Hello Everyone! Welcome back to Tax Destination. We are near the end of the Financial year 2023. So it is very important to do tax planning if you haven’t done yet. This quarter is probably your last chance to save taxes for the financial year 2022-23.
When we talk about tax saving, the first thing that comes in our mind is to avail various payment based deductions. So in this article we will talk about 80C deduction in detail.
Who are eligible for 80C deduction
Only an individual or a Hindu undivided family can avail the deduction available under 80C. This deduction is not available to companies, LLP, partnership firm and other person.
Quantum of Deduction
The maximum amount of deduction an Eligible person can claim is Rs 1,50,000.
Section 80C can be claimed is Certain payments are made during the year. Let us discuss this payments.
There are various payment in respect of which you can claim deduction under section 80C. For example, Life insurance premium, Sukanya Samriddhi yojana Tax saving, Fixed Deposit, NPS scheme, ELSS. So it is very important to understand which investment option would be right for you.
To understand this, we need to be aware of the lock in period, risk and the return associated with them.
Let’s look into some of the option under Section 80 C in detail.
Life Insurance Premium
Amount paid in respect of life insurance premium can be claimed as deduction under section 80C
Public Provident Fund
Any sum paid as a contribution to Public Provident Fund is eligible for deduction. The return is currently 7.1% p.a. Though the risk is very low here but it comes with a lock-in period of 15 years.
Sukanya Samridhi yujana
This investment option was launched as a part of the Campaign ‘Beti Bachao Beti Padhao’. It is currently offering around 7.6% p.a. The risk is low.
National Savings Certificate
Under this investment option one can do regular fix1ed income savings through post office account. It offers a guaranteed return and has low risk. The lockin period is 5 years.
Fixed Deposit
A bank fixed deposit with a tenure of 5 years is also eligible for deduction. Fixed Deposit will offer a fixed return around 5.5% to 7.5%. The risk is considerably low.
ELSS (Equity-Linked Saving Scheme)
This is a mutual fund investment option where we get deduction upto 1.5 Lakhs under 80C. Though the return are high, the risk is also high as compared to above mentioned options. It comes with 3 year lockin period.
Apart from the above options we can get deduction if paid for housing loan repayment, Tuition fees, Subscription to certain equity shares during a financial year.
Conclusion
Before investing, make sure to understand each of the option well. The risk and lockin period should be considered while selecting your ideal option for tax deduction.
Reach us for more guidance on the same @ 80728 61639
