Click here to download TDS on Salary for the Central Govt employees Income Tax Computed with all of Section as mentioned above U/s 80C. (This Excel Based Utility can prepare your all calculation like as Tax Compute +Form 16 Part A&B and Part B +HRA Relief calculation for the Financial Year 2014-15 and Assessment Year 2015-16.)
As per the Central Finance Budge
2014-15 the total limit under this section 80 C is Rs 1.5 lakh. Included under this
heading are many small savings schemes like NSC, PPF and other pension plans.
Payment of life insurance
premiums and investment in
specified government infrastructure bonds are also eligible for deduction under
Section 80C
Most of the Income Tax payee try to save tax by saving under
Section 80C of the Income Tax Act. However, it is important to know the
Section in toto so that one can make best use of the options available for
exemption under income tax Act. One important point to note here is
that one can not only save tax by undertaking the specified investments, but
some expenditure which you normally incur can also give you the tax exemptions.
Besides these investments, the
payments towards the principal amount of your
home loan are also eligible for
an income deduction. Education expense of children is increasing by the day.
Under this section, there is provision that makes payments towards the
education fees for children eligible for an income deduction
Sec 80C of the Income Tax Act is
the section that deals with these tax breaks. It states that qualifying
investments, up to a maximum of Rs. 1 Lakh, are deductible from your income.
This means that your income gets reduced by this investment amount (up to Rs. 1
Lakh), and you end up paying no tax on it at all!
This benefit is available to
everyone, irrespective of their income levels. Thus, if you are in the highest
tax bracket of 30%, and you invest the full Rs. 1 Lakh, you save tax of Rs.
30,000. Isn’t this great? So, let’s understand the qualifying investments
first.
Qualifying
Investments
Provident Fund (PF) &
Voluntary Provident Fund (VPF)and (PF) is automatically deducted from
your salary. Both you and your employer contribute to it. While employer’s
contribution is exempt from tax, your contribution (i.e., employee’s
contribution) is counted towards section 80C investments. You also have the
option to contribute additional amounts through voluntary contributions (VPF).
Current rate of interest is 8.5% per annum (p.a.) and is tax-free.
Public Provident Fund (PPF):
Max Limit raised from 1 Lakh to 1.5 Lakh
Life Insurance Premiums: Any amount that you pay towards
life insurance premium for yourself, your spouse or your children can also be
included in Section 80C deduction. Please note that life insurance premium paid
by you for your parents (father / mother / both) or your in-laws is not
eligible for deduction under section 80C. If you are paying premium for more
than one insurance policy, all the premiums can be included. It is not
necessary to have the insurance policy from Life Insurance Corporation (LIC) –
even insurance bought from private players can be considered here.
Equity Linked Savings Scheme
(ELSS): There are some mutual fund (MF)
schemes specially created for offering you tax savings, and these are called
Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS
are eligible for deduction under Sec 80C.
Home Loan Principal Repayment: The Equated Monthly Installment
(EMI) that you pay every month to repay your home loan consists of two
components – Principal and
Interest.The principal component of the EMI qualifies for deduction
under Sec 80C. Even the interest component can save you significant income tax
– but that would be under Section 24 of the Income Tax Act. Please read “Income
Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which
presents a full analysis of how you can save income tax through a home loan.
Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty
when you buy a house, and the amount you pay for the registration of the
documents of the house can be claimed as deduction under section 80C in the
year of purchase of the house.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six years. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six years. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
Pension Funds – Section 80CCC: This section – Sec 80CCC –
stipulates that an investment in pension funds is eligible for deduction from
your income. Section 80CCC investment limit is clubbed with the limit of
Section 80C – it maeans that the total deduction available for 80CCC and 80C is
Rs. 1 Lakh.This also means that your investment in pension funds upto Rs. 1
Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the
total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs)
of scheduled banks with tenure of 5 years are also entitled for section 80C
deduction.
Senior Citizen Savings Scheme 2004
(SCSS): A recent addition to section 80C list, Senior
Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small
savings schemes but is meant only for senior citizens. Current rate of interest
is 9% per annum payable quarterly. Please note that the interest is payable
quarterly instead of compounded quarterly. Thus, unclaimed interest on these
deposits won’t earn any further interest. Interest income is chargeable to tax.
5-Yr post office time deposit
(POTD) scheme: POTDs are similar to bank fixed
deposits. Although available for varying time duration like one year, two year,
three year and five year, only 5-Yr post-office time deposit (POTD) – which
currently offers 7.5 per cent rate of interest –qualifies for tax saving under
section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate
of interest is compounded quarterly but paid annually. The Interest is entirely
taxable.
NABARD rural bonds: There are two types of Bonds
issued by NABARD (National Bank for Agriculture and Rural Development): NABARD
Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD
Rural Bonds qualify under section 80C.
Unit linked Insurance Plan : ULIP stands for Unit linked
Saving Schemes. ULIPs cover Life insurance with benefits of equity
investments.They have attracted the attention of investors and tax-savers not
only because they help us save tax but they also perform well to give decent
returns in the long-term.
Children Education Fees :- children’s education expense (for which you need
receipts), that can be claimed as deductions under Sec 80C max Rs. 1,50,000/-
p.a.
