Budget 2024: The middle class has been begging for tax reductions and deductions as the interim budget approaches. One of the most well-known and frequently utilised provisions of the Income Tax Act is Section 80C. This section might be your first resource for arranging your taxes. A taxpayer can lower their tax obligation by claiming deductions under Section 80C for investments and costs up to Rs 1.5 lakh each financial year.
Time Sensitivity for FY24 Investments
It’s time to get moving if you haven’t yet made your FY24 tax-saving investments. The total amount of all deductions claimed under Sections 80C, 80CCC, and 80CCD (1) combined is subject to the yearly cap of Rs 1.5 lakh. Deductions are available for contributions made to the National Pension System (NPS) and Atal Pension Yojana (APY) and to specified pension plans from life insurers under Sections 80CCC and 80CCD (1), respectively.
Limitations in New Tax Regime
With the exception of the employer’s NPS contribution deduction allowed under Section 80CCD (2) (more on this later), no additional tax deductions are allowed under the new tax regime. Will the restrictions on Section 80C deductions be raised by the interim budget, which is set to be presented on February 1st? Because this provision was only available under the previous tax regime, tax experts believed it was extremely unlikely. Section 80C tax deductions are not permitted under the new income tax system.
Five important assets
Here are five important assets that provide you with Section 80C benefits if you have begun your tax planning for FY24 and are still filing taxes under the previous tax system.
- Public Provident Fund (PPF)
- National Pension System (NPS)
- Tax-saver fixed deposits
- Equity-linked savings scheme (ELSS) funds
- Unit-linked insurance plans (ULIP)
Considerations Beyond Tax Benefits
Every investment made under Section 80C reduces your taxable income. You must therefore take into account factors other than taxes when choosing one. You may want to think about PPF for tax-free predictable returns or NPS for marked-linked returns if you have a lengthy investment horizon and are willing to lock in your money for a number of years.
ELSS may be a preferable alternative for people who want some flexibility in their withdrawal terms due to its three-year lock-in. Given that ELSS is an equity product, it is advised to have a longer investing horizon.
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