If you plan to file your income tax return (ITR) under the old tax regime, you can start making investments in some tax-free instruments in order to claim deduction under section 80C before the financial year comes to an end.
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There are a number of tax saving instruments that one can invest into. These include ELSS, PPF, insurance premium, principal sum of home loan and others. Notably, these tax deductions are permissible only to those taxpayers who are filing their returns under old tax regime.
Under section 80C of Income Tax (I-T), taxpayers can claim tax deduction against their investment in a few select saving instruments which include ELSS, PPF, insurance premium and others. The tax deduction is allowed only up to a limit of ₹1.5 lakh in a year. And this limit is applicable for cumulative investment in all these schemes put together.
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Let us understand each of them in detail:
1. ELSS (Equity Linked Savings Scheme): These are mutual fund schemes with a 3-year lock in period. Investing into these schemes give income tax deduction to taxpayers.
2. PPF (Public Provident Fund): This is small savings scheme and one can invest for an amount between ₹500 and ₹1.5 lakh in a financial year. Withdrawal is permissible every year from 7th financial year.
3. Insurance premium: Insurance paid towards life insurance is eligible for tax deduction.
4. Principal sum of home loan EMI: The principal amount of home loan EMI is also tax exempt upto ₹1.5 lakh.
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5. Sukanya Samridhi Yojana (SSY): You can open an account in the name of a girl child below the age of 10 years. One can invest a minimum of ₹250 and a maximum of ₹1.5 lakh in a financial year. Investment into this account between ₹250 to ₹1.5 lakh is exempt from income tax.
6. National Savings Certificate (NSC): This is another small savings scheme which allows investors to invest any amount from ₹1,000 and above. There is no maximum limit but tax exemption is allowed only for investment upto ₹1.5 lakh.
7. Senior Citizens Savings Scheme (SCSS): This scheme, as the name suggests, is only meant for investors above 60 years of age. There shall be only one deposit in the account in multiple of ₹1,000 but not exceeding ₹30 lakh. However, as mentioned above, the tax exemption is given only for investment upto ₹1.5 lakh.
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Besides, 80C tax exemptions, taxpayers can also invest in some similar schemes which are as follows:
i.) 80CCC: This is the deduction given for annuity plan of LIC or other insurer towards Pension Scheme
ii) 80CCD(1): This is the income tax deduction given for pension scheme of central government.
