 80C are only available if you choose the old tax regime.

Examples of Deductions Under Section 80C

Here is a closer look at some examples of the investments and expenses eligible for deduction under section 80C.

Maximise Tax Savings with the Right Investments

If you plan your investments well, you can enjoy the dual advantage of reducing your tax burden and meeting your financial goals. Opting for one benefit does not mean you need to forego the other. For example, with Fi, you can invest in over 800 direct mutual funds, including tax-saving ELSS funds. You can invest daily, weekly, or monthly via automatic payments or SIPs. The best part is that Fi offers 100% flexibility and levies zero penalties for missed payments, if any.

Frequently Asked Questions

1. What is the 80C tax benefit, and how do I claim it?

Section 80C of the Income Tax Act allows you to claim a deduction up to the limit of Rs. 1.5 lakhs from your total income for specific investments and expenses. You can claim this benefit when filing your income tax returns.

2. Are donations eligible for tax exemptions under Section 80C?

Donations are not a part of the deductions under section 80C of the Income Tax Act. Instead, they are covered under section 80G of the Act. Some donations are eligible for a 100% deduction, while others are eligible for a 50% deduction.

3. Can a company avail of the benefit of Section 80C?

The provisions of section 80C of the Income Tax Act apply only to individuals and Hindu Undivided Families (HUFs). So, companies cannot avail of any of the benefits under this section.

4. Is the interest earned through these instruments also eligible for tax deductions under 80C?

Some of the investments covered under section 80C are Exempt-Exempt-Exempt (EEE), meaning that the investment, withdrawal and returns offer tax benefits. Some examples of these investments are PPF and EPF. For others, like a tax-saver FD, the interest earned is taxable.

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