Section 80C
Analysis
| As
per Assessment Year 2006-07 |
Post Budget Funda :
Rebates Turning to Reductions
As the taxation system has drastically shown a change in every steps of
money involvement, it has become necessary to think twice in parking
your money in the right place. Section 88 are now available for
deduction under the newly introduced section 80C.
- Rs 1 lakh can be invested under
this section without any sub-limits.
- Investment in pension funds under
section 80CCC can still be up to a maximum of Rs 10,000 and treated
as a part of investments of Rs 1 lakh under section 80CCE.
- For individuals who are looking for
more returns from their investments, can move away from low-return
infrastructure bonds. Earlier they were bound to purchase for Rs
30,000 for getting maximum tax benefits.
In simple words
A tax payer can invest up to Rs 1 lakh in EPF, PPF, life insurance,
infrastructure bonds, NSC, repayment of home loans, tax saving mutual
funds, pension plan, etc without any individual sub-limits except in the
case of Rs 10,000 in pension funds.
For an individual who has availed of a home loan, she can get a
deduction for its repayment from her taxable income up to Rs 1 lakh. She
benefits the most as apart from getting debt free, gets benefits from
two sections of income tax.
- First, for deduction in respect to
interest on home loan under section 24
- Secondly, deduction in respect to
repayment of home loan under section 80C.
The good thing
Now you can invest your full quota of investments (i.e. Rs 1 lakh) in
tax saving mutual funds, in case you are willing to take that extra bit
of risk. Or if you want to play safe and are looking for a fixed rate of
return, they opt for NSCs or PPF depending upon the term of investment.
For salaried
Salaried employees who are looking for an extremely safe investment,
with handsome return should ask their employers to voluntarily deduct
extra provident fund over and above the normal 12% deductions. The same
will fetch you a return of 9.5% compounded annually. Investments made in
PF are highly secure.
If you do not want to lock in your money for long can go for investment
in infrastructure bonds. The lock-in period is minimum three years, but
mind you, it will fetch the least amount of returns, between 5% and 5.5%
annually.
- Deduction in respect of Life
Insurance Premia, Contribution to Provident Fund, etc.
- Rs 1 lakh can be invested under
this section without any individual sub-limits except in the case of
Rs 10,000 in pension funds.
- Sections 88, 80L, 80CCC and 80CCD
is clubbed in.
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