Section 80C Deduction: How much can you save under section 80C

Several investments options and expenses are eligible for tax deductions under Section 80C. In total, you can save up to Rs. 150,000 under the section. Here’s a glance at the various instruments for tax saving declared under the Income Tax Act and Section 80C

a) Premium paid for ULIP, life insurance or an annuity plan

b) Contributions made into provident fund options such as EPF (Employer Provident Fund), VPF (Voluntary Provident Fund), PPF (Public Provident Function) or superannuation funds

c) Investments into NSC (National Savings Certificate), KVP (Kisan Vikas Patra), SCSS (Senior Citizen Savings Scheme), 5-year Post Office Term deposits and 5-year bank fixed deposits

d) Investments into notified ELSS (Equity Linked Saving Scheme) of a mutual fund

e) Repayment of the principal of a home loan taken for construction or purchase of residential property as per rules specified

Points to remember while claiming deductions under section 80C

  • You cannot claim investments or expenses under section 80C, in the form of a deduction on the capital gains earned (if any) as income. This means that if your income is made up of capital gains only, you cannot leverage Section 80C to avail tax savings on that income.
  • The amount of tax you can save by using section 80C depends on the individual tax slab in which your income falls under. For example, if your taxable income (the salary remaining after considering all deductions or exemptions from total gross salary) lies in the 30 percent plus  4 percent cess bracket, then that would the tax amount saved by you.

Therefore, if your total gross income for the financial year says, Rs 10.5 lakh and you take a deduction of Rs 1.5 lakh under section 80C, you would reduce your net taxable income to Rs 9 lakh. This, in turn, would bring down your tax liability by Rs   46800.

  • If you are above 60 years of age and your income is already less than the minimum exemption limit, currently at Rs 3 lakh for AY 19-20, then you would not save any tax by declaring investments/expenditures under section 80C, since your income is already not liable for any tax.

If you have not made any tax saving investment so far in the current financial year, you should start now.

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