Saturday, December 8, 2012

80C - Income Tax

Tax reliefs from Section 80C continue to be available to Indian citizens as per the latest budget. You can invest a maximum of Rs. 1 Lakh in any of the instruments as per Section 80C and get the entire amount of Rs. 1 Lakh deducted from your taxable income.

We have listed down the possible avenues available as part of Section 80C which citizens can make use of:

1. Provident Fund (PF): This includes both Employees Provident Fund (EPF) as well as Public Provident Fund (PPF), though you can invest up to a maximum of Rs 70,000 in PPF. The current rate of return on EPF is 8.5 per cent while that on PPF is 8.8 per cent.

2. Insurance: This includes a life insurance policy or a unit-linked insurance plan (ULIP). The lock-in period for ULIPs is between 3 to 5 years and the returns vary depending on the performance of your fund. There is a catch - if your annual premium exceeds 20 per cent of the sum assured on your policy, you will not get the tax benefit.

3. National Savings Certificate (NSC): This was a popular instrument earlier though have lost favor from investors at present. The current rate of return is 8.6% for 5 years and 8.9% for 10 years lock-in.

4. Bank Fixed Deposit: Last year, this was one of the best options for citizens as the interest rate was higher than PPF or other options. They come in with a lock-in of 5 years. Have a look at the tax saving FD interest rates here.

5. Retirement Benefit Plan: These are offered by mutual funds. Few examples are UTI Retirement Benefit Plan and Templeton India Pension Plan.

6. Equity Linked Savings Scheme (ELSS): These are offered by mutual funds. I have put a detailed post for ELSS.

7. Superannuation Fund: Usually your employer, on behalf of you, does this by deducting the investment amount from your salary.

8. Pension Policies: Earlier, there was a limit of Rs 10,000 on such investments; however that ceiling has now been removed.

9. Prepayment of Principal of home loan: Take the advantage of paying interest up to Rs 1.5 Lakhs as per another section. This section only includes taking advantage of paying the principal back up to Rs 1 Lakh.

10. Tuition Fees: Deduction under this section is available for tuition fees paid on two children’s education. If Assesse have more then two children then he can claim tuition fees paid of only two children’s. The Deduction is available for any two children. Husband and wife both have a separate limit of two children each, so they can claim deduction for 2 children each. Assesse cannot claim tax benefit for his own tuition fees.


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