Your Roadmap to Wealth: Leveraging Rs 2 Lakh Income Tax Deduction in 2024

If you want to learn how to get to a financially successful destination without doing this in a literal sense, while at the same time aiming to use a financial carrot to avoid paying taxes at the right time? Well, you’re in luck. Hence in the year 2024 Taxpayer’s Indian government has brought out the most attractive scheme to help the taxpayers with the payment of taxes where a standard deduction of Rs 2 lakhs towards their income tax payment is allowed. This deduction is not just a mere addition; it is a booster or rather a powerful explosive that will turn one’s financial experience around. Here you can save an amount of up to Rs 2 lakh from your tax liabilities, thus ensuring at least that much more goes to you and not to the exchequer. But here is the fun part and guess what? This deduction is not really a question of the simple avoidance of a certain amount of tax, which you would then be forced to pay; it is a question of how that money Is to be used In order to accumulate wealth. Indeed, it is a form of sowing seeds towards building a bittersweet harvest in life at one point or another. With the help of this deduction in mind, you can carefully avoid frequent dangers and, thus, contribute to building total financial security to spend as much time and effort on the development of a lifetime plan.

This guide is all about a clear understanding of processes and steps towards wealth creation and specifically about how a person can make the best out of  Section 80C which allows income tax deduction of up to Rs 2 lakh. Whether you require an understanding of tax laws and such other regulations or need to  identify the right time to apply the right financial tools and methods, this website will guide you in building the base knowledge you require to succeed in finance right at this moment.

Save Up to Rs 2 Lakh on Home Loans with Section 24

A taxpayer can reduce Rs 2 lakhs of income tax under Section 24 on interest paid on home loan. The house property can be said to have been taken on or after 1/04/1999 then the maximum deduction allowed for the betterment and redevelopment of the property is Rs 2 lakh. No one wants a large portion of his or her income to go in the form of income tax, this is why people try to utilize every section that may be at their disposal. According to the income tax act 1961, section 80C, a deduction up to Rs 1 lakhs can be claimed by any resident individual or Hindu undivided family. To say that 5 lakh is perhaps the most frequently employed trick among everyone in order to minimize their tax burden would not be a wrong statement at all. Keeping in mind the kind of response section 80C generates, it is however worthwhile noting that it is not the only way through which India’s populace avails income tax benefits.

Apart from the unemployment benefits taxation, there are numerous other sections of income taxation through which one can claim such as tax paid on the premiums for health insurance, or one can use the buying of home as one method among others. In addition to lakh rupees spent on Modi’s publicity campaign, [15] ANI Hitting out at the capital expenditure is carried out this year which advocates for Rs 7. This Income tax benefit can be claimed by any person who has bought or constructed any house and is inhabiting it And according to the provision of section 80 C upto Rs 50000 only can be claimed for this purpose. Since all the existing homeowners can also benefit from the relief given, section 24 also allows them to claim an amount up to Rs 2 lakhs for the interest on the home loan. Another condition that should be met is that the owner in the house property or any of his family members, is supposed to be residing in the house. The new rule formulated for such a situation is that in case one owns and occupies the property the prescribed limit of tax deduction in case of interest paid on housing loan is Rs 2 lakh,” it says. If the house property was purchased by taking a loan after 1st April 1999, exclusively for constructing the house property/for purchasing the house property that is used for letting, the individual can claim the maximum deduction of Rs. 2 lakhs.

Also Read: Maximizing Tax Deductions: A Guide for Small Business Owners

Eligibility Criteria for the Rs 2 Lakh Deduction

The next logical thing that comes to mind is the provision of Rs 2 lakh income tax deduction and the qualification needed to reap the full benefits from it. 

The deduction is available to individual taxpayers who meet specific conditions

• Resident Status: 

The taxpayer can be any individual living in India but the company must be registered and operating in India.

• Income Source: 

This can relate directly to the income from salaries, house property, and other income but not to income from capital gains.

• Investment in Specific Schemes: 

This deduction applies to certain investments or other allowable expenses.

Also Read: How to Maximize Your Tax Deductions Using CaptainBiz

Qualified Investments and Expenses

1. Section 80C Investments

The Rs 2 lakh deduction comprises the Investing and saving under section 80C, a precedent which was defined upto Rs 1. 5 lakh. However, for 2024 an increase of Rs. 50,000 has been made to the basic degree and the total amount now comes to Rs. /- two lakhs. Eligible investments include:

• Public Provident Fund (PPF)

• Employee Provident Fund (EPF)

• National Savings Certificates (NSC)

• Life Insurance Premiums

• Equity-Linked Savings Scheme (ELSS)

• Tuition Fees for Children

Section 80D of the Income Tax Act applies to the premium amount paid towards Health Insurance policies. The contributions towards the health insurance under section 80D also go a long way in attaining the Rs 2 lakh deduction. 

2. Section 80D and Health Insurance

Besides, expenditure incurred on health insurance plans under Section 80D also go for the Rs 2 lakh deduction.

Taxpayers can claim deductions for premiums paid towards

• Self, spouse, and children: 

In a range of up to Rs 25, 000

• Parents: 

It is finely possible to deposit extra Rs 25,000 (or Rs 50,000 if the account holder is a senior citizen).

3. Section 80E for Education Loans

Section 80E for Education Loans As a means of supporting student’s education, Indian government allows education loans availed by a person to be tax deductible under section 80E. For a month as we saw above there is no maximum ceiling but the total amount is now restricted to Rs 2 lakhs.

4. Section 24 for Home Loan Interest

Interest on Home Loan under Section 24 As per Indian Income Tax law, interest on home loan can be claimed as a deduction in computing the income of the assessee on which income tax has to be paid.

5. Section 80EE and 80EEA for First-Time Home Buyers

The government has also come up with two major subsections including the 80EE subsection as well as the 80 EEA subsection for first time homeowners. In other words it’s for further adjustments of interest expenses other than the Section allowances and under given conditions.

Step-by-Step Guide to Claiming Your Deduction

1. Keep Records: 

Keep records of all your eligible expenses on receipts and documents related to investments.

2. Calculate Total Deduction: 

Sum the eligible deductions as possible so that they would not exceed such an amount of Rs 2 lakh.

3. Fill the Correct Forms: 

Such areas when filing taxes for your enterprise be sure to use the right forms and ensure to mention all the deductions correctly.

4. Submit Proof:

In cases where you are asked to attach copies of documents you should do so in support of your claims.

Key Investments Eligible for the Rs 2 Lakh Tax Deduction

1. Public Provident Fund (PPF)

• Interest Rate: 

The rate of interest that is charged on PPF is determined by the government and is generally above that of the FD schemes.

• Lock-in Period: 

This means that PPF has what is known as a long-term lock-in period and this is preferred when an individual is saving for a long-term goal.

• Tax Benefits: 

Investment under PPF is allowed under section 80C of the income tax act and the amount of interest earned from this is also tax exempted.

2. Employee Provident Fund (EPF)

• Contribution: 

Employees pay 12% of their basic wage for their contribution; employers also contribute the same percentage.

• Tax Benefits: 

The investment made by the employee is under Section 80 C, where the interest earned on this amount is tax free.

3. National Savings Certificate (NSC)

• Interest Rate: 

Special features of the loan include: the nondiscriminatory interest rate, which is fixed to compound at the rate of 1 percent per annum.

• Lock-in Period: 

It is stated that non-statutory caste NSCs have a lock-in period of 5 years.

• Tax Benefits: 

The idea of making NSC more attractive to the investors, the government mandated that it can be a ‘deduction under section 80C of the Income Tax Act. The interest earned on NSC is fully tax-deductible.

4. Equity-Linked Savings Scheme (ELSS)

• Potential Returns: 

As funds that primarily invest in equities, ELSS funds provide higher returns than other conservative mutual funds.

• Lock-in Period: 

Lock-in period to avail this tax saving option is 3 years which is the least amongst all the options available under Section 80C.

• Tax Benefits: 

ELSS is another one which is a type of mutual funds and they have allowance under section 80C of the IT act, while gains in excess of Rs 1 lakh are taxed at 10% over and above the holding period of over a year.

Also Read: Understanding Financial Planning And Tax Saving Investment Plans – Financial Year

Conclusion 

Green Signal for the taxpayers is in the income tax form for 2024 with Rs 2 lakh deduction benefit that will help to reduce their income tax for investing in the eligible sectors declared by the government. These deductions include the following Saving and Investment allowance which are Savings Allowance for specified saving schemes as following Contribution to Saving Schemes like Public Provident Fund / National Savings Certificate (NSC), Insurance Premia paid for self & family, Rent paid for Accommodation/House Rent paid, and Home Loan Interest. This means that in order to claim these losses, the taxpayers need to guarantee that they have all the necessary documents ready and that they also need to make sure that they have filed their returns before the set deadlines, often July 31st for every end of the financial year. These deductions are not only exist for the purpose of lightening the tax burden for both individuals and corporations, but are also for the purpose of preventing spending from getting out of control and for the purpose of encouraging people to save and invest throughout their lifetimes, thereby improving people’s financial position over the long run.

FAQ

• What do people with Rs 2 Lakh Income Tax Deduction mean?

Income tax deduction of Rs 2 Lakh under section 80C of the Income Tax Act is a facility for the taxpayers under which there is provision to adjust the income and make saving upto Rs 2 lakh per Annum on the particular instruments which are notified by the government for such purpose.

• What concessional sections of the Income Tax Act can be availed on investments under Section 80 C?

Eligible investments and expenses include:

• Life Insurance Premiums

• Employee Provident Fund (EPF)

• Public Provident Fund (PPF)

• National Savings Certificate (NSC)

• Equity-Linked Savings Scheme (ELSS)

•  Sukanya Samriddhi Yojana

• Can I afford deductions for paying the loan amount for my home?

It is worth mentioning that the principal repayment of a home loan is also allowed as a deduction as per Section 80C. To this, it has been provided under section 24(b) that a deduction may be allowed in respect of interest on the home loan to the extent of Rs. 2,00,000/- separately.

• Whether premium paid towards life insurance policy is allowed as deduction u/s 80C upto Rs 2 Lakh?

Yes, premiums relating to life insurance policies for the self or spouse or children can be claimed under Section 80C. It is important to narrow down the options to the policy benefits which will help most in the financial protection aspect.

• Which expenses related to children’s education are considered tax-deductible?

Education tax on tuition fees for up to two children availed is also a part of section 80C of IT Act in India. This does not include charitable donations, development or capitation fees.

• Which of the following financial instruments can you benefit by investing in an Equity linked savings scheme?

ELSS are mutual funds that are mainly invested in stocks and one of the benefits of ELSS is that it has a lock in period of 3 years which is the least among all the 80C. While ELSS is a relatively safer investment option compared to directly investing in stocks, it indeed gives better returns than many other instruments for tax saving investment with comparable risks which are tied to stock market movements. The investments made in ELSS are also tax saving instruments that can be claimed as deductions under section 80C, which makes ELSS an ideal investment tool for wealth builders.

• Is there any home loan repayment advantage to getting this deduction?

Indeed, the principal repayment of a home loan is allowed for deductions as are provided in Section 80C. Moreover, there is another standard deduction for the interest spent on a home loan considering up to Rs 2 lakh under Section 24(b). This consideration implies that home loan repayments make a considerable impact on the  reduction of your taxable income from two perspectives.

• What is the Rs 2 Lakh Income Tax Deduction and who can benefit from it?

The Rs 2 Lakh income tax deduction is provided under Section 80C of the Income Tax Act. It allows individual taxpayers and Hindu Undivided Families (HUFs) to reduce their taxable income by investing in specific financial instruments and expenses, up to a limit of Rs 2 lakh per year. This deduction helps in lowering the overall tax liability.

• Can actually the payment of life insurance premium be claimed for the Rs. 2 Lakh deduction under Section 80C?

Premiums paid towards Life Insurance policies availing by yourself, your spouse and children are admissible for deduction under section 80C. This is why you should pick a policy that provides the kind of protection you need to have in the event of an accident.

• Can I deduct amounts that I have paid to cater for my children’s education fees?

So yes, these are the fees that are paid for the full education of up to two children and are allowed as a deduction under Section 80C of the IT Act for the concerned financial year. This deduction may only apply to the tuition fees and not the donations, development fees or other charges that you may find otherwise.

Rutuja Khedekar Freelance Copywriter

Rutuja is a finance content writer with a post-graduate degree in M.Com., specializing in the field of finance. She possesses a comprehensive understanding of financial matters and is well-equipped to create high-quality financial content.

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