Income Tax News: In recent Budget 2024 address, the Finance Minister maintained the status quo on the Section 80C tax deduction limit. The ceiling for availing tax benefits under Section 80C remains fixed at Rs 1.5 lakh for the ongoing fiscal year 2023-24 and is anticipated to remain unchanged for the forthcoming fiscal year 2024-25.
Understanding Section 80C
Section 80C of the Income-tax Act delineates various investments and expenditures that qualify for tax deductions. Individuals can diminish their gross taxable income by a maximum of Rs 1.5 lakh per financial year by engaging in these specified investments or expenses.
Strategies to Save Taxes through Section 80C
Taxpayers can avail tax benefits under Section 80C by investing in avenues such as Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Saving Scheme (ELSS) mutual funds, National Savings Certificate (NSC), and 5-year tax-saving fixed deposits with banks or post offices. Additionally, premiums paid towards life insurance policies also qualify for tax benefits under Section 80C.
Considerations and Guidelines
Each eligible investment entails specific maximum limits, rates of return, liquidity features, and taxation rules for earned returns. For instance, while the maximum investment in PPF stands at Rs 1.5 lakh annually, there is no upper limit on investments in ELSS mutual funds. However, the Section 80C deduction is capped at Rs 1.5 lakh.
Furthermore, taxpayers without business income must annually choose between the old and new tax regimes since the fiscal year 2020-21, with the new tax regime being the default option as of the fiscal year 2023-24. Consequently, individuals seeking tax deductions under Section 80C must opt for the old tax regime, as this deduction isn’t available in the new tax regime.
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