How to Maximise Your Deductions from Section 80C: A Comprehensive Guide-Part 2

• To maximise Section 80C deductions, strategically invest in government schemes (PPF, NSC, SCSS), life insurance premiums, EPF and ELSS

• Apart from Section 80C, consider tax-saving strategies like home loan interest deductions (Section 24B) and health insurance deductions (Section 80D) for maximum savings

• While some investments like FD and NSC qualify for deductions, their interest income is taxable

In Part 1 of the comprehensive guide to maximising Section 80C deductions of the Income Tax Act, we covered the basics. It includes crucial tax-saving tools, exploring several popular investment options like PPF, EPF and life insurance premiums. We also talked about other deductions you can claim. 

In Part 2, we uncover strategies to optimise your investments and answer frequently asked questions, empowering you to get the most tax benefits under Section 80C and minimise your tax burden.

To save on taxes using this section, make sure you plan how much you want to invest in government schemes (like NSC or SCSS) and contribute in terms of PPF and EPF. In addition, plan your life insurance premiums and home loan repayments as well as other investments like ELSS. 

Once you have calculated the total amounts based on the maximum deductions and fit them in with your future financial needs, you can file the income tax return. 

To maximise your savings as per these tax exemptions, be strategic about your investments, purchasing health insurance, and taking a home loan. 

• As a salaried employee, you can check for components to optimise taxes. For instance, you can claim house rent as a tax deduction if you don't get HRA. You can also claim internet and telephone bills as deductions within your taxable income under Rule 3(7)(ix) of the Income Tax Act, 1961. 

• Other than EPF, you can make additional Voluntary Provident Fund (VPF) contributions. You can do this in addition to the mandatory limit of 12% EPF contribution. Employees can contribute 100% of their basic salary and dearness allowance in VPF and then claim a deduction on their income. 

• If you opt for a home loan, your interest payable is also applicable for tax benefits under Section 24(B).

• You can buy health insurance for yourself and your family and claim deductions up to ₹25,000 annually on premiums as per Section 80D. The limit increases up to ₹50,000 per year for senior citizens of 60 years and over.

Section 80C is a great way to cut down your taxable income, but a few common slip-ups can reduce your benefits. These include:

• One common mistake that you can avoid is not having all your documents during the process of filing your ITR. Know your exact investment and expenses so you can fill out details accurately and get the deductions. 

• If you are not aware of all the valid tax deductions applicable, your taxable income may be higher than required. Ensure you go through the list in its entirety. 

• Some schemes, such as FD and NSC, allow you to claim deductions at the time of investing, but the interest income is taxable. Be aware of how these deductions work to maximise your savings. 

• Another mistake you can eliminate is an improper deduction of claims (or calculation errors) in the form. Simple reporting errors can lead you to receive an intimation notice under Section 143(1), asking for reclarification. 

• Another common mistake is not being aware of the latest tax regime where these deductions are not applicable. So, do your homework before you begin! 

1. What is the new limit of 80C?

As per the new regime, there has not been any hike in the deduction limit. As such, the deduction limit remains ₹1.5 lakh for the year. 

2. Can I claim 80C without investment?

Yes. There are several tax saving options under 80C you can claim deductions for, including the following:

1. Employee Provident Fund (EPF) contribution

2. Stamp duty and registration charges on home purchase

3. Principal repayment of your home loan

4. Tuition fees for children's education

5. Premiums paid for life insurance policies

3. Is HRA part of 80C?

No. HRA exemption falls under Section 10(13A). However, if you buy a home, the principal repayment is subject to deduction under Section 80C. 

4. Can I claim deductions under Section 80CCD if I am self-employed? 

Yes. If you are self-employed making contributions towards the National Pension System (NPS) or Atal Pension Yojana (APY), then you can claim deductions up to ₹1.5 lakh under Section 80CCD. 

5. What is 80C, 80CCC and 80CCD(1)?

These are sections of the Income Tax Act in India that allow individuals and Hindu Undivided Families (HUFs) to claim deductions on certain investments and expenditures. 

• Section 80C: Deduction up to ₹1.5 lakh per year on various investments schemes 

• Section 80CCC: Deductions for contributions made towards specific pension and life insurance policy 

• Section 80CCD(1): Deduction for contributions to the National Pension System (NPS) or Atal Pension Yojana (APY)

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