Why exhausting Rs.1,50,000 under  Section 80C makes for a good idea

Income tax you pay depends on how much you make in a year. An investment of Rs.1,50,000 under Section 80C can bring down taxes considerably — so much that it could move you down one income tax slab.  This means that you may have to pay only 10% tax instead of 20%.

Here’s an example:  Anjali has been in the workforce for a couple of years now but never cared very much about income taxes or tax planning. She makes about Rs.5,50,000 per annum and has invested some money in tax-saving mutual fund ELSS and PPF upon her father’s suggestions.

Anjali thought there wasn’t much to save and didn’t bother about taxed until she heard of Section 80C. Anjali decided to take the matter in her own hands and she sat down to understand about taxes, she  was surprised to learn that taxes were not such a big deal at all.

She quickly figured that with proper tax planning, she could considerably save up on her taxes.

Anjali’s taxes without Sec 80C investments Anjali’s taxes with Section 80C investments
Gross income Rs.5,50,000 Gross income Rs.5,50,000
Deductions u/s 80C NIL Deductions u/s 80C
Anjali’s contribution to PF Rs.36,000
Investment in PPF Rs.36,000
Investment in ELSS Rs.20,000
Total Rs.92,000
Taxable salary Rs. 5,50,000 Taxable salary Rs.4,58,000
Gross tax Rs.36,050 Gross tax Rs.19,364


Anjali has almost halved her taxes with investments under Section 80C. Find out how the Section 80C deductions play out with our income tax calculator.

Wondering how to choose a tax-saving investment under Section 80C? That’s on tomorrow’s blog post. If you have any questions, write to us support@cleartax.in


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