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Section 80 - Best Tax Saving Investment option and its Impact on Income Tax

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Section 80 - Best Tax Saving Investment option and its Impact on Income Tax
March 01, 2023
Taxation in India is a very elaborate mechanism and comes with a complete range of guidelines and regulations. The taxes are collected by the government directly and indirectly and based on this distinction, taxes are of two types - direct taxes (income tax, wealth tax etc.) and indirect taxes (GST, excise duties etc.). As an important regulatory step towards taxation and eligible exemption, Section 80C of the Income Tax Act. 1961 serves as an important guideline. In 2006, Section 80C was incorporated and the scope of exemptions offered by Section 88 and Section 80CCC were brought under its purview. Previously, Section 80CCC had dealt with the set of exemptions regarding annuity policies (pension related) benefits and the corresponding taxation under the specific income slabs of the same. Therefore, Section 80C has emerged as a joint platform for exemptions on earnings and income from the listed sources.
 

As responsible taxpayers and investors, we all know the value of tax saving and the overall benefits that it carries for or savings corpus. To ensure that we do not end up getting overtaxed and feel the resultant pinch on our pockets, it is important for us to have a clear understanding of Section 80C of the Income Tax Act, 1961 because it serves as the key mechanism of governing tax exemptions and the eligibilities, due investments and instruments for seeking those exemptions. In essence, Section 80C governs the whole set of exemptions that are applicable for the following payments:

1. PPF (Public Provident Fund):

All the contributions to the PPF made by individuals (excluding Hindu Undivided Families or HUFs) are eligible for deduction under Section 80C.

2. EPF (Employees Provident Fund):

Equal contributions to EPF by the employer and the employee are mandated and these contributions are eligible for deduction under Section 80C.

3. ELSS (Equity Liked Savings Scheme):

An ELSS comes with a lock in period of three years and is considered to be one of the best instruments for saving taxes in India. Under Section 80C, the contribution towards an ELSS is eligible for tax exemption (with an upper capping of Rs. 1.5 Lac in the particular financial year).

4. SCSS (Senior Citizens Savings Scheme):

Under Section 80C, the contribution towards an SCSS is eligible for tax exemption (with an upper capping of Rs. 1.5 Lac in the particular financial year).

5. Post Office savings schemes:

Starting from the year, contributions towards Post Office savings schemes have been brought under the purview of Section 80C.

  1. NSC (National Savings Certificate): Under Section 80C, the contribution towards NSC is eligible for tax exemption (with an upper capping of Rs. 1.5 Lac in the particular financial year).
  2. Unit linked insurance plans (ULIPs): ULIPs are market-related instruments and Under Section 80C, the contribution towards a ULIP is eligible for tax exemption (with an upper capping of Rs. 1.5 Lac in the particular financial year).
  3. Payable premiums to life insurance.
  4. NPS (National Pension Scheme): Under Section 80C, the contribution towards NPS is eligible for tax exemption (with an upper capping of Rs. 1.5 Lac in the particular financial year).
  5. Sukanya Samriddhi Yojana
  6. Installments towards home loan repayments
  7. Fee paid towards children's education.

HDFC Life offers various saving and investment schemes that are meant for the growth of your funds and for securing your financial health. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans .

 

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Francis Rodrigues Francis Rodrigues

Francis Rodrigues has a decade long experience in the insurance sector, and as SVP, E-Commerce and Digital Marketing, HDFC Life, manages the online sales channel, as well as digital and performance marketing. He has had hands-on experience in setting up sales channels and functional teams from scratch over a career spanning 2 decades.

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Vishal Subharwal Vishal Subharwal

Vishal Subharwal heads the Strategy, Marketing, E-Commerce, Digital Business & Sustainability initiatives at HDFC Life. He is responsible for crafting and ensuring successful implementation of the overall organisation strategy.

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