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Understanding tax exemption and scope of coverage

March 16, 2019 1607
Taxation is one of the key parameters for the economic growth and durability of any economic sphere in a country. In India, there is an elaborate system of taxation and it is broadly classified into two main types direct taxation and indirect taxation.  Direct taxes are the taxes that are liable to be paid directly by the individuals, HUFs (Hindu Undivided Families), commercial and corporate bodies etc. These taxes are therefore, paid directly to the government by the mentioned entities and include income tax, corporation tax, wealth tax etc. The governing body for direct taxation in India is the CBDT (Central Board of Direct Taxes). CBDT itself is a functioning body that comes under the supervision and regulation of the Revenue Department of the Finance Ministry of the Government of India. Central Board of Revenue Act, 1963 served as the turning point for direct taxation in India and CBDT came into being. CBDT mandates the rules, regulations and any updates regarding the way collection of direct taxes in India is done.

It is very important for every taxpayer to know in detail the very implications of tax savings that are allowed. In India, Section 80C of the Income Tax Act, 1961 defines the scope of tax-exemptions under various segments and for income from various sources. A brief list of main pointers for tax-exemptions in India is as follows:

  1. Unit linked insurance plans (ULIPs): Section 80C and 10D(D) of the Income Tax Act define the exemptions that are admissible for ULIPs. ULIPs are unit linked plans that offer market-related benefits. Under Section 80C and 10D, the payable premiums and the earnest benefits from a ULIP are eligible for tax exemptions. Section 80C mandates that the payable premiums are exempt from taxes up to a limit of Rs. 1.5 Lac in the particular financial year.
  2. PPF (Public Provident Fund): All the contributions to the PPF made by individuals and non-HUFs or Hindu Undivided Families are eligible for deduction under Section 80C.
  3.  ELSS (Equity Liked Savings Scheme): Under Section 80C, the contributions tmade towards ELSS are tax exempt with an upper capping of Rs. 1.5 Lac in the particular financial year.
  4. EPF (Employees Provident Fund): Contributions to EPF by the employer and the employee are eligible for deduction under Section 80C.
  5. NPS (National Pension Scheme): Under Section 80C, the contribution towards NPS is eligible for tax exemption up to a limit of Rs. 1.5 Lac in the particular financial year.
  6. SCSS (Senior Citizens Savings Scheme): Under Section 80C, the contribution towards an SCSS is eligible for tax exemption up to a limit of Rs. 1.5 Lac in the particular financial year.
  7. Post Office savings schemes: Section 80C also covers the tax-exemptions for Post Office savings schemes in India,
  8. NSC (National Savings Certificate): Under Section 80C, the contribution towards NSC is eligible for tax exemption up to a limit of Rs. 1.5 Lac in the particular financial year.

HDFC Life offers various savings and investment plans that are aimed at ensuring the growth of your funds and securing your financial future. For details, click on the mentioned link: https://www.hdfclife.com/savings-plans .

 

 

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