BREIF STUDY OF MAJOR TAX SAVINGS INVESTMENT INTRUMENTS UNDER SECTION 80 C - CA SUDHIR HALAKHANDI (AN INTERESTING ARTICLE ON MAJOR INVESTMENT UNDER SECTION 80CINCOME TAX, ) Finance Act 2005 has changed whole the scenario of investment based tax rebate and age old Section 80C practically resorted back replacing the Tax base rebate under section 88 and now in case of most of the assesses the calculation of Income tax payable by them is very simple. The complexities for calculation of tax rebate at different slabs has been done away and now the persons earning more will get more benefit of deduction under section 80C because the deduction is now being deducted from the Gross total income of the assessee hence the assessee who are paying the tax at maximum rate are eligible to take benefit of investment at maximum rate of tax. Further removal of inter-head restrictions on the investment has also made some of the investment schemes and constituents of the investment under section 80C more attractive. By Finance Act-2006 the Finance Minister has introduced the Bank deposits under this head and now the Bank deposit scheme – 2006 has also been declared which we have discussed in the previous issue. Now 4 Months of the current financial year is over and now it is the right time for the assesses to decide the mode of investment under section 80C. Hence we are presenting herewith a procedural study of the Investments that can be made under section 80C, which will help in taking the proper decision and also make the investment in such a way that they can get the deduction under section 80C. Here we are taking 4 major tax savings investment instruments :- 1. LIFE INSURANCE PREMIUM: - Life Insurance premium paid on the policies of the following persons can be claimed as deduction: - 1. Own life of the Assessee. 2. Life of the Spouse i.e. if the assessee is a male assessee then he can claim the deduction with respect to the life of the Wife and if the Assessee is a female assessee then she can claim deduction on the premium paid on the policy of the Husband. The deduction can be claimed year to year basis say one year the wife can claim the deduction of the premium and in the another year the husband can pay her premium and take the benefit of the deduction. 3. Life of the Child. Here the word used is only the child hence the assessee can take the deduction on the policy taken on his major or minor son, major or minor daughter, married or unmarried daughter. The parents can take the benefit of this deduction on the policies of their children on year-to-year basis by the paying the premium. 4. In case of Hindu undivided family the policies on which premium is paid may be on the life of the member of the family. Here also note that the member can claim the deduction in his individual capacity in one year and in another year the HUF can claim the benefit of deduction by paying the premium on the same policy. 2. 15 YEARS PUBLIC PROVIDENT FUND The public provident fund account can be opened with minimum subscription of Rs.500 and maximum subscription of Rs. 70000.00 and it carries a interest of 8% P.A. calculated on yearly basis. The account can be opened in selected Post offices or scheduled banks. The Maturity of the account is 15 years but the account can be extended for a period or periods covering 5 years. The account has the loan facility from the third year of investment and after 7 years partial withdrawal is possible. The account under this head cannot be attached by the order of any court. 1. In his own name. 2. In case of an individual, the contribution to the PPF can be made in the name of spouse of the assessee. Here also like LIC premium the year-to-year basis deduction is possible by contributing the PPF account by the husband in one year taking the benefit and in another year by the wife by making the contribution. 3. In the name of child. Here also child means major or minor son, major or minor daughter, married or unmarried son or daughter. 4. In case of HUF the investment should be in the name of any of the member of the HUF. 5. The interest from PPF account is totally tax free under 10 of the Income tax Act, 1961 and when deduction under section 80L for some other investment facilities have been withdrawn, the non taxability of interest of PPF has made it a major gainer. Though there is no maximum limit of investment in Income tax Act within the overall limit of Investment of Rs.1 Lakh under section 80C of the Income tax Act but as per the public provident fund scheme, the limit of investment is Rs.70000/= hence if a person has made investment more than this amount of Rs.70000/= by any means then the deduction under section 80C for the contribution towards PPF will also be restricted to Rs. 70000.00 only. 3. NATIONAL SAVINGS CERTIFICATE: - At present the eligible certificates are NSC VIII issue with 8% per annum interest compounding 6 Monthly. The interest accrued to this investment will also eligible for deduction under section 80C. The interest can be calculated as under: - Here once should note that the investment in the name of spouse and child is not eligible for deduction under section 80C but if the assesses name is also appear as joint owner (May be as first or second holder) then also the assessee can claim the deduction if he has invested the funds. The NSCs can be pledged for secutity of any loan and advance. The HUF can also purchase the NSC in the name of any of its members and can take the benefit of deduction under section 80C. 4. BANK DEPOSITS:- Recently the Governemt under section 80C has notified the Bank deposit scheme- 2006 and investment in the FDRs issued by the Banks for a minimum period of 5 years can be made as under: - 1. The investment can be made in Joint name but the first holder of the FDR can only claim the deduction. 2. In the case of HUF, to claim the deduction under section 80C, the investment should be in the name of Karta of the HUF. 3. The interest is taxable and also subject to TDS as per applicable provisions in this respect. The FDR issued under this scheme cannot be prematurely encashed and cannot be pledged for security of any Loan and advance. Still banks are under process to declare FDRs to be covered under this scheme and actual rate of interest payable on them.
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