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What is Section 80C?

Save Tax Now
  • 31st Jan 2022
  • 381

What is Section 80C?

Taxes are an important part of our country’s economy, making up for a significant share of the government’s tax budget, which is used to provide basic services to all the citizens. People who earn more than a specified number must therefore pay taxes according to the appropriate tax slabs.

Section 80C deduction Income Tax Act allows individuals to deduct expenditures for life insurance, fixed deposit accounts, pension funds, university fees, and the construction/purchase of residential buildings.

Tax Exemption Under 80C

Hindu Undivided Families (HUFs) and individuals are subject to tax breaks under section 80C of the Income Tax Act, covering a wide range of expenses. For instance, the 80C insurance premium limit is a provision that proves to be highly beneficial for taxpayers. Eligible taxpayers can seek deductions of up to ₹1.5 lakh per year under section 80C, which is a combination of deductions allowed under sections 80C, 80CCC, and 80CCD.

Tax Exemption Under 80C Sub-Sections

The 80C tax exemption list as per the Income Tax Act, 1961 is as follows:

  • Section 80CCC

Deduction under 80CCC allows for tax deductions on pension fund investments. The provision considers pension fund from any company, and allows for a maximum deduction of ₹1.5 lakh. However, individual taxpayers are the only ones who may seek this deduction.

  • Section 80CC

This section is designed to encourage people to save their hard-earned money by offering an incentive to participate in pension systems that have been approved by the Central Government. Payments made by a person and their employer are both tax deductible, as long as the deduction is less than 10% of the person’s income. This deduction is only available to individual taxpayers.

  • Section 80CCF

This section, that is available to both Hindu Undivided Families and Individuals, offers provision for tax breaks on long-term infrastructure bonds which have been authorized by the government. This section allows for a max deduction of ₹20,000.

  • Section 80CCG

Section 80CCG of the Income Tax Act allows for maximum deductions of ₹25,000 per year for certain individuals who reside in India. Deductions are allowed for investments in government-approved equity savings plans, up to a maximum of 50 percent of the amount invested.

Insurance & 80C Deduction Income Tax Act

Life insurance plans are commonly utilized to receive a tax deduction under section 80C of the Income Tax Act of 1961. Amounts up to ₹1,50,000 can be withdrawn from the 80C insurance premium limit (₹1 lakh for the fiscal year 2014-15). It is a common misperception that all premiums paid on life insurance plans are deductible under section 80C of the Income Tax Act of 1961, and that the full amount is deductible.

80C Tax Exemption List & Other Investment Tools

  • ELSS

Some mutual fund plans are specifically designed to help you save money on taxes. Under section 80C of the Income Tax Act, equity-linked savings schemes, or ELSS as they are commonly known, help shareholders to seek tax deductions up to ₹1.5 lakh.

  • PPF

The interest is compounded annually, and the program has a 15-year maturity time. The minimum contribution to a PPF account is ₹500, and the highest contribution is ₹1.5 lakh. Section 80C of the Income Tax Act allows you to deduct the sum you donate to your PPF.

To create wealth and savings, it is vital to pay your taxes on time and claim any tax exemptions under 80C. With government assistance and a thorough understanding of your needs and ultimate financial goals, you can avail maximum tax benefits from the different deduction and exemptions offered under the various sections of the Income Tax Act. One prudent decision can empower you to save and invest your money in the right way.

- A Consumer Education Initiative series by Kotak Life

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