Top 5 Sections of the Income Tax Act, 1961, for Tax Planning

Anyone who earns an income in the country is liable to pay income tax. The Income Tax Act comprises of various sections, which separately deal with various aspects of taxation in the country. Furthermore, this Act also provides the taxpayers with various income tax deductions they can claim while filing for income tax returns (ITR). Once the deductions are made, the total taxable amount would be taxed according to the income tax slab rates of the taxpayer.

The Income Tax Act contains 23 chapters in total, and 298 sections, as per the official website of the income tax department. While it is extremely tedious to go through all the income tax sections and chapters, the income tax department encourages taxpayers to make use of the deductions and rebates under the Income Tax Act, to reduce the amount that is liable to be taxed.

 

There are five sections in particular, however, that every taxpayer should know, which will be particularly helpful when you decide to invest your corpus in any of the investment instruments.

• Section 80C - Tax deduction on investments

Section 80C of the Income Tax Act allows for deduction on investments made in particular instruments. Two of the more popular ones are Tax Saving Mutual Funds and Tax Saving Fixed Deposits. Tax Saving Mutual Funds are equity-oriented; that is, at least 65% of their corpus should be invested in equities. Equity Linked Savings Scheme (ELSS) comes with a 3 year lock-in period with a minimum of 80% of corpus invested in equities, and are eligible for tax deductions of up to Rs. 1.5 lakhs under section 80C of the Income Tax Act.

Similarly, the Tax Saving Fixed Deposit scheme has a maturity period of not less than 5 years, with a maximum deduction of Rs. 1.5 lakhs that the investor can claim. The tax on interest earned above 10% would be according to the income tax slab rates of the individual.

You can invest in fixed deposits with returns of up to 8.35% on Bajaj Markets (with an additional 0.25% over and above the existing rates for senior citizens). You can choose from flexible tenures, ranging from 12 months to 5 years and benefit from assured returns.

• Section 80CCC - Tax deduction for contribution to pension funds

As a result of trying to encourage taxpayers to start investing in pension funds, Section 80CCC offers income tax deduction to pension funds under Chapter VI-A from the taxpayer’s gross total income for that financial year. This provides a tax deduction for any amount paid or deposited in annuity plan of any insurer (LIC or otherwise). Furthermore, the maximum deduction that can be claimed through Section 80CCC is Rs. 1.5 lakhs.

• Section 80CCD - Tax deduction for contribution to national pension scheme

Section 80CCD provides income tax deductions for contributions made to National Pension Scheme (NPS). Furthermore, the maximum deduction that can be claimed from Section 80CCD (1) is 10% incase of a salaried individual (employee), or 20% of gross total income -- or Rs. 1.5 lakhs, whichever is less, from non-employees (self-employed).

Section 80CCD (1B) allows for an additional deduction of up to Rs. 50,000 for the corpus deposited by the individual to their NPS account.

Section 80CCD (2) allows individuals to claim an additional deduction on their contribution to the employee’s pension account for up to 10% of their salary.

• Section 80TTA - Tax deduction for interest on savings account

As per Section 80TTA of the Income Tax Act (Chapter VI-A), individuals can claim deductions of up to Rs. 10,000 per annum from interest earned on savings accounts’ deposits, that are held in banks, post offices or a cooperative society.

• Section 80TTB - Tax deduction on interest income for senior citizens

As per Section 80TTB under the Income Tax Act, senior citizens (aged 60 and above) can claim tax breaks on interest income from deposits that are held by them. The maximum deduction allowed in a financial year is Rs. 50,000.

By using the various income tax deductions and exemptions allowed under the Income Tax Act, taxpayers can significantly reduce the taxable income. On Bajaj Markets platform, you can benefit from assured returns and high interest rates of up to 8.35 by investing in Fixed Deposits.