Section 80 C of the income tax act of 1961, as amended by various acts, defines privileged and non-privileged expenditure. You can contribute a maximum of Rs 1.5 lakh per financial year under section 80C. A pertinent provision in this regard is that deduction under section 80c can be availed against tax liability only when the scheme or scheme-cum-activity is approved by the tax department for availing its respective benefits. In this post, I will briefly explain how section 80C of the income tax act can help you save money.
What Exactly is Section 80C?
Section 80C is a section of the Income Tax Act of India, 1961, allowing you to save money on your taxes. The government introduced this section so that people can invest their money and save it from being taxed. If you choose to go for the new tax regime, there’s no way you’d be able to claim this benefit. But if you go for the old regime, then you can claim this deduction.
The way it works is that if you have an existing tax liability under the old regime, then you can claim this deduction. Under the new regime, if you have a new tax liability, then this deduction won’t be applicable to you.
This deduction helps in saving money because it reduces your tax burden. It also encourages people to invest in stocks and other financial instruments because they’ll get more benefit out of it when they invest their money in these instruments rather than just keeping it idle in a bank account. You can also take advantage of 80d deductions for additional savings.
What’s The Maximum Amount of Money You Can Save With Section 80C?
Section 80C of the Income Tax Act (IA) is a tax saving scheme that allows individuals to save a maximum amount of Rs 1.5 lakhs from their gross total income. This can be used to offset the number of deductions under Section 80C and Section 80CCD and thereby reduce their net taxable income.
The HUFs (Hindu Undivided Families) and some other taxpayers are eligible for this scheme. However, there are certain conditions that need to be satisfied before you can use this deduction.
The maximum amount of money that can be saved using this deduction is Rs 1.5 lakhs, provided you are in the highest tax bracket of 30%. This figure includes the cess of 4%.
Best Savings Options Under The Section 80C
1. Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is a small savings scheme that can help you save money on taxes. You can open a Sukanya Samriddhi Yojana account with your daughter, who is less than ten years old, in the name of the girl child.
The amount you deposit is eligible for a deduction under section 80C of the Income Tax Act, so the interest generated is tax-free. After your daughter reaches the age of 18 or passes the tenth grade, she can withdraw up to 50% of the amount available at the end of the preceding F.Y., and you can also close your Sukanya Samriddhi Yojana account prematurely after 5 years if there are exceptional circumstances.
The current rate of interest is 7.6% per annum for those who start an account with a minimum deposit of INR 250 and a maximum deposit of INR 1,50,000/- in a financial year with a maximum deposit of up to 15 years from the date of opening.
2. Public Provident Fund (PPF)
Public Provident Fund or PPF, is a savings account that pays 7.1 percent interest per annum. It is an ideal way to save money on taxes, as the interest earned is tax-free.
With a minimum deposit of INR. 500/- and a maximum deposit of INR. 1,50,000/- in a financial year, a single adult resident Indian or a guardian on behalf of a minor/person of unsound mind can open a PPF account.
You can make one withdrawal after five years, omitting the year the account was opened, and the amount of the withdrawal can be up to 50% of the total balance at the end of the fourth preceding year or the end of the preceding year, whichever is lower.
3. Senior Citizens Saving Scheme
If you think saving a little money for your future is still too hard, then we have the solution for you. The Senior Citizen Saving Scheme (SCSS) is one of the most popular tax-saving investments for elderly persons who are looking to save money on taxes as per section 80C of the income tax act.
With a minimum deposit of INR. 500/- and a maximum deposit of INR. 1,50,000/- in a financial year, a single adult resident Indian or a guardian on behalf of a minor/person of unsound mind can open a PPF account.
The account will mature after 5 years from the date of inception; however, in the event of the account holder’s death, the account will generate interest at the rate of a PO Savings Account from the date of death.
Final Words
In a nutshell, section 80C provides tax benefits to salaried individuals. The basic idea behind introducing this section was that a salaried individual should be able to save some portion of his/her income from tax without any major difficulty. You can also opt for 80d deduction for income tax under the ITA.