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Tax saving hack: Section 80C Simplified
Want to reduce your tax burden under the old tax regime? Section 80C is your friend. This financial tool can lower your tax expense by as much as ₹1.5 lakh annually. The good news? You don't have to be an expert in taxation to do this. With so many investment options in Section 80C, you can pick and choose options as per your target and reduce your tax outflow.
Please note that this exemption is not available to those who file taxes under the new tax regime.
What is section 80C?
Section 80C is a section of the Income Tax Act that allows you to reduce your taxable income as per the Old Tax Regime. If you invest your money in ELSS, PPF, FDs, NPS, and other such tax saving instruments, you can deduct an amount of ₹1.5 lakh in a financial year. This limit covers all the investments and expenses that fall under this section.
Apart from investments, certain expenses also qualify for deduction under Section 80C. These include:
- Life insurance premiums paid for self, spouse or children
- Principal repayment on a home loan
- Tuition fees paid for up to two children’s education in India
Who is eligible for section 80C benefits?
Anybody who pays income tax in India can avail Section 80C benefits:
Key takeaways
- Salaried employees
- Self-employed professionals, businesspeople, and freelancers
- Retired or senior citizens with taxable income.
Popular investment schemes under Section 80C
Section 80C provides a lot of investment options to cater to varying needs; here are some:
| Investment Option | Lock-in Period | Risk | Returns |
|---|---|---|---|
| PPF (Public Provident Fund) | 15 years | Low | Fixed |
| ELSS Mutual Funds | 3 years | High | Market-linked |
| Tax-Saving FDs | 5 years | Low | Fixed |
| National Pension System | Until retirement | Moderate to High | Market-linked |
| Sukanya Samriddhi Yojana | 21 years | Low | Fixed |
| Senior Citizens’ Saving Scheme (SCSS) | 5 years | Low | Fixed |
| Unit Linked Insurance Plans (ULIPs) | 5 years | Moderate to High | Market-linked |
| EPF (Employees’ Provident Fund) | Until retirement | Low | Fixed |
Conclusion
Section 80C is a straightforward and effective method to reduce your tax liability and build wealth at the same time. By knowing the various avenues available – from investment products to eligible expenses like life insurance premiums and children’s tuition fees – you can devise an optimal tax-saving strategy that takes you closer to your financial goals. The key is to choose options that align not just with tax benefits but also with your broader financial needs.
Disclaimer: This article is for information purposes only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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