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Kotak e-Term

Features

  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**
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Ref. No. KLI/22-23/E-BB/492

T&C

Section 80C Deduction in Budget 2024: Will the Government Increase Section 80C Limit?

Income Tax Act 1961 offers a tax deduction of up to ₹1.5 lakhs for taxpayers investing in some selected schemes.

  • 2,191 Views | Updated on: Oct 22, 2024
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Income tax benefits are provisions in the tax laws that allow individuals and businesses to reduce their tax liability. These benefits come in various forms, such as deductions and exemptions. Section 80C is one such provision where taxpayers can claim a deduction of up to ₹1.5 lakhs for investments or expenses made in eligible instruments or categories. Let us understand about Section 80C deduction in budget 2024-25 in detail.

What is the Section 80C Benefit?

Section 80C of the Income Tax Act of 1961 provides a significant tax-saving opportunity for individual taxpayers and Hindu Undivided Families (HUFs) in India. It allows a deduction from the total taxable income for certain investments, expenditures, and payments. The maximum deduction limit under Section 80C is ₹1.5 lakhs per financial year.

Here are some key investments and expenditures eligible for deduction under Section 80C:

  • Life Insurance Premiums: Premiums paid for life insurance policies for self, spouse, and children.
  • Employee Provident Fund (EPF): Contributions made to EPF.
  • Public Provident Fund (PPF): Deposits made into a PPF account.
  • National Savings Certificate (NSC): Investments in NSCs.
  • Equity Linked Savings Scheme (ELSS): Investments in ELSS mutual funds.
  • Unit Linked Insurance Plan (ULIP): Premiums paid for ULIPs.
  • Tuition Fees: Tuition fees paid for children’s education (for a maximum of two children).
  • Home Loan Principal Repayment: Principal repayment on home loans.
  • Fixed Deposits: Tax-saving fixed deposits with a minimum tenure of 5 years with banks and post offices.
  • Sukanya Samriddhi Yojana (SSY): Deposits made in the SSY account for the girl child.
  • Senior Citizens Savings Scheme (SCSS): Investments in SCSS.

Why the Section 80C Limit Should be Increased?

While the government has introduced new tax regimes with lower tax rates, the Section 80C deduction remains popular among taxpayers. An increase in the limit could provide a much-needed boost to savings, investments, and overall financial planning. While it is a popular tool for tax planning, many argue that the limit should be increased due to several reasons:

Rising Costs of Living and Inflation

  • Eroding purchasing power: Due to inflation, the value of ₹1.5 lakh has diminished significantly over the years. This means the same amount of investment offers less financial security than in the past.
  • Increased expenses: The cost of living has risen substantially, including education, healthcare, and housing. A higher limit would allow taxpayers to allocate more funds toward these necessities.

Encouraging Long-term Savings and Investments

  • Financial planning: Section 80C promotes savings and investments for long-term goals like retirement, education, and homeownership. An increased limit would encourage more individuals to plan for their future.
  • Boosting the economy: Higher investments in tax-saving instruments can increase funds for sectors like infrastructure and housing, stimulating economic growth.

Addressing Tax Burden on Middle Class

  • Tax relief: The tax burden on the middle class can be significant. Increasing the Section 80C limit would provide some relief and improve disposable income.
  • Fairness: Given the rising income tax slabs, a higher deduction limit would create a more equitable tax system.

How to Claim Section 80C Deduction?

To claim a Section 80C deduction, you must invest in or incur eligible expenses within the financial year and provide the necessary documentation during tax filing. Here is a general outline of the process:

See if You have Invested in Eligible Expenses

To avail yourself of the benefits of Section 80C, you must invest in options like PPF, EPF, NSC, life insurance premiums, tuition fees, ELSS, etc. Make sure to complete your investments before the end of the financial year to claim deductions for that year.

Gather Necessary Documents

Collect original or certified copies of investment proofs (passbooks, certificates, receipts, etc.) for all eligible expenses. Keep detailed records of your investments and expenses for future reference.

Declare Investments to Employer (if applicable)

If you are a salaried employee, inform your employer about your investments through Form 12BB. This helps them calculate your taxable income accurately.

File Income Tax Return

When filing your income tax return, provide the details of your Section 80C investments and expenses in the appropriate sections of the return form. You also have to attach copies of the supporting documents as required.

FAQs on Section 80C Deduction in Budget 2024-25


1

What is the maximum amount of deduction allowed under Section 80C for the financial year 2024-25?

The maximum deduction under Section 80C for FY 2024-25 is ₹1.5 lakhs, but only if you opt for the old tax regime. The new tax regime does not offer this deduction.



2

Is there a limit on the total amount of investment one can make under Section 80C?

Yes, the total amount of investment eligible for deduction under Section 80C is capped at ₹1.5 lakhs for FY 2024-25 (old tax regime only).



3

Can I claim deductions under Section 80C for investments made in the name of my spouse or children?

No, deductions under Section 80C can only be claimed for investments made in your own name. Investments made in the name of your spouse or children cannot be claimed as a deduction.

Suggested Readings

1. Income Tax Deductions List - Deductions on Section 80C, 80CCC, 80CCD & 80D - FY 2023-24 (AY 2024-25)

2.Lesser-Known Tax Deductions That Could Lower Your Tax Burden
Amit Raje
Written By :
Amit Raje

Amit Raje is an experienced marketer who has worked in various Fintechs and leading Financial companies in India. With focused experience in Digital, Amit has pioneered multiple digital commerce in India. Now, close to two decades later, he is the vice president and head of the D2C business department. He masters the skill of strategic management, also being certified in it from IIMA. He has challenged his challenges and contributed his efforts in this journey of digital transformation.
Amit Raje
Reviewed By :
Prasad Pimple

Prasad Pimple has a decade-long experience in the Life insurance sector and as EVP, Kotak Life heads Digital Business. He is responsible for developing user friendly product journeys, creating consumer awareness and helping consumers in identifying need for life insurance solutions. He has 20+ years of experience in creating and building business verticals across Insurance, Telecom and Banking sectors

Kotak e-Term

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Features

  • Life Cover till 85 years for Life & Life Secure Option
  • 3 Payout Options
  • Special Rates for Women
  • Option to exit the policy with premium refund at the age of 60*
  • Special Rates for Non-Tobacco Users
  • Free Medical Check Up every 5th year**
Want to Know More?
Invest NOW

Ref. No. KLI/22-23/E-BB/2435

T&C

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The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The content has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Further customer is the advised to go through the sales brochure before conducting any sale. Above illustrations are only for understanding, it is not directly or indirectly related to the performance of any product or plans of Kotak Life.

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