The majority of people are aware of the deduction that has been provided by section 80C of the Income Tax Act of 1961. For the current financial year, the highest deduction that can be claimed under section 80C is Rs 1.5 lakh. This article thus contains a variety of investment possibilities that not only create money for but can also be claimed as deductions from your total taxable income. The following are the various investment avenues:
Employees’ Provident Fund (EPF) and Voluntary Provident Fund (VPF):
A portion of your paycheck is withdrawn as an EPF contribution on a monthly basis. You can claim the whole amount deducted annually as a deduction when calculating your total taxable income. You should, however, inquire with your employer about the amount of interest earned on the corpus throughout the fiscal year. If an employee is ready to accept a lower take-home pay, he or she can increase this contribution. VPF is the name for this supplementary donation, which is also tax-deductible under Section 80C. Both the EPF as well as the VPF have the same rules.
PPF (Public Provident Fund):
PPF is a government-sponsored programme that allows you deductions on your income tax under Section 80C. In a financial year, you can invest as little as Rs 500 or as much as Rs 1.5 lakh. PPF interest is now tax-free (compounded annually) and has a 15-year maturity term. It’s worth mentioning that the interest rate is guaranteed but not fixed. Every quarter, the rate is subject to change. The current interest rate is 7.1 percent.
Premiums for life insurance:
Section 80C allows you to deduct any amount paid toward life insurance premiums for yourself, your spouse, or your children. However, please keep in mind that the premiums you pay for your parents or in-laws are not deductible under Section 80C.
ELSS (Equity Linked Savings Scheme):
Equity Linked Savings Schemes are mutual fund schemes that are specifically designed to save you money on taxes. Section 80C allows you to deduct your ELSS contributions. Because it is equity-linked, ELSS has the potential to yield better returns than other tax-saving investments, but it also carries a larger risk. The amount that can be invested in any of these programmes is unlimited, but the tax benefit is limited to Rs 1.5 lakh.
Repayment of the Principal on a Home Loan:
The two components of the equated monthly installment (EMI) that you pay to repay your home loan are Principal and Interest. The principle is eligible for a Section 80C deduction. Even interest can save you money on taxes, but only if you use Section 24 of the Income Tax Act.
Sukanya Samriddhi Account:
It is possible to open an account on behalf of your minor daughter until she reaches the age of ten in this particular scheme. Any money placed in this account qualifies for a Section 80C deduction. Furthermore, this account can be formed for a maximum of two girls, with the third child being included in the case of twins. Other terms and conditions apply to this investment.
The aforementioned investments will definitely assist you in saving a chunk of your income tax if followed properly. For more information about saving your income tax, you may contact our experts.