Knowing the benefits of Section 80C of the Income Tax Act 1961 can help individuals save on tax. Investments are a smart way to avail tax benefits as there are various sections of the Income Tax Act that provide exemptions to the taxpayers.
Life Insurance Policy with Money Back offer
Premium paid on Life Insurance with money back offer is the income tax exempted under Section 80C of the Income Tax Act 1961. To avail the benefits of income tax exemption, the annual premium should not be more than 10 % of the sum assured, and the income taxpayer must have paid two years premium of the life insurance policy with a money-back offer.
Sukanya Samriddhi Yojana
Investments made towards this scheme are eligible for tax deduction under Section 80C of the Income Tax Act. This scheme ensues interest which is compounded and credited to the account annually. This accumulated interest is exempt from taxes, ensuring that the funds grow to their maximum potential. The amount invested can be withdrawn on maturity or on closing the account. As the amount is exempt from tax, it ensures that the girl child can utilize the amount in its entirety without having to pay tax on it. These tax provisions ensure that both the depositor and the beneficiary enjoy tax exemptions, ensuring they can carry on with their lives without having to worry about taxes. While contributions towards this scheme are eligible for tax deductions, only one depositor can claim tax exemptions under Section 80C of the Income Tax Act.
Public Provident Fund or PPF
Public Provident Fund contributions made every year are eligible for tax deductions under Section 80C of the Income Tax Act, 1961. The deduction limit for PPF deposits was Rs.1 lakh which has been increased to Rs.1.5 lakhs from FY 2014-15. Therefore, all deposits made to your PPF account can be claimed as deductions under 80C. Section 80C allows for a maximum deduction of Rs.1.5 lakh per year inclusive of all investment instruments.
ELSS Mutual Funds
Equity Linked Saving Scheme (ELSS) or tax saving mutual fund schemes help investors to save taxes under Section 80C of the Income Tax Act 1961. The investments in ELSS are subject to a lock-in period of 3 years and qualify for a tax deduction of up to Rs 1.5 lakh. You can avail a tax benefit of Rs. 46,800 per annum, along with the shortest lock-in period of just three years when compared with other investments that can be used to avail deductions under 80C.
Post Office Savings
This savings account facility offered by the Post Office provide an interest of 4% per annum. Under Section 80TTA, interest income earned from savings accounts (including Post Office Savings Account) up to Rs. 10,000 is tax deductible from the gross income.