Understanding Section 80C and 10(10D)
Updated: Mar 25
Understanding Section 80C and 10(10D)
Saving taxes is a crucial aspect of financial planning. One of the most popular ways of saving taxes in India is by investing in tax-saving instruments such as Public Provident Fund (PPF), Equity-Linked Saving Scheme (ELSS), National Savings Certificate (NSC), and so on. The government offers several tax-saving options under Section 80C and Section 10(10D) of the Income Tax Act, 1961. In this article, we will discuss the basics of Section 80C and Section 10(10D) and how they can help you save taxes.
Section 80C
Section 80C is one of the most popular sections of the Income Tax Act. It offers several tax-saving options to individuals and HUFs (Hindu Undivided Families). The maximum tax exemption that can be claimed under Section 80C is Rs. 1.5 lakh per financial year. Some of the popular tax-saving instruments under Section 80C are:
Employee Provident Fund (EPF) – The contribution made by employees towards their EPF account is eligible for tax exemption under Section 80C.
Public Provident Fund (PPF) – The contribution made towards PPF account is eligible for tax exemption under Section 80C.
Equity-Linked Saving Scheme (ELSS) – ELSS is a type of mutual fund that invests in equity shares of companies. Investment made in ELSS is eligible for tax exemption under Section 80C.
National Savings Certificate (NSC) – The investment made in NSC is eligible for tax exemption under Section 80C.
Tax Saving Fixed Deposits (FDs) – The investment made in tax-saving FDs with a tenure of 5 years is eligible for tax exemption under Section 80C.
Apart from the above-mentioned tax-saving instruments, Section 80C also offers tax exemption on life insurance premiums, home loan principal repayment, and tuition fees paid for children's education.
Section 10(10D)
Section 10(10D) of the Income Tax Act offers tax exemption on the maturity proceeds of life insurance policies. Any sum received under a life insurance policy, including the bonus, is exempt from tax if the following conditions are satisfied:
The policy should be issued on or after April 1, 2012, and the premium should not exceed 10% of the sum assured.
The policy should be for the life of an individual or spouse or child, and in the case of HUF, any member of the HUF.
The policy should not be a Keyman insurance policy.
In case the policy is surrendered or terminated before the completion of the original term, the tax exemption will not be available.
The tax exemption under Section 10(10D) is available for all types of life insurance policies, including endowment plans, money-back plans, and unit-linked insurance plans (ULIPs).
Conclusion
Tax-saving is an important aspect of financial planning. Section 80C and Section 10(10D) of the Income Tax Act offer several tax-saving options to individuals and HUFs. By investing in tax-saving instruments and availing of the tax exemptions available under these sections, one can save a significant amount of money on taxes. It is important to consult a financial advisor and choose the right tax-saving instrument that suits your financial goals and risk appetite.
