Section 80C Deduction for Financial Year 2020-21 / AY 2021-22

Section 80C Deductions to be deducted while computing total income for Financial Year (F.Y 2020-21)/  Assessment Year 2021-22 (A.Y 2021-22)

The aggregate amount of deductions allowed under section 80C (along with 80CCC & 80CCD) is INR 1,50,000. The deductions under section 80C are allowed only to the following assessees:-

a. Individual

b. Hindu Undivided Family

Following are the Savings/ Investments covered under section 80C where we can invest which are allowed to be deducted from the total income:- (Maximum deduction which can be claimed under this section is INR 1,50,000)

(i). LIFE INSURANCE POLICY:-

Investment in a Life insurance policy to keep in force an insurance on the life of:-

a. Individual Himself

b. His/Her Spouse

c. Child of such Individual*

* Child may be married/unmarried, dependent or not on the Individual.

For HUF – A deduction would be allowed on the premium paid by HUF for any of its members of the family.

However, there are certain limits on the amount of premium eligible for deduction with respect to the premium paid on an insurance policy which is as follows:-

*Capital Sum Assured refers to the value of insurance cover provided at the time of buying the insurance policy. In case of any eventuality, like death, the sum assured is the amount that is paid to the beneficiary.

(b). There is a minimum holding period of 2 years that needs to be fulfilled in order to claim a deduction for life insurance premium paid under section 80C. Where the Life Insurance Policy is terminated or sold etc before the minimum holding period of 2 years then the deduction allowed in earlier years would be deemed as income of the previous year in which such policy is terminated or sold etc.

(ii) Any payment made by the individual only to effect or keep in force a contract of non-commutable deferred annuity* for any of the following person:-

– Individual Himself

– His/Her Spouse

– Child of such individual

Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of payment of the annuity.

* Non-Commutable Deferred Annuity:- It is a non-transferable contract with an insurance company that promises to pay the owner a regular income, or a lump-sum amount at some future date.

(iii). Sum deducted by or on behalf of the government:- Any sum deducted by or on behalf of the government –

(a). From salary payable of such individual

(b). For purpose of securing to him a deferred annuity or

(c). Making provision for his spouse or children.

(d). However, the sum deducted from salary payable shall not exceed 1/5th of Salary.

(iv). Statutory Provident Fund or Recognized Provident Fund:-

Statutory Provident Fund– This fund is maintained by a Government and Semi-Government organization.

– Govt. employee contributes a certain amount from their salary to this fund.

– Accumulation to this fund is paid to the govt. employee at the time of retirement or superannuation.

– This fund is also termed as GPF (i.e Government Provident Fund) therefore only govt. employees can contribute in this fund and not private sector employees.

Recognized Provident Fund– This fund is recognized by commissioner of income tax as per the rules and provisions contained in income tax act.

– Here it covers EPF (i.e employee provident fund)

– Employer deduct some portion from the salary of it’s employee and deposit it in EPF account along with it’s own contribution in the name of employee which the employee will get at the time of retirement.

(v). PUBLIC PROVIDENT FUND:-

Any contribution made by an individual (whether salaried or self employed) or HUF in PPF would be allowed as deduction from total income. Investment of Individual can be in the name of :-

– Individual himself

– His/Her Spouse

– Any Child of such individual (Dependent /not or Married/not)

Investment of H.U.F can be in the name of :-

– Any member of the Family.

(vi). Approved Superannuation Fund:-

Any contribution made by an employee in an approved superannuation fund would be allowed as deduction from total income.

*Approved superannuation fund:- It is a fund that is approved by the commissioner of income tax if certain conditions are fulfilled. You can even confirm from your employer whether your superannuation fund is approved or not.

(vii). Investment in schemes notified by Central Government:-

Any contribution made by an individual towards following schemes:-

(a). National Saving Scheme,1992

(b). Sukanya Samriddhi Account – Any sum deposited in the name of girl child under this scheme  would be eligible for 80C deduction.

* Girl child may be individual’s daughter or for whom such individual is legal guardian.

(viii). National Savings Certificate:- (VIII OR IX ISSUE).:-

Any subscription made by an individual or HUF to National Saving Certificates would be eligible for deduction under section 80C. Where the interest accrued on such certificates is reinvested or deemed to be reinvested than such reinvested amount would also be eligible for deduction under this section.

(ix). Unit Linked Insurance Plan of Unit Trust of India:-

Any contribution made by individual or HUF in Unit Linked Insurance Plan of Unit Trust of India would be eligible for deduction.

In case of Individual, contribution made by individual  for :-

a. Individual himself

b. His/Her Spouse

c. Any child of such individual (Married/Unmarried, Dependent/Independent)

In case of HUF:- Any member of the HUF.

Unit Linked Insurance Plan of LIC Mutual Fund section 10(23D):-Any contribution made by individual or HUF in Unit Linked Insurance Plan of LIC mutual fund would be eligible for deduction.

In case of Individual, contribution made by individual  for :-

a. Individual himself

b. His/Her Spouse

c. Any child of such individual (Married/Unmarried, Dependent/Independent)

In case of HUF:- Any member of the HUF.

(x). Subscription to Notified Annuity Plan:-

Any subscription/contribution by individual or HUF to notified annuity plans of LIC or any other insurer would be eligible for deduction. Following are the Annuity plans which have been notified where we can invest and save our tax.:-

a. New Jeevan Dhara

b. New Jeevan Dhara-I

c. New Jeevan Akshay

d. New Jeevan Akshay-I

e. New Jeevan Akshay-II

(xi). Equity Linked Saving Scheme,2005:-

Equity linked saving scheme is a category of mutual fund which provides dual benefits i.e Tax Savings and Capital Appreciation. ELSS comes under the category of Equity and therefore more than 65% of your amount would be invested in equity.

*It is having Minimum Lock-in Period of 3 Years which is less as compared to lock-in period of PPF, NPS which are having lock-in period of 5 years or more.

(xii). Notified Pension Fund:-

Any contribution made by an individual to a Notified Pension Fund would be eligible for deduction. One such notified pension fund is (RETIREMENT BENEFIT PENSION FUND)

(xiii). National Housing Bank:-

Any contribution made by an individual to any deposit scheme or contribution to any pension fund setup by national housing bank would be eligible for deduction. One such notified deposit scheme of the National Housing Bank is Home Loan Account Scheme.

(xiv). Tuition Fees of Children (Any 2 children):-

Where you have school going children, you can include in deduction their tuition fees which you have paid for the year to any university , college, school or other educational institution situated in India. The tuition Fees paid would be eligible for deduction only when it is paid for full-time education and not for open learning.

(xv). Home Loan (Deduction on Principal Repayment):-

Where an individual has taken home loan for purchase or construction of residential house property, then the principal portion of the emi (Easy Monthly Installment made for repayment of such loan) paid for the year would be eligible for deduction under section 80C subject to certain conditions :-

a. Such property shall not be sold for 5 years from the date of possession.

b. Where the individual sold such house property before the period of 5 years than all the  deductions which he had claimed in earlier years with respect to principal amount would be added back to his income in the year of sale.

* Also Payment made for Stamp Duty and Registration Fees can also be claimed as deduction along with principal amount (Subject to ceiling limit of INR 1,50,000) in the year in which it is paid.

(xvi). Investment in Equity Shares or Debentures:-

Where any individual or HUF subscribe to equity shares or debentures of any eligible issue of capital* of :-

a. Public Company or

b.  Public Financial Institution

where proceeds from such issue of shares or debentures are utilized for infrastructure company.

* Eligible issue of Capital:- Means an issue of shares or debentures made by public company or public financial institution and the entire proceeds from such issue are utilized wholly & exclusively for purpose of infrastructure business referred to in section 80IA(4).

(xvii). Term Deposit:-

Any sum deposited by an individual or huf  in a term deposit for a fixed period of not less than 5 years in any scheduled bank or any other bank constituted under banking companies act.

(xviii). NABARD Bonds:-

Deduction would be eligible for NABARD bonds purchased by an individual or huf .

*NABARD – National Bank for Agriculture and Rural Development.

(xix). Senior Citizen Saving Scheme:-

Any sum deposited by an individual or huf in a senior citizen saving scheme rules, 2004.

(xx). Time Deposit:-

Any sum deposited by individual or huf in a 5 years time deposit account under Post Office Time Deposit Rules, 1981.

(xxi). Pension Scheme under Section 80CCD:-

Only Central Government employees are eligible for this deduction and contribution shall have lock-in period of 3 years.

**  All the above mentioned deductions would be eligible only on payment basis and not on due basis i.e it would be allowed as deduction only when it is actually paid during the previous year.