Taxpayers in India can avail of various deductions and exemptions under the tax laws. One method of reducing your tax liability is by claiming a deduction under 80C of the IT Act. Notably, under 80C, one can claim deductions up to INR 1.5 Lakhs/year from their gross total taxable income.

In this article, let's understand Section 80C deductions and how they benefit taxpayers.

Identifying Subsections Under Section 80C

The Income tax act categorises the deduction under Section 80C into various subsections. These are:

• Section 80C: Include investments in provident funds, life insurance premiums, payments made towards home loans, etc.
• Section 80CCC: All mutual funds and pension plans payments come under this subsection.
• Section 80CCD(1): Include your payments towards National Pension Schemes, Atal Pension Yojana, and similar Government schemes.
• Section 80CCD(1B): Any investment up to INR 50000 towards National Pension Scheme.
• Section 80CCD(2): Exemptions include the employer's contribution toward NPS.

Having identified the various subsections under 80C, let's explore the important instruments under 80C.

Elements under Section 80C

Public Provident Fund

PPF is a government savings scheme intended for the long-term financial benefit of the taxpayer. While it matures 15 years after the account opening, contributors can withdraw money from the seventh financial year.

Sukanya Samridhi Yojana

This is a Government aided savings scheme for parents with a girl child. It is an investment instrument that matures once the girl reaches age 21.

Unit-Linked Life Insurance Plan

ULIP is a one-in-all instrument that provides life insurance plans, investment opportunities, and a life cover with a lock-in period of 5 years.

NABARD Rural Bonds

Rural bonds offered by the National Bank of Agriculture and Rural Development are eligible for tax deductions up to INR 1.5Lakhs.

National Savings Certificate

If you are a risk-averse individual, NSC can be your much-desired tax-saving instrument with a maturity period of 5 to 10 years.

Life Insurance Premiums

Your LIPs can make you eligible for tax benefits under Section 80C. Presently, the exemption is applicable only on annual premiums of up to 10% of the total sum assured.

So, if you are a taxpayer investing in any of these instruments, you may be eligible for a deduction under section 80C.

Eligibility For Exemption Under Section 80C

To start with, corporate bodies and companies cannot claim deduction under 80C. Individuals and Hindu United Families are eligible.

Moreover, the investments that are eligible for deductions are:

Besides these, there also exists deduction under section 80c to 80u to get the best possible financial benefits.

Conclusion

Having sound financial knowledge is key to claiming the right deductions. Claiming a deduction under 80C is a great way to ensure you obtain the greatest benefits from your investments. But personal finance can often be complicated.

Fi Money simplifies this by offering an AI-powered Analyser which can provide you with beneficial tips to manage your income and analyse your expenditure closely. This Analyser can also help you learn your credit score and provide you with deep insights for managing your money.

Frequently Asked Questions

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

80C tax benefit is an exemption measure provided to individuals and Hindu United Families who subscribe to certain investment instruments. You can claim deductions up to INR 1.5 lakhs by mentioning your investment expenses in the relevant section of the IT form

2. Are taxpayers allowed to claim 80C deductions while filing Income Tax returns?

Yes, claiming a deduction under 80C is possible while filing Income Tax returns. It is essential to ensure that your investments in a financial year are eligible for benefits under Section 80C.