Employee? Want to save on income tax? Claiming a Section 80C Deduction? These mistakes must be avoided


Save Income Tax with Section 80C Deductions: There’s a common question on everyone’s mind: How do you save payroll tax? And if you want an answer to the question, there are many legitimate ways to save tax under the Income Tax Act of 1961. Section 80C belongs to the same, it probably is the most popular and preferred item for taxpayers because it helps reduce taxable income by making tax-saving investments or making qualifying expenses. Section 80C also has subsections – 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2).

Section 80C of the Income Tax Act came into force on April 1, 2006. It essentially allows certain expenses and investments to be exempted from tax. Here in this article, Amit Gupta, Co-Founder and MD, SAG Infotech, shares his knowledge of how salaried people can save income tax by properly claiming deductions under Section 80C. . avoiding some common mistakes: –

Amit Gupta says: “If you plan your investments well and distribute them wisely among various investments such as Public Provident Fund (PPF), National Pension System (NPS), National Savings Certificate (NSC), reimbursement mortgage, etc., you can claim a deduction. up to Rs 1.5 lakh each year, which will reduce your tax liability. “

Developing further, Gupta adds: “However, there are two important points you should be aware of, the first is that only individuals and HUFs can benefit from the benefits of this deduction and businesses, partnership companies and LLPs cannot. And, the second is that taxpayers are not allowed to deduct according to article 115BAC of the recent 2020 finance law. We observed that if the taxpayer opts for 115BAC under the new tax regime, he will not be able to claim any claim under article 80C, but if the taxpayer opts for the old tax regime for any fiscal year, he can still benefit from the deduction provided for in article 80C.

“If you are not into taxation, it will be a bit difficult to understand every part of it and maximize the savings. But we can still make you more aware of the risks and mistakes that taxpayers usually make because of. of their poor planning, so that you can make the most of them.

1. Do not pay attention to the lockout period

Some deductions under Article 80C are subject to a lock-in period, e.g. term deposits have a lock-in period of 5 years, similarly share-linked savings plans (ELSS) have a lock-in period of 3 years. If the taxpayer violates the blocking period restrictions, the income will be treated as the taxpayer’s income for that year and will be taxable.

Now, taxpayers will have a similar situation with long-term investments like the PPF, which has a 15-year lock-in period to qualify under Section 80C. Thus, taxpayers are advised to choose investments that help them achieve their financial goals. In addition, the taxability of investment returns and the taxability of the amount received at maturity are the two factors that any taxpayer should check before choosing an investment plan.

2. Request for deduction for repayment of private loan

It has been observed that taxpayers try to claim a deduction on the repayment of any type of mortgage loan under section 80C, but it should be understood that the main component of private loans (loans taken out from friends and relatives ) is not covered by section 80C.

If a taxpayer wishes to claim a deduction for the main component of the home loan, he must ensure that the loan must be provided by the specified entities / persons u / s 80C (2) (xviii) (c). Loans granted by a bank, a cooperative bank, the National Housing Bank, the Life Insurance Company, etc. fall under it.

3. Deduction on registration and stamp duties

Expenses such as stamp duties, registration fees and certain other expenses directly related to the transfer of ownership of a dwelling house (only) are permitted under section 80C. For commercial properties, these expenses cannot be deducted under section 80C. Thus, taxpayers should wisely choose the type of property to claim the Section 80C deduction.

4. Error when requesting the deduction for tuition fees

If a taxpayer tries to claim a tuition or tuition deduction, the taxpayer should consider certain provisions before making a claim. The deduction will be available for fees paid for full-time education in India for up to two children, and only the tuition portion of the full fees will be eligible for the deduction. So before you provide any data, be sure to do some math.

5. Too much investment in group insurance plans

Life insurance plans are life insurance plans that are good for saving tax and essential investments. However, investing a large chunk of your hard earned money in it will not give you good returns. So if you want to save more, invest in a term plan, which is also eligible for a tax deduction under section 80C. “

Gupta advises all taxpayers not to rush investment or wait for a last minute deposit. This is because the chances of making a bad investment decision are high in the haste to save tax. “Treat these tax benefits like social benefits and never invest just to save taxes,” he concluded.

(Disclaimer: The opinions / suggestions / advice expressed here in this article are solely by investment experts. Zee Business suggests that its readers consult their investment advisers before making a financial decision.)

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