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 to 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.

Different Income Tax Saving Schemes in India

The government has provided a lot of means for the individuals to save the tax from income by investing or depositing in the various government schemes like:

1. Public Provident Fund (PPF)

Public Provident Fund or generally called as PPF is saving scheme for employees in various government, public and private sector organizations for Income Tax Saving in India. The government has set limit for saving ranging from a minimum of Rs. 500 to the maximum of Rs. 70,000. The government pays a rate of interest at 8%. This can be opened in any public sector banks like SBI and others. For employees the company deposits in the PPF.

2. National Savings Certificates (NSC)

National Savings Certificates or NSC is yet another saving scheme for Tax Saving on Income in India. The investment in this scheme starts from a minimum of Rs 100 ar a rate of interest of 8%. A person investing in this scheme can avail Income Tax benefit under the Income Tax Act, 1961 section 88 for the amount invested.

3. Post Office Scheme (POS)

This is one of the best and most used scheme in India for Income tax saving in India. A person can join in this scheme any time in the year and the account can be operated either single or jointly.

4. Kisan Vikas Patra (KVP)

Kisan Vikas Patra or KVP as known is a scheme which is for Income Tax Saving in India where a person’s investment gets doubled in 8 years earlier it was 5 years. A person can invest a minimum of Rs 100 and under Income Tax Act, 1961 the person gets tax benefit for the amount invested.

5. Dividend

As per the Income Tax Act 1961 any person can claim income tax benefit from the income earned from dividends which from the UTI, shares and mutual funds.

Section 80C and Section 80D saves Income Tax

Section 80C Deductions

Under the provision of Section 80C of the Income Tax Act 1961 the department allows certain investments and expenditure to be tax exempted if these investments and expenditure fall in the category of Section 80C. The maximum limit is set to Rs. 100,000 and can be claimed from any of the below mentioned items:

1. Provident Fund or Public Provident Fund contributions
2. Premium payments of Life Insurance Policies
3. Pension Plans investments
4. Investing in the Equity Linked Savings schemes (ELSS) of mutual funds
5. Investment in specified government infrastructure bonds
6. National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80C limit)
7. All housing loan payments including registration fee or stamp duty if any.
8. Tuition fees for children towards school or college or university or similar institution. (Only for 2 children)

Section 80D – Medical Insurance Premiums

Medical insurance policies which are well known as Medi claim Policies have been in much usage these days and investing in these policies provides tax deduction up to Rs 30,000. This is in addition to Rs.1,00,000 savings. Senior citizens can claim up to Rs. 20,000. This can be claimed on any premium paid on medical insurance for self, spouse, parents and children.

Income Tax savings through Life Insurance Plan

Life insurance plans provides security and also a confidence that the amount invested will meet in the time of difficult situations and every individual is encouraged to invest some portion in to these Life Insurance policies. These investments into these policies also provide Tax savings on Income in India. Every Life insurance policy gives tax benefits. This also enables you to plan your finances. Always there are new policies coming into the market and one need to decide what they require. It is a good option to invest some amount in the traditional plans and some in the Unit linked policies (ULIP’s) and SIP’s.

Equity Linked Savings Scheme (ELSS) for Income Tax savings

Equity Linked Savings Scheme has become popular these days as it has the potential for higher capital appreciation. These schemes have a minimum lock in period of 3 years.
Features of Equity Linked Savings Scheme (ELSS)

Maximum investemt – Rs. 1 lakh.
Lock-in period – 3 years.
Liquidity option is curtailed.
It is a risk based investment but returns are maximum even up to 47%.

Categories: Save Income Tax
Tags: Save Income Tax, Section 80C