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Section 80C Deductions as per Income Tax Act, 1961

Taxes can be challenging. Your investment and savings plan should consider how the returns will be taxed when they mature or are withdrawn. Your varied investments are eligible for tax deductions under Section 80C of the Income Tax Act of 1961.

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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

The income tax department of India offers numerous deductions from tax liability under chapter VI A. These exemptions and deductions act as effective means to motivate taxpayers to save and invest, which is the ultimate objective. Although the 80C deduction income tax act is the most well-known, other similar tax deductions can help people decrease their tax bills.

All You Need to Know About 80C

What is Section 80C?

Section 80C prescribes combinations of activities, including Sections 80CCC. & 80CCD. You could deduct the amount from your total taxable income for the Previous Year (PY) if you used some of your income for these purposes during the PY.

Assume, for illustration, that during PY 2021-22, you had a taxable income of ₹10,000,000. Your total taxable income will be lowered to ₹900,000 for the PY if you invest ₹100,000 of this income in one or more of the activities listed under Section 80C.

Read on to understand the different means through which you can avail the benefits of income tax deductions and make the most of your hard-earned income.

Learn About Section 80C

Individuals can seek tax deductions and lower their taxable income via tax exemption under 80C of the Income Tax Act, 1961. Individuals and Hindu Undivided Families (HUF) can also claim ₹1,50,000 as non-taxable earnings from their yearly income if they make specified investments.

There are certain subsections to the 80C tax exemption list under the Income Tax Act, 1961, as mentioned below:

INCOME TAX ACT SUB-SECTIONS

EXEMPTIONS

Section 80C

Tax exemption under 80C is for payments made towards life insurance premiums, ELSS, the principal amount of a house loan, SSY, NSC, SCSS, and other provident funds, such as EPF, PPF, etc.

Section 80CCC

Payments to annuity pension schemes can be deducted under Section 80CCC. The annuity pension or amount received on surrendering of the annuity is taxed in the year of payment, along with any interest or bonus accumulated on the annuity.

Section 80CCD (1)

Payments by employees are considered

under section 80CCD (1).

The following are the maximum deductions that can be made:

  • 10% of your annual salary (in case taxpayer is an employee)

  • 20% of total gross revenue (in case of self-employed)

  • ₹1.5 lakh (maximum permitted under section 80C)

Section 80CCD (1b)

For money placed in an NPS account, an extra deduction of ₹50,000 is permitted. Additionally, payments to the Atal Pension Yojana are also deductible.

Section 80CCD (2)

Under this clause, employers can take up to 10% of their base wage plus dearness allowance as NPS contributions. Only salaried employees are eligible for this perk; self-employed persons are not.

Section 80C Insurance Premium Limit

Life insurance plans. are commonly utilized to receive a tax deduction under Section 80C of the Income Tax Act 1961. Amounts up to ₹1,50,000 can be withdrawn from the 80C insurance premium limit (₹1 lakh for the fiscal year 2014-15). However, you should duly note that all premiums paid on life insurance plans are not deductible under section 80C of the Income Tax Act, 1961, and the full amount is not deductible.

Income Tax Return & Section 80C

Contributing to the list of benefits is the fact that it is possible to claim the 80C tax exemption list even across sub-sections if you file your income tax return. before the end of the assessment year.

Are 80C and 80CCC the same?

Up to ₹1.5 lakh can be deducted annually from your taxable income thanks to Section 80C deductions on various assets. As opposed to this, Section 80CCC allows for an annual deduction of up to ₹1.5 lakh for contributions made by an individual to certain pension schemes. Thus, Section 80CCE caps the annual exemption ceiling at ₹1.5 lakh. The deductions allowed by this section may be made by any individual taxpayer who has contributed to an annuity plan made available by an insurer.

Conclusion

The Indian Government has meticulously crafted the Income Tax Act to benefit both the country and its people. Thus, it is critical to pay your taxes on time and claim any exemptions or deductions allowed by the law. Section 80C and other similar provisions, when understood well and employed correctly, can not only help you avail the maximum benefits effortlessly but also empower you to build your wealth and savings manifolds.

Key Takeaways

  • Individuals can seek tax deductions and lower their taxable income via tax exemption under 80C of the Income Tax Act, 1961.
  • You can deduct the amount from your total taxable income for the Previous Year (PY) if you used some of your income for these purposes during the PY.
  • Life insurance plans are commonly utilized to receive a tax deduction under Section 80C of the Income Tax Act 1961.
  • Up to ₹1.5 lakh can be deducted annually from your taxable income thanks to Section 80C deductions on various assets.

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