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June 2012
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How to save taxes under Section 80-C

This article explains how the deductions under Section 80C of the Income Tax (ISR) Act can help reduce your income tax. It also lets you decide where to invest to claim deductions under Section 80C.

Earned income is subject to income tax arrangements. Income tax rate is different for different income levels and, therefore, the income tax you pay depends on the total income in a given year

Government encourages certain types of savings – mostly long-term savings for retirement – and, therefore, offers tax incentives for saving the genre.

Section 80C of the Law on Income Tax is the section that deals with these tax benefits. It says eligible investments to a maximum of Rs 1 lakh is deductible from your income. This means that your income is reduced by the amount of the investment (up to R 1. Lakh), and you end up paying no tax on it at all!

This benefit is available to everyone, whatever their income level. So if you’re in the tax bracket of 30% and you invest Rs together. 1 lakh, you will save tax of Rs 30,000. Is not that amazing?

Then, you must first understand the investment for qualification.

Eligible Investments

• Provident Fund (PF): The payments you make to your PF is charged Sec 80C investments. For most of you who are employed have that amount automatically deducted from your salary each month.

Therefore, it is only compulsory saving for the future, but also immediate tax savings!

• Voluntary Provident Fund (VPF): If you increase your contributions PF above the legal limit (which is deducted compulsory for your employer), whichever is entitled to deduct under § 80C.

•Equity-linked note savings schemes (ELSS): Some of the funds (MF) systems specially created to provide you with a tax saving, and these are called equity linked notes, savings schemes or ELSS. ELSS investments you make are deductible under Sec 80C.

National Savings Certificate (NSC): The amount that you invest in National Savings Certificate (NSC) can be included in Sec 80C deductions.

•Stamp Assignment and Allotment Charges for a home: The bulk you pay as brand assignment back you shop for a house, and the bulk you pay for the allotment of the abstracts of the abode can be claimed as answer beneath area 80C in the year of acquirement of the house.

•National Savings Certificate (NSC): The amount that you proceed in National Savings Certificate (NSC) can be built-in in Sec 80C deductions.

• Infrastructure Bonds: These are also known as Infra Bonds. They are issued by infrastructure companies, no government. The amount you invest in these bonds can also be incorporated into Sec 80C deduction.

• Public Provident Fund (PPF): If you have a PPF account and invest in this sector, this amount may be included in Section 80C deduction. The minimum and maximum investment allowed in PPF is Rs 500 and Rs 70,000 per year, respectively.

• Group Life Insurance: The amounts to be paid for life insurance premium yourself, your spouse or your child may also be included in Section 80C deduction.

Please note that premiums paid life insurance for your parents (father / mother / both) or your in-laws are not entitled to deduct under § 80C.

If you pay a premium for insurance, all insurance premiums may be included.

It is not necessary to have the life insurance policy Insurance Corporation (LIC) – Safe to buy even private actors can be viewed here.

• Pension funds – 80CCC Section: This section – Sec 80CCC – stipulates that investment in pension funds are entitled to a deduction from your income. Section 80CCC investment limit is the limit of clubs with Article 80C – this means that the total deduction available to 80CCC and 80C is Rs 1 lakh.

It also means that your investment in pension funds up to Rs 1 lakh may be claimed as a deduction u / s 80CCC. But as mentioned above, the total deduction u 80C / s 80CCC not exceed Rs 1 lakh.

• Bank of maturity: This is a recent introduction of an asset class, under 80C. The bank fixed deposits (also known as maturity), with a maturity of 5 years or more can be included in your Sec 80C investments.

• Senior Citizen Savings Plan (SCSS): SCSS is a deposit system is specifically designed for the elderly.

• Post Office: This is a fixed-term deposits offered by the Department of Posts (India), through post offices in India. If the term deposit is opened for the duration of 5 years or more, the amount invested qualified for the deduction for 80C.

Others: Apart from the main ideas listed above, there are other things the bill raising children (you need receipts) which can be used as a deduction under  80C .

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