To encourage savings/investments government gives tax breaks on certain financial products under Section 80C of the Income Tax Act to Tax Payer ( Any Individual , Hindu Undivided Family) . Section 80C will help to you save taxes on investments up to 1 lakh.
Below are the different options available under this section:
PF & VPF: Provident Fund (PF) is deducted from your salary. Your employer also contributes to it. While the employer's contribution is exempt from tax, your contribution is counted as investment under Section 80C. You can also contribute additional amounts to Voluntary PF (VPF).
Public Provident Fund (PPF): A PPF account can be opened with a nationalized bank or a post office. The rate of interest earned is 8%, which is tax-free, and the maturity period is 15 years.
National Savings Certificate (NSC): This is small-savings instrument for a period of six years. The rate of interest is 8%, compounded half-yearly. The interest accrued every year is liable to tax, but the interest earned is also deemed to be reinvested and, thus, eligible for tax deduction.
Equity Linked Savings Scheme (ELSS): ELSS schemes are tax-saving mutual funds. The returns are not guaranteed, since an ELSS invests in equities. The money invested is locked in for three years.
Life insurance premiums: Any amount you pay towards life insurance premium for yourself, your spouse or your children can be included for tax deduction. If you are paying premiums for more than one insurance policy, all the premiums can be included. Besides, investments in unit-linked insurance plans (Ulips), which offer life insurance with investment benefits, are also eligible for tax deduction.
Home loan:
(a) any installment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
(b) any installment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
(c) repayment of the amount borrowed by the assessee from—
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(5) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under clause (viii) of sub-section (1) ofsection 36, or
(6) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
(7) the assessee’s employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or
(8) the assessee’s employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,
but shall not include any payment towards or by way of—
(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or
(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or
(C) any expenditure in respect of which deduction is allowable under the provisions of section 24 of Income Tax Act ( Interest paid in lieu of Housing Loan taken)
Fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are entitled for tax deduction.
Others: Expenses on children's education can be claimed as deduction under Section 80C.
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