For a long time, taxpayers saving under Section 80C of Income Tax Act mainly relied on traditional methods such as investing in Provident Funds (PPF/EPF), paying Life Insurance premiums, ELSS mutual funds, or repaying the principal of a home loan. But, here is some great news from the government, even your mundane recurring expenditures settled through UPI (Unified Payment Interface) seem to have the potential to reduce your taxable base a bit.What is the Major Change?The Government of India has formally notified that some small digitized payments made through UPI will now be exempt from tax under Section 80C. Thus, your routine digital transactions for basic services now contribute towards the ₹1.5 lakh tax deduction limit.What Type of UPI Payments Are Eligible?Though the specific criteria are very important to assess, the preliminary announcement focuses on payments for:For the most part, all those routine utility and service payments that you use UPI for can now help reduce taxable income. This is a positive development considering such expenses do not qualify for tax relief in any form.Why Is This Happening?This clearly shows an effort from the government to move towards a cashless and more digitized economy. The government’s intention seems to be to promote the use of UPI and digital payments by providing tax incentives. Now, as consumers, we receive some form of tax incentives, while the economy at large stands to gain in form of reduced black money and enhanced digitization.What Does This Mean For You?The upper limit of ₹1.5 lakh under Section 80C remains the same for cumulative deductions, but now with UPI payments, the scope increases making tax planning much easier and integrated into day-to-day life. This seems to be a balanced attempt to help the lesser-privileged common taxpayer while simultaneously improving the digital payment infrastructure in India.
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