When tax season approaches, we as individuals often panic, and our last-minute tax savings investment decisions may not be well-researched. Therefore, it is important not only to file your income tax return on time but also to be aware of the best tax saving plans into which you could invest. Timely investments in these could help you shape your financial future well. Today, we will share the ways in which you could do tax saving under sec 80 c of the Income Tax Act.
Let us take a look!
Income Tax Return FY- 2023- 24
Income Tax Return (ITR) is a crucial form for declaring net tax liability, claiming deductions, and your reporting gross taxable income.
Firms, companies, Hindu Undivided Families (HUFs), and self-employed or salaried individuals must submit ITR to the Income Tax Department of India.
- There are seven forms designated for different types of taxpayers: ITR 1, ITR 2, ITR 3, ITR 4, ITR 5, ITR 6, and ITR 7.
Now, taxpayers file their income tax returns through the New income tax portal, which offers enhanced features and streamlines the tax filing process.
The last due for income tax filing for FY 23-24 is July 31st, 2024.
Tax Slabs for AY 2024-25| Latest Changes
The Finance Act 2023 changed Section 115BAC, effective AY 2024-25, making the new tax regime the default for individuals, HUFs, AOPs, BOIs, or Artificial Juridical Persons.
However, eligible taxpayers can choose to stick to the old tax regime.
This regime allows claiming various deductions and exemptions on income tax returns.
For “non-business cases,” taxpayers can select their preferred regime each year directly in their ITR before the due date under section 139(1).
Eligible taxpayers with business or professional income can opt out of the new tax regime by submitting Form-10-IEA before the due date under section 139(1) for filing the income tax return.
Withdrawal from the old tax regime can be done using Form No.10-IEA.
But, for those with business or professional income, switching to the old tax regime and withdrawing the option in subsequent AYs is a one-time opportunity.
Smart Steps for Your Tax Saving Investments
The aim of smart tax-saving investments isn’t just about dodging taxes but also about earning tax-free money.
Instead of scrambling at the end of the financial year and picking random tax-saving tools, it’s wiser to begin investing early in the year. This way, you have time to plan your investments carefully and grab the best returns.
When choosing the right tax-saving plan, factors like fund safety, how quickly you can access your money, and the returns you expect are important.
Many tax-saving under Section 80C of the Income Tax Act lets you get tax exemptions up to Rs 1,50,000. You can pick from options like ELSS (Equity Linked Saving Scheme), Public Provident Fund, Life Insurance, National Savings Scheme, Fixed Deposits, and Bonds.
Let us take a look at the best tax-saving plans of 2024!
Top Tax Saving Investments 2024
Income Tax Act of 1961 offers multiple tax-saving plans:
If you’re using the old tax rules, you can still get deductions up to Rs.1.5 lakh under section 80C. But remember, these rules don’t apply if you’ve chosen the new tax system.
Know the difference between the old tax and the new tax regime before filing your income tax return.
- Fixed deposit: Save tax by putting money in tax saver Fixed Deposits.
You can claim up to Rs.1.5 lakh deduction under section 80C. These FDs offer 5-year lock-in period, and the interest you earn is taxable. You can use these tax saving plans at the right point of time before filing income tax returns. Interest rates usually range from 5.5% to 7.75%.
- PPF (Public Provident Fund): A popular way to save tax, you need to open a PPF account at a post office or designated bank branch.
It lets you claim deductions up to Rs 1.5 lakh under Section 80C.
- ULIP (Unit-linked insurance plan): These are long-term investment plans where you can choose between equity and debt funds. You get tax savings under sections 80C and 10(10D).
- National Savings Certificate: These bonds help small to mid-income investors save on taxes under Section 80C.
- Senior Citizen Savings Scheme: This scheme offers steady returns and tax benefits under Section 80C for individuals over 60.
- Life insurance: Offers security to your family and tax benefits. Premiums come under Section 80C, with tax-free proceeds on death/maturity under Section 10(D).
- Health insurance or Mediclaim: Covers medical expenses and offers tax benefits under Section 80D.
- NPS (New Pension Scheme): Managed by the PFRDA, contributions fall under Section 80CCD, along with Sections 80C and 80CCC.
- Tax-saving mutual funds: Also known as ELSS, they invest in stock markets and qualify for tax benefits under Section 80C.
Comparing the Best Tax Saving Plans 2024
Below is a simple tabular representation of the top tax-saving investments for which you can claim tax deductions under the Income Tax Act of 1961.
| Tax Saving Options | Returns | Tax Benefits |
| Unit Linked Insurance Plan (ULIP) | Market Linked Returns | Section 80C and 10 (10D) – Tax benefits on premiums paid and maturity amount |
| Sukanya Samriddhi Yojana (SSY) | 8.2% p.a. | Section 80C and 10 (10D) – Tax benefits on contributions and maturity amount |
| Public Provident Fund (PPF) | 7.1% p.a. | Section 80C – Tax benefits on contributions and tax-free interest |
| Employee Provident Fund (EPF) | 8.15% p.a. | Section 80C – Tax benefits on contributions and tax-free interest |
| Senior Citizen Saving Scheme (SCSS) | 8.20% p.a. | Section 80C – Tax benefits on deposits and tax-free interest |
| National Pension Scheme (NPS) | Market Linked Returns | Section 80C, 80 CCD(1B), and 80 CCD(2) – Tax benefits on contributions and additional deduction for employer’s contribution |
| National Savings Certificate (NSC) | 7.7% p.a. | Section 80C – Tax benefits on investment and tax-free interest |
| Tax Saver FDs | 5.5% to 7.75% p.a. | Section 80C – Tax benefits on investment and interest income are taxable |
| ELSS Fund | Returns vary | Section 80C – Tax benefits on investment and returns are subject to market performance |
| Life Insurance | Depends on policy | Section 80C – Tax benefits on premiums paid and maturity amount is tax-free if the policy term is more than 2 years |
| Term Insurance | No returns | Tax-free death benefit |
| Health Insurance | No returns | Premiums up to Rs. 50,000 for self, spouse, and dependent parents under Sec 80D; Additional Rs. 25,000 for senior citizen parents |
Tax Saving Under 80C
What are the deductions under sec 80c of the Income Tax Act?
Let us take a look!
Section 80C, 80CCC, 80CCD (1)
Deduction towards payments made to:
80C
All of the saving plans mentioned below have a combined deduction limit of ₹ 1,50,000
- Life Insurance Premium
- Provident Fund
- Tuition Fees
- National Savings Certificate
- Housing Loan Principal
- Subscription to certain equity shares
- Other various items
80CCC
- Annuity plan of LIC/ other insurer towards Pension Scheme
80CCD(1)
- Pension Scheme of the Central Government
Section 80CCD(1B)
- Deduction towards payments made to the Pension Scheme of the Central Government, excluding deduction claimed under 80CCD (1)
- Deduction limit of ₹ 50,000
Section 80CCD(2)
- Deduction towards contribution made by an employer to the Pension Scheme of the Central Government
- If the Employer is a PSU or Others
- Deduction limit of 10% of salary
- If the Employer is a Central or State Government
- Deduction limit of 14% of salary
Section 80CCH
Contributions made to the Agnipath Scheme are eligible for a deduction.
An individual who enrols in the Agnipath Scheme and subscribes to the Agniveer Corpus Fund on or after November 1, 2022, can claim a deduction in their total income calculation for any amount paid or deposited in the fund during the previous year.
- If the Central Government makes any contribution to the account of an assessee,
In this case, he gets a deduction in the computation of the total income of the whole of the amount so contributed.
Lesser-Known Tax-Saving Strategies from Section 80
When it comes to saving on taxes, there are more options than just the commonly known avenues like PPF and ELSS.
Explore these lesser-known strategies to minimise your tax burden.
Section 80GG: Rent Expenses Exemption
For individuals who haven’t yet purchased a house and incur substantial expenses on rent, there exists a beneficial provision within the Income Tax Act known as Section 80GG.
This provision is particularly relevant for:
- Salaried employees without House Rent Allowance (HRA)
- For self-employed individuals, freelancers, and business owners who reside in rented accommodations.
Under Section 80GG, individuals can claim income tax exemptions if they meet certain criteria. There are three conditions specified, and the least amount among these conditions determines the extent of the exemption.
Condition 1: Annual rent paid minus 10% of total income.
Condition 2: ₹5,000 per month.
Condition 3: 25% of total income.
However, it’s important to note two conditions before claiming the exemption.
Firstly, if the individual, their spouse, or minor child owns a house property in the location where they reside, they are ineligible for this exemption.
Secondly, if the individual has a self-occupied house property and hasn’t declared any rental income for it in their Income Tax Return (ITR):
It implies they reside in that property and are thus ineligible for the exemption.
Therefore, understanding and fulfilling these conditions is crucial when considering the exemption under Section 80GG.
Section 80D: Medical Insurance Premium Deductions
The Income Tax Act offers tax-saving opportunities beyond the commonly known deduction for medical insurance premiums.
While it’s well-known that premiums for medical insurance policies are eligible for deductions under this section, there’s an additional component that many overlook.
If you, your spouse, or dependent children hold medical insurance policies and you’re below the age of 60, you can claim an annual deduction of up to ₹25,000. Moreover, if you also pay the premium for your parents’ policies, an additional ₹25,000 deduction is available. Notably, if your parents are senior citizens, the deduction limit increases to ₹50,000.
To ensure eligibility for Section 80D benefits, premium payments must be made via bank transfer, while preventive health check-up expenses can be paid in cash.
Section 80CCD(1B): NPS Contributions
You may already be aware that by utilising Section 80C and its associated avenues, you can claim a deduction of up to ₹1.5 lakhs. These deductions are typically derived from investments in instruments like PPF and ELSS, among others.
However, many overlook the additional tax-saving opportunity provided by Section 80CCD(1B), which allows for an extra deduction of ₹50,000 specifically for contributions made to the National Pension System (NPS).
You may also want to know the Income Tax Slabs in India
Importance of Filing Income Tax Returns
Here are some reasons why it is a must to do ITR Filing:
- Filing ITR allows adjustment of capital losses against capital gains, which is especially beneficial for equity investors.
- Enables easy claiming of tax refunds for deductions like TDS on rental income or fixed deposits.
- Acts as proof of income, facilitating loan applications from financial institutions.
- Essential for claiming tax deductions, even if total income is below the basic exemption limit.
- Mandatory for individuals owning foreign assets, including immovable property, to comply with tax laws and avoid penalties.
- Even if income is below the basic exemption limit, filing ITR helps in future deductions and financial planning.
FAQs| Income Tax Return Filing
Income tax return filing is the process where taxpayers declare their taxable income, deductions, and tax payments to the Income Tax Department each year.
You can return your income tax by filing the appropriate ITR form through the Income Tax Department’s e-filing portal.
Individuals whose income exceeds the basic exemption limit set by the Income tax department must file an ITR.
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Disclaimer: Investments in the securities market are subject to market risks; read all the related documents carefully before investing.