The salaried person tries the most options under Section 80C of Income Tax while computing the tax exemption. Usually we think that we will get tax exemption only by investing in the options covered under this section, but the department also adds a condition with every tax exemption. If you are unable to fulfill these conditions then your tax exemption will be forfeited.
New Delhi. At present, investment proof is being sought by the company for the salaried people, so that their tax deduction can be calculated in the current financial year 2022-23. Employees are also using various investment options to save their tax. Among them, the tax exemption of Rs 1.5 lakh under Section 80C of Income Tax is the most popular.
But, if you are thinking that by investing money under 80C, you will be sure and will avoid tax deduction, then this news is for you only. You also need to be aware that due to some mistakes or omissions, the department can end your tax exemption. Every taxpayer should be aware of these riders of income tax under 80C.
Condition is attached with the deduction
Tax exemption is given by the Income Tax Department with certain conditions. A taxpayer can avail these exemptions only if he fulfills all the terms and conditions. If the taxpayer fails to fulfill these stipulated conditions, then the entire amount of tax exemption claimed by him gets added to his income in the next financial year.
What kind of tax exemption
if the amount is withdrawn before maturity from an investment or has been claimed on any expenditure outside the tax exemption or the tax exemption taken on transfer of investment outside the specified condition can be withdrawn by the department . So if you feel that the investment made by you is no longer profitable and withdraw money from it or stop paying insurance premium, then you will not get the benefit of tax exemption.
The biggest loss in an insurance policy
If you have purchased a life insurance policy and claim annual tax exemption on its premium, then stopping the payment of its premium can be harmful for you. Firstly, you will not get the benefit of insurance and secondly if you stop paying the premium within two years, then the tax exemption taken under 80C will also end and you will have to pay more tax. In case of ULIPs, this period is five years. That is, if you default in paying the premium of ULIP within five years, then the tax benefit will be withdrawn.
Pension plan will also give a blow
If someone has bought a pension plan and has taken tax exemption in 80C on his premium payment, then he should not stop his premium payment within two years. By doing so, the tax exemption availed will end. In the case of government employees, this period is three years. That is, if the government employee defaults in depositing the premium of the pension plan within three years, then the tax exemption taken on it will end.
Double whammy on home loan
If a taxpayer has taken a home loan and is availing tax exemption under 80C on the principal amount, then he cannot sell the house for five years to maintain it. If someone takes a home loan and sells the house within five years, not only will his tax exemption be forfeited, but he will also have to pay capital gains tax.
Not only this, if the tax exemption being taken by you ends and the amount of exemption taken earlier on it gets added to your income, then you will also reach the new tax bracket. Here it is possible that the interest rate on you will be higher. For example, if a person comes in an income of Rs 4.50 lakh, then a tax bracket of 5 percent will be applicable to him, but the premium of the insurance policy is added to his income, which is more than Rs 50 thousand, then now that person has an income of 5 lakh. and its tax bracket will be 20 percent.
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