With the Budget 2022 implemented in the country, who doesn’t want to reduce their payment of tax? “No one” is the straightforward answer to this question. In the present economy where inflation rules the country, everyone wants to have more money in their pockets and safe custody so that they can use it in future. Payment of tax has become a matter of worry in such an economy and everyone wants to pay the least tax so that they can have more money with them. But, tax saving is not everyone’s cup of tea. Only a small number of individuals succeed in saving tax at the end of a financial year. This happens because maximum people are unaware of Section 80C of the Income Tax Act.
Benefit of Section 80C
In Section 80C of the Income Tax Act, the government allows multiple tax saving options to individuals. There is a list of investment options which helps every individual save some part of their taxable income under Section 80C.
The list contains some very friendly investments like Provident Fund, Public Provident Fund, National Savings Certificate, 5-year Fixed Deposit and time deposit in Bank and Post Office respectively, Life Insurance Premium, Pension fund, Tuition fees and NHB Term Deposit scheme.
Which schemes include in Section 80C and how to invest in these schemes efficiently?
- Starting with Provident fund (PF), it is helpful to salaried personnel whose employer deducts PF from salary before paying. The amount of PF deducted is considered under Section 80C.
- Public Provident Fund (PPF) helps both, self-employed and salaried individuals in saving tax. Although it is a long-term scheme, usually 15 years, however people go for it because it offers assured returns. Individuals are free to contribute any amount between Rs 500 and Rs 150,000 per year. The rate of interest at present is 7.1%. interest of 7.6% is allowed which is free from being taxed.
- Bank’s Fixed Deposit scheme having a tenure of 5 years or more can be a tax-saving option. It is different from generally fixed deposits and requires depositors’ certain sacrifices. The depositor needs to mention the words “Tax Saver Fixed Deposit” at the time of depositing the amount. Bank official puts a stamp on the FD receipt which ensures 5-year lock-in and deposit or cannot avail of facilities such as premature withdrawal, auto-renewal facility or loan against fixed deposit.
- The Time Deposit scheme of the post office is completely similar to the bank’s term deposit.
- Life Insurance for taxpayers, taxpayers’ spouses and children are considered and only the premium amount i.e. 10% of total amount for insurance is tax-free.
- National Saving Certificates (NSC) VII & IX Issue
- National Saving Time Deposits
- National Saving Monthly Income Accounts
- Sukanya Samridhi Account
- Senior Citizens Saving Schemes
- Mutual Fund Schemes
Use other tax deduction sections also!
Apart from the above-mentioned tax saving options, there are some more available options under Section 80C. Individuals can also choose other options such as 80D, 80DD, 80G, 80E, etc to save some part of the tax. The amount of tax saved can be maximized by choosing the tax saving options efficiently which is only possible after knowing each of the options completely. Thus, anyone who is looking forward to saving on tax in the financial year 2022-23 (A.Y.2023-24) should choose the most suitable option from the list of options mentioned above and invest in the best-suited one.