Investment under section 80C
- Thursday, April 19, 2012, 8:59
- Income Tax
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Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include:
Provident Fund (PF) & Voluntary Provident Fund (VPF: PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF).
Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Current rate of interest is 8.60% tax-free and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,00,000. A point worth noting is that interest rate is assured but not fixed.
Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.
Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C.
Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest.The principal component of the EMI qualifies for deduction under Sec 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of theIncome Tax Act. Please read “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.
Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.
Pension Funds – Section 80CCC: This section – Sec 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C – it maeans that the total deduction available for 80CCC and 80C is Rs. 1 Lakh.This also means that yourinvestment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly. Please note that the interest is payable quarterly instead of compounded quarterly. Thus, unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable to tax.
5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although available for varying time duration like one year, two year, three year and five year, only 5-Yr post-office time deposit (POTD) qualifies for tax saving under section 80C. The Interest is entirely taxable.
NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.
Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments. They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term.
Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.
Read our Earlier post for detailed Analysis of Section 80C
All about deduction under section 80C and tax planning
Related posts:
- Investment in Bonds of IFCI, IDFC, LIC and NBFCs (Classified as Infra Finance Company) Eligible for Tax Exemption under Section 80CCF
- Section 80C – Investment in Residential House Property
- Deduction under section 80C and tax planning
- Budget 2010: Insertion of a new Deduction for investment in Long Term Infra-structure Bonds – section 80CCF
- Public Provident Fund (PPF) – Investment Limit, Income tax benefit
Sir,
I would like to know, can a person claim deduction u/s. 80C, of the Stamp duty & regn. chgs. paid even he has not taken a loan but self financed it
Yes he can.
Dear Sir,
whenever resign my job after i will drawn the PF from the previous employer, it is taxable income or not.
Whether late payment fee paid to LIC also qualifies for 80C deduction, since the terms used are “any sum paid to ..keep in force” ?
whether service tax paid on the life insurance premium is eligible for 80C and rebly the same for 80D also?
sir ,i whould like to know,that can a person take deduction of 80c when he paid lic premium by mode of cash payment.
Yes . He can
Is the investment in PF made from income of previous year eligible under 80C
pl update ur home page and specif the VPF max %
it’s neccessary to open a/c in post office. than i got nsc. please tell me.
thanks & regards
Neeraj Kumar Sharma
I have one query.
My wife is dependent on me.
So whether I get tax benefit on the PPF investment done on her name?
I booked a flat which is under construction & paid a stamp duty & registration charges also. so can i take a benefit of that deduction for my income tax calculations
Hi, I am having two questions:
1) I have signed an agreement for new flat in the month of Feb’11 can I claim this in the next financial year undet 80 C.
2) I have availed a Home Loan in which I have my wife as co-applicant. What type of statement do I request from the Bank where I want to claim tax benefit for both of us. Is it only one statement provided by the bank and we can claim whatever proportion we are fine amongst us.
Hi,
I Have Opened FD with UBI (Tax Saving) for 5 years but i do not want to claim it under section 80C in the current FY 2010-2011.
Can i claim this FD in the next financial year (2011-2012)
Dinesh
No. Only in the year of investment the same can be claimed u/s. 80C.
i would like to know that 5 year post office recurring deposit is covered under tax rebate or no and if it covered then it comes under which section
i would like to know that 5 year post office recurring deposit is covered under tax rebate or no and if it covered then it comes under which section please let me know at the earliest
Thank you very much it is very usefull
once again thankyou
Nimit
If an employee retires from the services of the corporation and wants to maintain his/her PF account with the employer self managed trust.Is employer can retain the PF amount of the Employee on superannuation and if yes for how long??????
Can a daughter get IT deduction under 80c to the premium paid for ULIP policy taken in the name of mother for 2011-12 year?
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Is Peerless MF Child Plan eligible for deduction u/s 80c. And for HRA computation Purpose is D.A is also to be considered as part of the salary.
Is it necesary for me to become Proposed Policy Holder (PPH) in policy to be taken on Son’s name to save tax u/s 80.C for me?
i want tax planning for my cousin to save tax from housing loan and investments in life insurance scheme and to get maximum benifit by saving TDS from his salary.
Hi
I have a Recurring deposit of Rs 10000 per month upto 5 years at 9.5% interest rate.
Overall my investement will become Rs 6lkhs and Maturity amount is Rs 7,68,753
Iam getting the additional amount of Rs 1,68,753 after 5th year.
Since Recurring deposit amount is taxable ,My question is , should i pay tax once after 5th year Rs 16,875.3(Assume 10% tax bracket).
Or should i pay tax every year 5 times by calculating the additional amount for evey year.
Doubt on this:”Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction.”
I heard to get the tax exemption for the wife’s life insurance it has to be paid by the husband through his cheque. Is it correct? What should be the mode of payment to get wife’s investment tax exemption.
Crisp note on 80C on investments.