The Income Tax Act contains Section 80C, which allows some investments and expenditures to pay income tax. You can reduce the amount of tax you owe by claiming deductions of up to Rs. 1.5 lakh if you carefully plan your future financial affairs and allocate your money among various investments, such as the Public Provident Fund and the National Savings Certificate.
Provident Fund: A Provident Fund is a form of retirement investment that is deducted automatically from your monthly income. Provident Funds are also referred to as PFs. Both the employee and the employee's employer will contribute to the PF. The contribution the employee pays can qualify for deductions under Section 80C of the Income Tax Act, in contrast to the contribution made by the employer, which is exempt from taxation. In addition, employees can contribute to the Provident Fund Account of their own will. Under subsection 80C of the Income Tax Act, taxpayers may claim a tax deduction for contributions made to voluntary provident funds, usually known as VPF.
The Public Provident Fund is a common kind of long-term investment because it guarantees a specific rate of return on the money invested. The scheme has a maturity duration of 15 years, and the interest is compounded annually. The minimum amount that can be contributed to the PPF is 500 rupees, and the maximum amount that can be contributed is 1.5 lakh. In accordance with Section 80C of the Income Tax Act, you can claim a tax deduction for the amount that you contribute to the PPF.
If you have acquired a life insurance policy for yourself, your children, or your spouse, the premiums you pay towards it are eligible for deductions under Section 80C of the Income Tax Act. If you have purchased a life insurance policy for yourself, your children, or your spouse, the premiums you pay towards it are eligible for deductions. You can combine all the premiums and claim deductions for up to Rs. 1.5 lakh per year if you have several life insurance policies from different insurance providers.
It is a type of mutual fund scheme developed specifically to reduce a person's tax liability. Investors can submit claims for tax deductions under Section 80C of the Income Tax Act for up to Rs.1.5 lakh if they invest in equity-linked savings schemes, sometimes known as ELSSs for short.
The National Savings Certificate, sometimes known by its abbreviated form, NSC, is one of the most well-liked and widely used tax-saving instruments available to citizens of India. Both five and ten years will pass before the scheme is considered fully mature. This strategy for earning a fixed income over the long run compounds the interest semi-annually. There is no upper limit on the amount of money that can be put into an NSC investment; the least amount of money that can be put into this certificate is 100 rupees, and there is no maximum amount of money that can be put into an NSC investment. You can deduct from your taxable income, in accordance with Section 80C of the Income Tax Act, a portion of the amount that you invest in National Savings Certificates, up to a maximum of Rs. 1.5 lakh in any fiscal year. Individuals can register a Sukanya Samriddhi account for a girl child between the day of her birth and when she turns 10 years old as part of the Sukanya Samriddhi Scheme. The Sukanya Samriddhi scheme accepts investments of as little as one thousand rupees (INR) and as much as one and 1.5 lakh over the course of a single fiscal year. Both the interest rate and the compounding of that interest are done on a yearly basis with this account. You can claim tax deductions for the interest you earn by using this scheme in accordance with Section 80C of the Income Tax Act.
It is also abbreviated as ULIPs These insurance policies offer protection to the policyholder and generate significant returns throughout the policy's life. These plans not only help people save money but also provide tax benefits in accordance with Section 80C of the Income Tax Act, which is one of the primary reasons why they have been so popular in recent times. This is one of the primary reasons why these plans have become so popular in recent years.
Repayment of the principal amount of the home loan: You may be able to claim a tax deduction for the portion of your monthly installment payment (EMI) that is applied towards the repayment of the principal amount of your home loan under Section 80C of the Income Tax Act. The principal amount and the interest are the two components that make up the total amount you are responsible for repaying on your home loan. The portion of the repayment that pertains to the interest cannot be claimed as a deduction in accordance with Section 80C of the Income Tax Act; however, the portion that relates to the repayment of the principal amount most certainly can.
If you buy a home or property and pay stamp duty and registration fees, you may be eligible for tax deductions for these amounts under Section 80C of the Income Tax Act. These deductions apply only if you claim your deductions on your tax return.
Commonly referred to as "Infra bonds," infrastructure bonds are financial instruments not issued by the government but rather by private infrastructure corporations. If you invest in these bonds, you can qualify for tax deductions of up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
NABARD rural bonds:
Bhavishya Nirman Bonds and NABARD Rural Bonds are the two varieties of bonds that may be purchased through NABARD, which stands for the National Bank for Agriculture and Rural Development in India. However, only the latter is eligible for tax deductions in accordance with Section 80C of the Income Tax Act; the maximum amount that you can claim as deductions is Rs.1.5 lakh. Only the latter is eligible for tax deductions in accordance with Section 80C of the Income Tax Act.
Senior Citizen Savings Scheme:
The Senior Citizen Savings Scheme is the best potential option for older citizens looking to make a long-term investment in debt. The returns on investment are attractive compared to those offered by other schemes, and the interest is distributed once every three months. Those who are older than sixty years old are eligible to contribute to this program and receive tax benefits of up to one and 1.5 lakhs under the provisions of Section 80C of the Income Tax Act.
Post Office Time Deposit Scheme for 5 Years:
Post office deposit schemes are very similar to fixed deposit options made available by banks. The tenure of these long-term debt schemes could be anything from one year to five years, but according to Section 80C of the Income Tax Act, only the interest generated on five-year post office time deposit schemes is qualified for tax deductions. This provision applies only to long-term debt schemes.
Recent update on Section 80C from the Union Budget 2023
During the recently concluded Union Budget 2023, Finance Minister Nirmala Sitharaman did not modify the existing guidelines surrounding Section 80C. As a result, if you continue to adhere to the previous tax system, you will be able to take advantage of deductions of up to Rs. 1.5 lakh. If you switch to the new tax regime, the rules governing deductions will not apply to you.