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Key Takeaways
Section 80C allows deductions up to ₹1.5 lakh for investments in ELSS, life insurance, PPF, ULIPs, tax-saving FDs, and more.
Section 80CCC applies to contributions made to specific pension plans.
Section 80CCD(1), (1B), and (2) provide tax benefits on contributions to NPS and other government pension schemes, offering up to ₹2 lakhs in total deductions.
ULIPs and ELSS are popular 80C tools offering tax savings plus investment growth potential.
PPF and NPS offer long-term savings with moderate to high returns and tax-free or tax-deferred maturity benefits.
Tax-saving FDs are low-risk but taxable on interest income.
Home loan repayments and children’s tuition fees also qualify for deductions under 80C.
Combining options across these sections helps maximise tax savings while aligning with financial goals.
Working hard to make a better world for yourself while simultaneously contributing to the country’s growth with taxes, you are already doing a lot as an ordinary man. Balancing the finances to fulfil both scenarios can be challenging. The best way out of it is to pay the taxes as per the Government-approved guidelines, but by keeping it to a minimum out of your total income.
The Government itself allows tax savings through different sections of the Income Tax Act. The quite common ones among them are Section 80C, 80CCC, and 80CCD. Are these applicable to your income? Uncover your answer here, with these Sections being the main point of discussion in this article.
Tax Deductions Under 80C, 80CCC and 80CCD
The maximum deduction under 80C and 80CCC is Rs. 1.5 lakhs. For 80CCD, it varies as per the salary. Here is what each section deals with:
80C: It allows claiming tax deductions on investments made in Equity Linked Saving Schemes, payments towards life insurance premiums, principal amount of home loan, and others.
80CCC: It allows claiming tax deductions towards pension funds.
80CCD: This section is subdivided into various categories:
80CCD(1): It allows deductions on payments towards Atal Pension Yojana or other pension schemes as per the Government. The employed individuals can claim a maximum deduction of 10% of their basic salary and Daily Allowance. The self-employed can claim the maximum deduction of 20% of their gross total income.
80CCD(1B): Here, deductions are claimed for investments in NPS. It allows deduction in addition to Rs. 1.5 lakhs under 80C. The maximum deduction limit is Rs. 50,000.
80CCD(2): The deductions here are to be done on the employer’s contribution towards NPS. It is also in addition to Rs. 1.5 lakhs under 80C. The maximum deduction limit is 14% of basic salary and Daily Allowance for Central government employees and 10% of basic salary and Daily Allowance for other employers.
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Tax Savings Under 80C
A few of the top chosen methods for claiming tax deductions under 80C are:
ULIP
Investments of up to ₹1,50,000 are eligible for deductions under Section 80C. If you are looking for tax savings under this section, it is a good idea to invest in ULIPs (Unit Linked Insurance Plans). Several ULIPs offered by Canara HSBC Life Insurance, such as the Wealth Edge Plan, not only provide tax benefits but also combine savings and insurance cover. ULIPs are popular because they offer dual benefits: market-linked growth potential along with life insurance protection. Moreover, the Wealth Edge Plan can be purchased online, making it a convenient investment option.
Upper limit for tax break: ₹1.5 lakh under Section 80C
Are returns taxable? Maturity amount is tax-free under Section 10(10D) if the annual premium is within the prescribed limits
What kind of ROI can I expect? Being market-linked, there are no guarantees, but returns typically range between 12% to 14%, depending on fund performance
Did You Know?
More than 93% of income tax returns were filed online in FY 2023–24 using e filing 2.0.
Source: The Economic Times.
ELSS
Another popular option for saving tax under 80C is ELSS or Tax Saving Mutual Funds. Be sure to read the document carefully to be sure that your chosen mutual fund is indeed tax-friendly. ELSS enjoys popularity because it has a comparatively low lock-in period of 3 years.
Upper limit for tax break: Rs 1.5 lakh
Are returns taxable: Yes, returns obtained after a 3-year lock-in period are taxable as Long-Term Capital Gains (LTCG).
What kind of ROI can I expect? Being market-linked, the range of growth and interest varies tremendously
Tax-saving FD
Fixed deposits remain popular in India due to their perceived safety and reliability compared to other types of investments. Although the interest rates do not match up with inflation rates, many people find the fixed rate of interest and the safety of their capital to be comforting and dependable. The option comes with a 5-year lock-in period.
Upper limit for tax break: Rs. 1.5 lakh
Are returns taxable? Yes, the interest you earn is taxable
What kind of ROI can I expect? Honestly, it varies from one bank to the next, but in general, you typically earn 5.5% to 7.5% interest on your FD.
PPF
Public Provident Fund is a government-sponsored scheme that allows deductions under 80C. However, fewer people, especially fewer young Indians, invest due to being daunted by the long lock-in periods. The lock-in period for PPF is 15 years, although a partial amount can be withdrawn after 5 years.
Upper limit for tax break: Rs. 1.5 lakh
Are returns taxable? PPF interest is tax-free
What kind of ROI can I expect? The amount varies and is announced as part of the Union Budget. It very rarely crosses 7.1% for PPF
Tax Savings Under 80CCD
This section includes the National Pension Scheme or NPS. The total deduction under Section 80C and 80CCD(1) should not be more than Rs. 1.5 lakh. Moreover, the additional deduction of Rs. 50,000 is applicable under 80CCD(2). For NPS, the lock-in period is until the investor turns 60 years old. Further, around 60% of the collected corpus can be withdrawn, with 40% allowed to be used for purchasing annuity. If the corpus is less than 5 lakh, the whole amount can be withdrawn.
Upper limit for tax break: Rs. 2 lakhs
Are returns taxable? In the given scenario of splitting the corpus in 60:40, the subsequent income from annuity plans is taxable
What kind of ROI can I expect? Ranges between 9% to 12% per annum
Other deductions
Monthly outgoings that never seem to cease, such as repayment of your home loan and paying your kids' tutors, are agreeably burdensome, but on the bright side, you can claim tax benefits against these payments.
It is most advisable to consider certain realities when investing to save tax. One, you want a somewhat low lock-in period. Two, it makes sense - since these are investments at the end of the day - to pick an option that allows you to take home a good return on your investment. Be sure to choose after careful consideration.
Conclusion
Saving tax doesn’t mean avoiding it; it means planning better. Make use of the options under Sections 80C, 80CCC, and 80CCD to reduce your tax liability while building a strong financial foundation. Whether you choose market-linked options like ELSS and NPS or prefer safer routes like PPF and FDs, be sure to align them with your risk appetite and long-term goals.
Glossary
e filing 2.0: The advanced income tax filing platform by the government of India for simpler and quicker ITR filing.
Income Tax Slab: The structure of tax rates against various ranges of income under the New and Old tax regimes.
Section 80C: A provision of the Income Tax Act for deduction up to ₹1.5 lakh for particular investments.
ULIP: Unit Linked Insurance Plan brings insurance together with equity/debt investment.
Section 10(10D): Tax-free maturity benefits from life insurance policies, subject to specific conditions.
Disclaimer - This article is issued in the general public interest and meant for general information purposes only. The views expressed in this blog are solely those of the writer and do not necessarily reflect the official policy or position of Canara HSBC Life Insurance Company Limited or any affiliated entity. We make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the blog or the information, products, services, or related graphics contained in the blog for any purpose. Any reliance you place on such information is therefore strictly at your own risk. You should consult with a qualified professional regarding your specific circumstances before taking any action based on the content provided herein.
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