When it is about savings based on income tax slab 2023-24 or slabs ahead, the Indian tax act offers you with distinct investment avenues, and one of the most beneficial and popular provisions is Section 80 C deduction. This section provides you with the opportunity to leverage your expenses and investments to lower your taxable income, resulting in higher savings. By effectively using the provision as per Section 80 C, you may not just save your taxes massively but even build a prudent financial base.
What are the advantages of leveraging 80 C?
Tax liability reduction
Through Section 80 C deductions, you can considerably lower your tax liability, which may lead to increased savings.
Tax deduction
Deduction under Section 80 C permits individuals to get a tax deduction of as high as Rs 1.50 lakh from their overall taxable income.
Diversified investment
Section 80 C deduction offers a wide range of investment platforms, permitting individuals to select options in alignment with their risk appetite and financial goals.
An encouragement to periodically save
The provisions of Section 80C encourage individuals to cultivate a habit of saving and investing, which is crucial for financial stability and growth.
Long-term wealth creation
Investing in certain eligible instruments under 80C can provide long-term wealth creation opportunities, helping individuals achieve their financial objectives.
Now, let’s explore how to leverage Section 80C for higher savings in India
Public Provident Fund or PPF
This is a long-term retirement scheme. Contributions to PPF accounts, up to the prescribed limit of Rs. 1.5 lakh are eligible for deductions under Section 80C.
Employee Provident Fund (EPF)
Contributions towards EPF are eligible for deductions under Section 80C. For example, Mr. Kumar, an employee earning a yearly income of Rs 8 lakh, contributes towards EPF his basic salary at 12 per cent, with is Rs 96,000. This specific amount can avail tax deduction benefits.
National Savings Certificate (NSC)
NSC is a government-backed savings instrument with a fixed tenure. Investments made in NSC are eligible for deductions under Section 80C.
Equity-linked savings scheme (ELSS)
ELSS is a type of mutual fund that invests primarily in equities. Investments made in ELSS funds are eligible for deductions under Section 80C, and they also offer the potential for higher returns.
Tax-saving fixed deposits
Certain banks offer tax-saving fixed deposits with a lock-in period of five years. Investments in these deposits qualify for deductions under Section 80C.
Life insurance premiums
Premiums paid towards life insurance policies, such as term insurance or endowment plans, are eligible for deductions under Section 80C.
Tuition fees
Payments made towards the tuition fees of children’s education are eligible for deductions under Section 80C.
Unit Linked Insurance Plans (ULIPs)
Contributions made towards ULIPs are eligible for deductions under Section 80C. ULIPs offer a combination of investment and insurance benefits.
Sukanya Samriddhi Yojana (SSY)
Contributions made towards the SSY account for the girl child are eligible for deductions under section 80C deduction.
Home loan principal repayment
The principal component of the Equated Monthly Instalment (EMI) for a home loan is eligible for deductions under Section 80C.
Senior Citizen Savings Scheme (SCSS)
Investments made in SCSS, available to individuals aged 60 years and above, are eligible for deductions under Section 80C.
Five-year bank fixed deposits
Certain bank fixed deposits with a lock-in period of five years qualify for deductions under Section 80C.
Employee Share Purchase Scheme (ESPS)
Deductions can be claimed on the amount invested in an ESPS, subject to certain conditions.
National Pension Scheme (NPS)
Contributions made to NPS are eligible for deductions under Section 80C, subject to the overall limit of Rs. 1.5 lakh.
Senior citizens’ mediclaim
Premiums paid towards health insurance policies for senior citizens are eligible for deductions under Section 80C.
Voluntary Provident Fund (VPF)
Contributions made by employees towards VPF, over and above the mandatory EPF, are eligible for deductions under Section 80C.
Infrastructure bonds
Investments made in eligible infrastructure bonds qualify for deductions under Section 80C.
Post Office Time Deposit (POTD)
Investments made in POTD with a tenure of five years are eligible for deductions under Section 80C.
Repayment of housing loan principal
The principal component of the EMI for a housing loan is eligible for deductions under Section 80C.
Rural development bonds
Investments made in rural development bonds, issued by the National Bank for Agriculture and Rural Development (NABARD), qualify for deductions under Section 80C.
Senior Citizens’ Savings Scheme (SCSS)
Investments made in SCSS, available to individuals aged 60 years and above, qualify for deductions under Section 80C.
Tax-saving fixed deposits with co-operative banks
Certain co-operative banks offer tax-saving fixed deposits that qualify for deductions under Section 80C.
Pension funds
Contributions made to notified pension funds, such as the Central Government Pension Scheme, qualify for deductions under Section 80C.
Sukanya Samriddhi Yojana (SSY) contributions
SSY is a government scheme aimed at securing the financial future of the girl child. Contributions made towards the SSY account are eligible for deductions under Section 80C. By participating in this scheme, parents can avail tax benefits while ensuring financial stability for their daughters.
National Pension Scheme (NPS) tier 1 contributions
Contributions made to NPS Tier 1 accounts are eligible for deductions under Section 80C. By contributing to NPS, individuals not only avail tax benefits but also build a corpus for their retirement, ensuring a financially secure future.
Employee Provident Fund (EPF) voluntary contributions
Apart from the mandatory EPF contribution, individuals have the option to make voluntary contributions to their EPF account. These voluntary contributions, within the prescribed limits, are eligible for deductions under Section 80C, allowing individuals to boost their savings while reducing their taxable income.
Conclusion
By effectively leveraging the provisions of Section 80C, individuals can optimise their tax savings and enhance their overall financial well-being. It is crucial to carefully assess the available investment options and choose those that align with one’s financial goals and risk appetite. With a diverse range of options available, individuals can create a balanced portfolio while enjoying the benefits of reduced tax liability and higher savings. Start exploring the opportunities offered by Section 80C today and pave the way for a secure and prosperous future.
