New to Tax Saving? A Guide to 80C
If you've just started your career, the term "Section 80C" might sound intimidating, but it's actually your best friend when it comes to saving income tax. In simple terms, Section 80C of the Income Tax Act allows you to reduce your taxable income by up to ₹1.5 lakh every year by making certain investments and expenditures.
How Does 80C Work? A Simple Example
Imagine your annual taxable income is ₹8 lakh. By investing ₹1.5 lakh in eligible 80C investments, you can lower your taxable income to just ₹6.5 lakh. If you fall in the 20% tax bracket, this simple step can save you over ₹30,000 in taxes every year!
Popular 80C Investment Options
Here are a few of the most common and effective instruments under Section 80C:
- Public Provident Fund (PPF): A government-backed, long-term savings scheme offering safety and tax-free returns.
- Equity Linked Savings Scheme (ELSS): A type of mutual fund with a 3-year lock-in period that invests in the stock market, offering wealth creation potential along with tax benefits.
- Employee Provident Fund (EPF): Your mandatory contribution to your provident fund account also qualifies for an 80C deduction.
The First Step to Financial Planning
Effective tax saving is the foundation of a smart financial plan. By choosing the right instruments, you not only reduce your tax liability but also build a corpus for your future goals.
To dive deeper, read our detailed guide on the Best Tax Saving Investments in India.