Question

Mr. X deposits ₹65,000 in a term deposit of 5 years with the Post Office to avail tax deduction under Section 80C. Assuming Mr. X does not opt for the concessional tax regime under Section 115BAC of the Income Tax Act, 1961. On the basis of the above problem, select the correct option:

• A. No tax deduction can be availed under Section 80C
• B. It is an unlawful act to treat a personal expenditure
• C. Mr. X is guilty of tax evasion/tax avoidance
• D. Mr. X is not guilty of either tax evasion/tax avoidance

Hint:

Tax planning through eligible deductions like 80C is legal, while tax evasion (concealing income) and avoidance (misuse of loopholes) are punishable.

Answer 1

The Correct Option is D

Step 1: Understanding Section 80C.
Section 80C of the Income Tax Act allows deductions up to ₹1,50,000 from taxable income for specific investments and expenditures such as life insurance premiums, Public Provident Fund (PPF), and 5-year term deposits with post offices or banks.
Step 2: Application to the case.
Mr. X’s investment in a 5-year Post Office term deposit qualifies under Section 80C, provided he has not opted for the concessional tax regime under Section 115BAC. Since he has not opted for 115BAC, he is eligible for the deduction.
Step 3: Conclusion.
Mr. X’s act is legitimate and qualifies as tax planning — not tax evasion or avoidance.