If I invest Rs 20,000 in a tax saving fund, how much tax will I save i.e. complete 20,000 will be counted in the Rs 1 lakh limit or some percentage of it?
- Ajay Sengar
The entire Rs 20,000 invested in a tax saving fund will be counted in the 1 lakh limit. This is irrespective of how much one earns and which tax bracket one falls in.
Under Section 80C, an individual gets a deduction of upto Rs 1,00,000 for investments in ELSS scheme or any such instrument that is eligible for deduction under the section. One is free to decide as to how to reach this limit while earlier there were several sub-caps for different instruments.
Earlier, a rebate under Section 88 was applicable and was based on an individual's income. If the gross total income was less than Rs 1.5 lakh, a 20 per cent rebate was applicable, between Rs 1.5 to Rs 5 lakh, 15 per cent rebate was applicable and for income above Rs 5 lakh, Section 88 was not applicable. Also, the maximum investment in ELSS was Rs 10,000.
This article was originally published on February 17, 2009.
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