CA Sandeep Kanoi

CA Sandeep KanoiIf an individual falls in the 30% tax bracket and has exhausted the maximum limit of Sec 80C, one can save Rs 46,350 in taxes.  We runs you through the provisions of Section 80C. However, we highlight those schemes that are little known and which many investors avail of sparingly.

Stamp duty and registration charges

The first and foremost provision that many taxpayers are not aware of is stamp duty and registration charges. According to the law, ‘the amount paid towards stamp duty, registration fees and other expenses for the purpose of transfer of house property to the owner also qualifies for tax exemption’. This is over and above the principal payment that qualifies under Section 80C. But deduction u/s. 80C for  total amount including Principal Loan Repayment and stamp duty and registration charges can not exceed Rs. Rs. 1.50 Lakh .

Exemption for interest payment towards home loan is permissible under another section hence the above limit of Rs 1.50 lakh does not apply to it.

Let us take an example, Mr A purchases a house property of Rs 32 lakh and takes a home loan of Rs 25 lakh at 10%. His stamp duty and registration charges on this work out to approximately Rs 1.75 lakh. The interest for the first year comes to Rs 2.48 lakh and principal payment comes to Rs 41,376.

Thus, Mr A can claim maximum tax exemption of Rs 2  lakh on his interest payment under Sec 24. The entire principal payment (not more than Rs 1.50 lakh) of Rs 41,376 can be claimed under Sec 80C.

Nonetheless, it still leaves Rs 1,08,624 to be invested in other tax-saving instruments to reduce overall tax liability. In reality, buying a house is quite often an expensive affair, leaving little cash with the home buyer. On top of it, if one has to make additional investment to save on tax, it becomes difficult.

But with the inclusion of registration and stamp duty fees under Section 80C, it not only reduces tax liability but also saves the property buyer from further cash outgo. As in this case buyer has not to invest further Rs. 1,08,624 in tax-saving instruments to claim Full deduction U/s. 80C as his Payment of Rs. 1.75 lakh towards Stamp duty and registration charges also qualifies for deduction Under Section 80C.

Fixed-deposit with HUDCO or any housing board
Another provision that would be eligible for exemption under Section 80C is ‘any sum paid towards fixed-deposit schemes of HUDCO or to any housing board, which is constituted in India for the purpose of planning, development or improvement of cities or towns’.

Typically, these schemes are promoted by state housing boards to promote long-term social sector objectives, or for infrastructure development of city.  In fact, principal payment towards home loans taken from Housing and Urban Development Corporation (HUDCO) also qualifies for exemption under Sec 80C.

Even subscription to a home loan account scheme of the National Housing Bank (NHB) or contribution to any notified pension fund set up by the NHB also meet the requirements. Hence, if these two offer home loans at competitive rates, one can avail loan from them as well.

Contribution to a non-commutable deferred annuity plan

Further, contribution to a non-commutable deferred annuity plan is also an option to avail tax exemption. In normal parlance, this is nothing but a standard pension plan eligible for tax exemption under Section 80C.

This includes schemes such as Jeevan Suraksha by LIC or Pension Plus plan by HDFC Standard Life. Contribution to an approved superannuation fund is also a way to claim tax benefit.

Typically, large organisations maintain superannuation funds and contribute to them. In case employees want to make a higher contribution; they can do so to the extent of 15% of basic plus dearness allowance. Besides these lesser-known options, the other commonly used options are contribution to employee provident fund, life insurance premium, or payment of tuition fees. Five-year tax saving fixed deposits issued by banks can also be bought.

These FD’s have an edge over NSC with a one-year lesser lock-in period. However, the NSC has an edge because of the fact that interest accrued is also eligible for 80 C limit for the first five years that is not the case with FDs.

Equity-linked savings scheme MF or Ulips

Besides, these low risk options, one can go for high-risk return schemes such as equity-linked savings scheme MF or even Ulips. ELSS usually provides a higher return in the long run than small savings schemes and carries a lower lock-in period of three years.

Small savings schemes offer a lower return of around 8 to 9.3%. Further, there is a relatively long lock-in period -15 years for the PPF and six years for NSC. The advantage with these schemes is that they offer a guaranteed return unlike equity-based products where there is no guaranteed return and one can lose money like when the markets tumbled in 2008.

Risk profile and investment strategy are the key determinants for allocating funds to any scheme. Also, one must consider inflation-adjusted returns before taking a decision.

Also Read- Lesser Known Tax Saving Tips / Deductions

10 lesser known Income Tax Deductions

Deduction we use to forget while computing taxable income

(Republished with Amendments)

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4 responses to “Little known schemes u/s. 80C of Income Tax Act”

  1. deepti says:

    my dad bought property in year 1994 on power of attorney in almora bcz that time seller was below 18 so was not able to do registry. now my dad want to do registry of that property,transaction had made in the past..does the seller will come under tax for the property which is sold in the past??

  2. Niraj Modi says:

    hi tax guru,
    i have purchased property in 2015 and got the same registered in Feb 2016; can i claim under 80C in 16-17 ta deduction or i will have to stick to 15-16 window only

  3. Shammi says:

    I have got a Pre-approval for a Home loan where my wife (as a house wife) is a Primary applicant along with me ( as a secondary applicant ) in the loan application, the reason to made her Primary applicant as there was less amount paid for processing as compared if i become Primary. She has no income and entire loan amount has been sanctioned based on my salary and proofs.

    We have identified a property and going to register that as soon as Legal on the property documents get completed by Loan Legal / Technical department.

    Loan department provide a go-head in next couple of days, we shall be going to register the property jointly where she would be primary and i would be secondary.

    1. As the entire payment on Stamp Duty would be aprox 2 Lakhs+, Would i be able to get a Tax exemption under sec 80C in this Financial year upto 1.5 Lakhs if limit is not exhausted and further more the EMIs would be going with our joint account where i shall be transferring the amount via NEFT from my Salary account to another joint account and then the EMI would be getting debited via ECS to Loan company.

    2. Should i be getting full rebate on my interest and principal , Since my wife has no income and EMIs are only getting paid by me via a Joint Bank account.

  4. Shammi says:

    I have got a Pre-approval for a Home loan where my wife (as a house wife) is a Primary applicant along with me ( as a secondary applicant ) in the loan application, the reason to made her Primary applicant as there was less amount paid for processing as compared if i become Primary. She has no income and entire loan amount has been sanctioned based on my salary and proofs.

    We have identified a property and going to register that as soon as Legal on the property documents get completed by Loan Legal / Technical department.

    Loan department provide a go-head in next couple of days, we shall be going to register the property jointly where she would be primary and i would be secondary.

    1. As the entire payment on Stamp Duty would be aprox 2 Lakhs+, Would i be able to get a Tax exemption under sec 80C in this Financial year upto 1.5 Lakhs if limit is not exhausted and further more the EMIs would be going with our joint account where i shall be transferring the amount via NEFT from my Salary account to another joint account and then the EMI would be getting debited via ECS to Loan company.

    2. Should i be getting full rebate on my interest and principal , Since my wife has no income and EMIs are only getting paid by me via a Joint Bank account.

  5. Sudhir says:

    We have booked a flat and paid stampn duty and registration charges and will be getting possession in the month of May 2016. Can we both can claim exemption under Section 80C of the IT Act, and what would be limit for Assessment Year 2016-1017?

  6. Nishant sharma says:

    Hi,
    Can stamp duty & registration exemption under 80c be claimed if the I buy a flat in resale?

    Thanks & Regards

    Nishant

  7. Ashwin B S says:

    Hi

    We have purchased a apartment in 2013 and the possession is due for Jan 2016 , if the project gets delayed by another 6 months from Jan 2016 – Can I still claim Interest under 80cc as I understand from sources that there is a lock in period of 3 years from the time of sign of agreement or disbursement of loan and we need to have the possesion within 3 years.

  8. Pramod Kumar says:

    I have purchased a plot and paid a stamp duty in 2014

    Can I claim stamp duty benefit under section 80C,
    – See more at: http://taxguru.in/income-tax/little-known-schemes-under-section-80c-of-the-income-tax-act-1961.html#comment-1837721

  9. Pramod Kumar says:

    I have purchased a plot and paid a stamp duty in 2014

    Can I claim stamp duty benefit under section 80C,

  10. Rashmi says:

    If my father gifts me money (Rs.6,00,000) to partially repay my home loan of Rs. 25,00,000 (which is under mine and my spouse’s name), will I have to pay tax for the amount my father gifted me.

  11. ANANT SJ says:

    Dear Sir,

    I have purchased Flat in KHB Heritage of Karnataka Housing Board, Belgaum during the month of May.2013. For this I have paid Stamp duty and registeration charges of Rs.2 Lakhs.

    This amount I have non claimed as income tax exemption during 2013-14 and 2014-15.

    Kindly inform me whether I can claim this amount of Stamp duty and Registeration charges as Income Tax exemption during this financial year 2015-16 or not. If yes under which section I can claim exemption.

    Regards.

    Anant S Joshi
    HLL Lifecare Ltd
    Kanagala – 591 225
    Belgavi Dist
    Karnataka.
    Mob.9448941798

    Under Section 24(b) and 80 C of IT act My details of interest and principal for 2014-15 and 2015-16 are as below.
    2014-15 2015-16

    Total Interest 106081/- 100884/-
    Principal 50555/- 55719/-
    ————————-
    Grand Total 156636/- 156603/-
    ————————-

  12. Kumar says:

    Hi Team,

    1- If i am buying a plot in Uttarpradesh, will the registry and stamp charges will be an exemption under 80 C for plot buying.

    2- if the plot buyer are joint and then how much both can claim.

    3- How to claim , as i can have photo copy of registry on my name and but registration fees receipt is having seller name (as presenter / applicant), some body shared that i can show register photo copy having details of stamp value, land value, and registration fees, on back of stamp by (computer person).

    4- what is the minimum requirement of document as proof for plot buying,
    in my case only address is mention and my thumb and signature , i given my pan
    card may the Katib used it for pan photocopy in registration process (not
    confirmed). I pan card required or best to be written in Stamp paper of
    land registration.

    Regards
    Kumar

  13. Rawal Singh Bhati says:

    @AD Accrued inome on Interest is taxable income therefore you have to add in your GTI

    Also, you can claim 80C deduction for such interes, because interest accrued on NSC is deemed to be investment for 80C.

    Therefore net effect remains no tax payable, however last year k interest pe 80C ka deduction ni milega

  14. Rawal Singh Bhati says:

    @varsha
    Stamp duty will be add to cost of property

    And if you had loan, then for interest amount take benefit u/s 24 and for principal repayment amount take benefit u/s 80G

    There is no confusion, because people merge all transaction in single therefore confusion creates.

  15. Varsha says:

    Dear Sir,

    Many questions are asked above under construction property. I have the same question, Can you clarify the deduction of stamp duty, registration , loan amount and interest in case of under construction property, and the benefits available only after getting possession.

  16. AD says:

    Is Interest on NSC Tax free ????

  17. nagaraj says:

    31-03-2015 Bangalore
    My reply to the doubt raised by one Sri Nagaraj d.19-01-2013.
    Sri Nagara has to verify components of total amount of vrs.

    Following components are exempted fully:- (section 10 and various sub-sections thereunder)of income tax act valid as on this date (31-03-2015);-

    1) Provident fund balance paid fully (employer’s and employee’s)
    2) Gratuity amount fully. Note: There is ceiling of Rs.10 lakhs on gratuity
    payable by the employer under section 4 of gratuity act.
    But under income tax act, such payment is fully exempt.
    3) Leave encashment upto Rs.5 lakhs is fully exempted from income tax act.
    4) Commutation of pension fund (generally 1/3 of commuted value of pension)
    is fully exempted from income tax act.
    5) Ex-gratia payment is exempted upto Rs.5 lakhs in the year of receipt.
    For example, in my case I received ex-gratia payment of Rs.11 lakhs from S B I
    on my retirement. The employer deducted income tax at source on gratutity amount
    Rs.6 lakhs ( Rs.11 lakhs eligible amount less Rs.5 lakhs exempted under income tax
    act.
    So the employee can find out the amount of such excess gratuity exceeding Rs.5 lakhs. Such excess amount alone is taxable at the applicable rate.
    Insist on form 16 and demand for it.

  18. CA. Subhash Chandra Podder says:

    Good, informative. Thanks.

  19. tajinder says:

    I have purchased a plot and takes a housing loan from bank. I want to know that can i take a tax benefit in income tax. Is stamp duty paid on plot registry comes under section 80c. Plz reply

  20. Neelanjan Datta says:

    Hi,

    I have buy an under construction flat this year which cost is 24L, among which I have paid 3L and rest from loan. Am I eligable to get tax benifit on the amount I have paid and the EMI I have paid this year?

  21. Srinivasan says:

    Income year 2014-15

    My father gave Rs.2 Lakh towards gift for me to buy a land. I will not repay this amount to him. I will buy a land with this amount (by adding some money from my packet) after few months. Shall I need to include this amount as income in my IT returns ( if to be declared, can I declare it as non-taxable income – if so under which heading I can include this). please advise me.

  22. myth says:

    1.hi my husband is a salaried person and going to buy a under construction house
    2.Registration vl b in jan 2015(fin yr 2014-2015)
    3.Completion of hse and possession aftr june 2015(fin yr 2015-2016)
    My question is:
    1.since registration and completion are in different financial yr whether
    under 80 c regISTRATION AND STAMP DUTY should be shown on fin yr 2014-2015
    or
    ONLY aftr completion on fin yr 2015-2016
    plz gve details
    whether we can hv tax exemption this yr itself
    Plz explain dis scenario in detail…
    Thanks in advance

  23. Surender says:

    Whether the Tax exemption is applicable of payment for Stamp duty of open plot registration.

  24. myth says:

    1.hi my husband is a salaried person and going to buy a under construction house
    2.Registration vl b in jan 2015(fin yr 2014-2015)
    3.Completion of hse and possession aftr june 2015(fin yr 2015-2016)
    My question is:
    1.since registration and completion are in different financial yr whether
    under 80 c regISTRATION AND STAMP DUTY should be shown on fin yr 2014-2015
    or
    ONLY aftr completion on fin yr 2015-2016

    plz gve details
    whether we can hv tax exemption this yr itself

  25. Mukesh says:

    In what schemes a non resident can invest to claim 80C deductions
    Do we have double taxation trite with USA

  26. Manish Dwivedi says:

    Please Review sec 80 DDB and Advice that Can I claim for amount

    Spend on My Mother under ” Blindness and Vision Problem ”

    Cornea Replaced in One Eye As that Eye was having Totally Zero Vision .

    Regards
    Manish Dwivedi

  27. Gokul says:

    I have purchased a vacant land near to Chennai on 13th Mar 2013.

    Whether I am eligible for Tax Exemption for the FY 2013-14.

  28. CA Ruchika Baranwal says:

    section 80 C allow maximum limitof deduction Rs 1lac hence Stamp duty &reg charges will be included in maximum limit of rs 1lac

  29. CA Himanshu Jain says:

    service tax paid on Life insurance premium is also claimed as deduction under section 80c.. Reason for that is Sec 80 provide that whole amount paid or deposited in previous year is part of deduction…whole amount also include service tax

  30. Ranipatna says:

    A.O has served me with notice of 148, my some some income has escaped in total income, what will happen to me, kindly reply

  31. V. R. THAKURDESAI says:

    can we get exemption in section 24 of interest payment for housing loan taken from pat pedhi or co op pat sanstha

  32. V. R. THAKURDESAI says:

    can we get exemption in section 24 of interest payment for housing loan from pat pedhi or pad sanstha

  33. N G NAGARAJ says:

    I have taken VRS in the month of Apr 2012,I want to know for calculating income should I take VRS amount and the interest earned from the amount which I have invested as the total income.My employer has all ready deducted tax for the VRS amount,so my query is can I take only the interest earned as the income for FY 2012-13,please clarify.

  34. Harish Naganna says:

    But ,can we claim the stamp duty and registration for a property under construction for the purpose of 80 c

  35. B.N.Naidu says:

    Dear Sir,
    I hav paid House loan interest 1,12287/- & principal 6630/- for the year 01.04.2011 to 31.03.12.How much amount exaption in income tax.

  36. Abhishek Barnwal says:

    Can interest on housing loan in excess of 1.5 lac be claimed as repayment of loan u/s 80c if max limit of Rs. 1 lac is not exhausted? Please any one clarify.

  37. CA Shikha Gupta says:

    Stamp duty paid on Lease/rental deeds is not allowed because Section 80C clearly specifies that stamp duty and registeration charges only for the purpose of transfer of house property is allowed. Secondly,the deduction of Rs. 100000 is the maximum deduction allowed under this section inclusive of stamp duty and registeration charges.

  38. CA Shikha Gupta says:

    if the amount of stamp duty and registeration charges is included in the amount of loan and we are claiming deduction for the principal repayment of loan u/s 80C, then stamp duty and registeration charges are not allowed as it will amount to double deduction.But it is advisable to take benefit of these in the one year only.

  39. arun says:

    can anybody confirm whether service tax paid along with the life insurance premium is also eligible for exemption u/s 80C. plz give me the link of the document if possible to prove this.

  40. reddy says:

    is repayment of agricultural loan exempted from tax?
    if so under which sec?,limit..etc details plzz
    also is investment in e-gold exempted from tax?

  41. MOhnish says:

    I Have purchased a plot and paid a stamp duty in 2009… no home loan taken…. currently living on rent and doing construction on plot…

    CAn I claim HRA deduction & stamp duty benfir under section 80C….

  42. Balasaheb Khune says:

    adding the stamp value and registration charges for tax benifit, but main thing is at the time registration main amount is stamp paper costbut bank dosnt give any bill supooriting, so how can claim the exemption without any supporiting ??

  43. Sarim says:

    What is the limit of Stamp Duty which can be claimed as deduction?
    Can the exemption limit u/s 80C exeed Rs. 1 lac in this case?????

  44. Kumar says:

    Some times stamp duty & registration chargres are paid on Lease/ Rental deeds. Are these charges eligible under Section 80 C?

  45. sanjay says:

    Most of the banks are now adding the stamp value and registration charges with the property value and then sanctioning 85% of the sum as loan. Thus while repaying principal one gets benefit under 80C for the stamp value (the financed portion )

    Besides, can we claim the stamp value straight under 80C once again?

  46. Ravindra says:

    Dear Sir,
    Quiet interesting!!! only Last month I have paid stamp duty & registration Charges. Thanks.
    Ravindra chaudhari

  47. Pardha saradhi says:

    I have gone through the exemptions given u/s 80 c of IT act. but there is a little bit confusion, is these are can claim over and obove Rs.1.00 lakh or included in the limit of 1.00 lakh. Please clarify clearly.

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