Changes in Income Tax for Budget 2024: In the recent Budget 2024 announcement, the Finance Minister retained the existing limit for tax deductions under Section 80C. The maximum cap for availing tax benefits under Section 80C remains at Rs 1.5 lakh for the ongoing fiscal year 2023-24 and will continue unchanged for individuals aiming to save on taxes through Section 80C investments in the upcoming fiscal year 2024-25.
Section 80C of the Income-tax Act enumerates various investments and expenses eligible for tax deductions. By participating in these specific investments or expenditures, individuals can reduce their gross taxable income by up to Rs 1.5 lakh per financial year.
To benefit from Section 80C tax deductions, individuals can invest in options such as Employees’ Provident Fund (EPF), Public Provident Fund (PPF), Equity Linked Saving Scheme (ELSS) mutual funds, National Savings Certificate (NSC), and 5-year tax-saving fixed deposits with banks or post offices. Moreover, payment of life insurance policy premiums also qualifies for tax benefits under Section 80C.
It is essential to note that each eligible investment comes with specific maximum limits, rates of return, liquidity, and taxation rules for the earned returns, as reported by ET. For example, the maximum investment allowed in PPF in a financial year is Rs 1.5 lakh, while there is no limit on the investment amount in ELSS mutual funds; however, the Section 80C deduction is capped at Rs 1.5 lakh.
In cases where individuals are unable to make specific investments, they can still secure deductions under Section 80C from their gross taxable income through certain expenses. These expenses encompass repaying the principal amount of a home loan, tuition fees for children, payment of stamp duty, registration fees, and other costs related to purchasing a house.
Since the financial year 2020-21, individuals without any business income are required to annually choose between the old and new tax regimes. As of the fiscal year 2023-24, the new tax regime is the default option. Consequently, individuals seeking tax deductions under Section 80C must opt for the old tax regime, as this deduction is not available in the new tax regime. It is crucial for taxpayers to be aware of these rules to make informed decisions regarding their tax planning and investment strategies.
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