As the financial year 2024-25 is nearing its end, you still have time to save taxes for this year.
If you’re following the old income tax system, you can reduce your tax liability by claiming various tax deductions under the Income Tax Act rules.
In the new tax system, only a few tax deductions are available to the taxpayer.
Section 80C: A Popular Tax Saving Tool
When it comes to tax deductions, Section 80C is one of the most well-known options. Most taxpayers first look to claim deductions under this section.
Here’s a breakdown of the tax benefits available under Section 80C:
Which Savings Instruments Are Covered Under Section 80C?
Under the old tax system, you can claim a tax deduction of up to ₹1.5 lakh under Section 80C.
This benefit is available to individual taxpayers and Hindu Undivided Families (HUFs). Tax deductions under Section 80C are available on investments in the following:
Life insurance premiums
Equity-linked Savings Scheme (ELSS)
Employee Provident Fund (EPF) contribution
Voluntary Provident Fund (VPF) contribution
LIC’s annuity plan
National Pension Scheme (NPS) investments
Public Provident Fund (PPF)
Tax-saving Fixed Deposits (FD)
Sukanya Samriddhi Yojana
Senior Citizen Savings Scheme (SCSS)
National Savings Certificates (NSC)
Unit-linked Insurance Plans (ULIP)
Children’s tuition fees
NABARD bonds
Subscription to select equity shares
Principal repayment of home loan
Additional Sections Related to Section 80C
To fully understand the benefits of Section 80C, it’s also important to know about Sections 80CCC and 80CCD, as they complement Section 80C.
Section 80CCC
This section allows tax deductions on investments in annuity plans from LIC or any other insurance company.
An annuity plan provides a pension, and the pension received is taxable. Any amount received upon surrender of the plan, including interest or bonus, is also taxable.
Section 80CCD
Section 80CCD (1): This sub-section provides tax deductions on deposits made into a pension account under the Central Government Pension Scheme.
Salaried employees can claim a deduction of up to 10% of their salary, subject to a maximum of ₹1.5 lakh.
Section 80CCD (1B): This offers an additional tax deduction of up to ₹50,000 for salaried employees who deposit into their NPS account.
Up to 60% of the NPS maturity amount received as a lump sum is tax-free, but monthly annuity income is taxable.
Section 80CCD (2): This allows tax deductions on the employer’s contribution to the employee’s NPS account.
The contribution can be up to 10% of the salary. Under the new income tax system (effective from April 1, 2020), salaried employees can claim deductions for employer contributions to their NPS accounts.
Important Reminder: The total tax deduction across Sections 80C, 80CCC, and 80CCD (1) cannot exceed ₹1.5 lakh in a financial year.
