Tax Saving Tips: The financial year 2024-25 is now in its final phase, and if you have not yet invested for tax savings, then you have time till March 31, 2025. Taxpayers adopting the old income tax system can avail many types of tax deductions, while the exemption in the new system is limited. In such a situation, Section 80C proves to be the most important for those adopting the old tax system. This is the most popular provision among Indian taxpayers, as tax exemption is available on many investment options under it.
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How much benefit is available in Section 80C
In the old tax system, tax deduction can be claimed on investment up to Rs 1.5 lakh under Section 80C. Both individual taxpayers and Hindu Undivided Families (HUF) can avail of this exemption. This provision includes many types of savings instruments, such as life insurance premiums, ELSS mutual funds, EPF and VPF contributions, LIC annuity plans, NPS, PPF, tax saver fixed deposits, Sukanya Samriddhi Yojana, Senior Citizen Savings Scheme, NSC, ULIP, NABARD bonds, children’s tuition fees, select equity shares, and repayment of home loan principal amount.
What is Section 80CCC?
Under Section 80CCC, taxpayers can take a tax deduction on investing in annuity plans of LIC or other insurance companies. An annuity means a pension. The pension, bonus, or surrender value received from this plan is added to the taxable income. That is, there will be an exemption on investment, but tax will have to be paid on pension income.
Provisions of Section 80CCD
1- Section 80CCD is mainly related to the National Pension System (NPS) and has many parts.
2- Under Section 80CCD(1), a salaried employee can get tax deduction by investing up to 10 percent of his salary in an NPS account. Its maximum limit is Rs 1.5 lakh.
3- An additional deduction of up to Rs 50,000 is available under Section 80CCD(1B), which gives additional benefits, especially to NPS investors. 60 percent of the NPS maturity amount is tax-free, while the monthly pension received from the remaining amount is added to the taxable income.
4- Under Section 80CCD(2), an employee can also claim a tax deduction on the NPS contribution made by his employer. This amount can be up to 10 percent of the salary. This exemption is also available in the new income tax system.
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Total tax deduction limit
It is important to note that a total maximum tax deduction of Rs 1.5 lakh can be taken by combining sections 80C, 80CCC, and 80CCD(1). But apart from this, an additional deduction of Rs 50,000 can be availed under 80CCD(1B).