Income Tax Saving: Under the old income tax system, a taxpayer can claim tax deduction on investment up to a maximum of Rs 1.5 lakh under section 80C. The benefit of this section is for individual taxpayers and Hindu Undivided Families
Tax Saving: The financial year 2024-25 is about to end. If you have not yet done tax saving for this financial year, then you can do so till March 31, 2025. If you have adopted the old income tax system, then tax liability can be reduced by taking advantage of various types of tax deductions under the rules of the Income Tax Act. In the new income tax system, the taxpayer is getting the benefit of only a few tax deductions.
If we are talking about deductions, then section 80C is considered to be the most popular. Most taxpayers claim deduction under this section first and most. Let us know the complete details of the tax benefits available under section 80C…
Which savings instruments are covered
Under the old income tax system, a taxpayer can claim tax deduction on investment up to Rs 1.5 lakh under section 80C. The benefit of this section is for individual taxpayers and Hindu Undivided Families (HUFs). The investment options on which tax deduction is available under section 80C include – life insurance premium, ELSS, EPF contribution, VPF contribution, contribution to LIC’s annuity plan, investment in NPS, deposit in PPF (Public Provident Fund), deposit in tax saver FD, investment in Sukanya Samriddhi Scheme, deposit in Senior Citizen Savings Scheme, deposit in NSC, Ulip, children’s tuition fees, NABARD bonds, subscription to select equity shares and repayment of principal amount of home loan.
To know about section 80C, it is also important to know about section 80CCC and 80CCD. Without these, 80C is considered incomplete.
Section 80CCC
This section of the Income Tax Act offers tax deduction on investment in any annuity plan of LIC or any insurance company. Annuity means pension. To claim this deduction, the plan must be a pension paying one. The pension received from the annuity plan or the total amount or bonus received along with interest on surrender of this plan comes under the purview of income tax.
Section 80CCD
Section 80CCD (1): This sub-section offers tax deduction on deposits in pension accounts under the Central Government Pension Scheme. A salaried employee can claim deduction by depositing up to 10 per cent of his salary in the pension account, up to a maximum of Rs 1.5 lakh.
Remember that under sections 80C, 80CCC and 80CCD (1), a total tax deduction of more than Rs 1.5 lakh cannot be claimed.
Section 80CCD (1B): Through this, a salaried employee can avail tax deduction of up to Rs 50,000 by depositing in the NPS account on his own behalf. Up to 60 per cent of the maturity amount of NPS, which is received as a lump sum, is tax free but monthly annuity income is taxable.
Section 80CCD (2): An employee can also claim tax deduction under section 80CCD (2) on the employer’s contribution to NPS. This is equal to 10 percent of the salary. Under the new income tax system effective from April 1, 2020, a salaried employee can claim tax deduction under section 80CCD (2) on the employer’s contribution to his NPS account.
