Have you calculated how much income tax you need to pay this year? And how much income tax you can save by investing in tax-saving instruments? Don't wait for the last minute. Very soon, you will have to submit the necessary documents as proof towards tax-savings investments and deductions to your employer. Income tax laws allow many exemptions that can help reduce your income tax liability. Section 80C of the Income Tax Act is one of the most widely used avenues for claiming income tax deductions by individuals.
Surcharge becomes applicable if income exceeds a specified limit. And it is applicable on the basic tax (without inclusion of cess).
The concept of marginal relief is meant to provide relaxation from levy of surcharge to a taxpayer where the total income exceeds marginally above Rs. 50 lakh or Rs. 1 crore, as the case may be.
(Also read: How marginal relief lowers your income tax liability)
Broadly you can avail Section 80C benefits under two ways: expenditures and investment. Sukanya Samriddhi Scheme, PPF, insurance premium, , NSC, NPS, tax saver bank fixed deposits, ELSS, and Senior Citizens Savings Scheme are some of the investment schemes that offer tax deduction under Section 80C.
Your own contribution towards EPF is eligible for deduction under Section 80C of Income Tax Act.
Deductions under Section 80C are not only available for investments but also for specified expenditures made by the taxpayer.
Children's tuition fees: The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs. 1.5 lakh a year.
Home loan principal payment, stamp duty and registration cost of the house at the purchase of house are some of the expenditures allowed for Section 80C deduction.
The interest earned in income-tax saving bank FDs is taxable as per the investor's tax bracket. TDS or tax deducted at source is applicable on the interest earned. Some banks allow a minimum deposit as low as Rs. 100 for opening income-tax saving FDs. The maximum amount in a year is Rs. 1.5 lakh.
Interest on income tax-saving deposits is payable on a monthly or quarterly basis. The interest amount earned can be reinvested.
Tax-saving fixed deposits have a lock-in period of five years. No premature withdrawals or loans are allowed. The interest rate on tax-saving fixed deposits is typically the same as normal fixed deposits. SBI, for example, offers an interest rate of 6 per cent on tax-saving bank FD (6.50 per cent for senior citizens).
PPF is a popular small savings scheme which enjoys an EEE or exempt, exempt, exempt status in terms of income tax implication - contribution, interest and maturity proceeds all are tax free.
PPF accounts have a maturity period of 15 years and this can be extended in blocks of five years.
Interest rate on PPF is revised every quarter. Currently, 7.8 per cent is offered on PPF.
ELSS funds or tax-savings mutual funds are categorised as equity mutual funds. Gains for equity mutual fund units (SIP or lumpsum) held for more than 12 months are considered as long-term capital gains. There is no tax on long-term capital gains from equity funds.
ELSS funds have a lock-in period of three years.
| General category | Senior citizens | Super senior citizens | |||||
| (Up to 60 years of age) | (60-80 years) | (Above 80 years) | |||||
| Income | Tax | Income | Tax | Income | Tax | ||
| Up to Rs. 2.5 lakh | Nil | Up to Rs. 3 lakh | Nil | Up to Rs. 5 lakh | Nil | ||
| Rs. 2,50,001-Rs. 5 lakh | 5% | Rs. 3,00,001-Rs. 5 lakh | 5% | Rs. 5,00,001-Rs. 10 lakh | 20% | ||
| Rs. 500,001-Rs. 10 lakh | 20% | Rs. 5,00,001-Rs. 10 lakh | 20% | Above Rs. 10 lakh | 30% | ||
| Above Rs. 10 lakh | 30% | Above Rs. 10 lakh | 30% | ||||
| Surcharge of 10% for income between Rs. 50 lakh and Rs. 1 crore with marginal relief | |||||||
| Surcharge of 15% for income above Rs. 1 crore with marginal relief | |||||||
| # Rebate of up to Rs. 2,500 for taxable salary up to Rs. 3.5 lakh | |||||||
| # Education and higher education cess of 3% | |||||||
Surcharge
Surcharge becomes applicable if income exceeds a specified limit. And it is applicable on the basic tax (without inclusion of cess).
Marginal relief
The concept of marginal relief is meant to provide relaxation from levy of surcharge to a taxpayer where the total income exceeds marginally above Rs. 50 lakh or Rs. 1 crore, as the case may be.
(Also read: How marginal relief lowers your income tax liability)
How to avail benefits under Section 80C
Broadly you can avail Section 80C benefits under two ways: expenditures and investment. Sukanya Samriddhi Scheme, PPF, insurance premium, , NSC, NPS, tax saver bank fixed deposits, ELSS, and Senior Citizens Savings Scheme are some of the investment schemes that offer tax deduction under Section 80C.
Your own contribution towards EPF is eligible for deduction under Section 80C of Income Tax Act.
Deductions under Section 80C are not only available for investments but also for specified expenditures made by the taxpayer.
Children's tuition fees: The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs. 1.5 lakh a year.
Home loan principal payment, stamp duty and registration cost of the house at the purchase of house are some of the expenditures allowed for Section 80C deduction.
Some of the popular investment options that offer deductions under Section 80C
Tax-saving FDs
Interest on income tax-saving deposits is payable on a monthly or quarterly basis. The interest amount earned can be reinvested.
Tax-saving fixed deposits have a lock-in period of five years. No premature withdrawals or loans are allowed. The interest rate on tax-saving fixed deposits is typically the same as normal fixed deposits. SBI, for example, offers an interest rate of 6 per cent on tax-saving bank FD (6.50 per cent for senior citizens).
Public Provident Fund (PPF)
PPF is a popular small savings scheme which enjoys an EEE or exempt, exempt, exempt status in terms of income tax implication - contribution, interest and maturity proceeds all are tax free.
PPF accounts have a maturity period of 15 years and this can be extended in blocks of five years.
Interest rate on PPF is revised every quarter. Currently, 7.8 per cent is offered on PPF.
ELSS mutual funds
ELSS funds or tax-savings mutual funds are categorised as equity mutual funds. Gains for equity mutual fund units (SIP or lumpsum) held for more than 12 months are considered as long-term capital gains. There is no tax on long-term capital gains from equity funds.
ELSS funds have a lock-in period of three years.
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