Articles deals with deduction under Section 80C of the Income Tax Act and explains who is eligible for deduction, Eligible Investments, Limit for deduction, who can invest for whom and time period for investment.
Background for deduction under Section 80C of the Income Tax Act (India) / What are eligible investments for Section 80C:
Section 80C replaces the Section 88 with more or less same investment mix available in Section 88. The new section 80C has become effective w.e.f. 1st April, 2006. Even the section 80CCC on pension scheme contributions was merged with the above Section 80C. However, this new section has allowed a major change in the method of providing the tax benefit. Section 80C of the Income Tax Act allows certain investments and expenditure to be tax-exempt. One must plan investments well and spread it out across the various instruments specified under this section to avail maximum tax benefit. Unlike Section 88, there are no sub-limits and is irrespective of how much you earn and under which tax bracket you fall.
The Maximum limit of deduction under section 80C is Rs 1.50 lakh from Financial year 2014-15 / Assessment Year 2015-16. Before FY 2014-15 the limit was Rs. 1 Lakh. Under this heading many small savings schemes like NSC, PPF and other pension plans. Payment of life insurance premiums and investment in specified government infrastructure bonds are also eligible for deduction under Section 80C.
Most of the Income Tax payee tries to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in toto so that one can make best use of the options available for exemption under income tax Act. One important point to note here is that one can not only save tax by undertaking the specified investments, but some expenditure which you normally incur can also give you the tax exemptions.
Besides these investments, the payments towards the principal amount of your home loan are also eligible for an income deduction. Education expense of children is increasing by the day. Under this section, there is provision that makes payments towards the education fees for children eligible for an income deduction.
Section 80C of the Income Tax Act is the section that deals with these tax breaks. It states that qualifying investments, up to a maximum of Rs. 1.50 Lakh , are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1.50 Lakh), and you end up paying no tax on it at all!
This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1.50 Lakh, you save tax of Rs. 45,000. Isn’t this great? So, let’s understand the qualifying investments first.
Page Contents
- A. Investments Qualifying for deduction under section 80C
- i. Provident Fund (PF) & Voluntary Provident Fund (VPF):
- ii. Public Provident Fund (PPF):
- iii. Life Insurance Premiums:
- iv. Equity Linked Savings Scheme (ELSS):
- v. Home Loan Principal Repayment:
- vi. Stamp Duty and Registration Charges for a home:
- vii. Sukanya Samriddhi Account :
- viii. National Savings Certificate (NSC) (VIII Issue):
- ix. Infrastructure Bonds:
- x. Pension Funds – Section 80CCC:
- xi. 5-Yr bank fixed deposits (FDs):
- xii. Senior Citizen Savings Scheme 2004 (SCSS):
- xiii. Amount Contributed (for a fixed period of not less than 3 years) by a Central Government employee to his NPS (Tier –II) account (Applicable from the Assessment Year 2020-21):
- xiv. 5-Yr post office time deposit (POTD) scheme:
- xv. NABARD rural bonds:
- xvi. Unit linked Insurance Plan :
- xvii. Others:
- B. So, where should you invest for Section 80C Deduction?
- C. When to Invest for Section 80C deduction?
A. Investments Qualifying for deduction under section 80C
i. 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). Interest is tax-free. Must Read-EPF Act 1952 vis-á-vis Income Tax Act – Tax Treatment of PF Dues
ii. Public Provident Fund (PPF):
Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Interest is compounded yearly and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000. A point worth noting is that interest rate is assured but not fixed. Also the interest on Public Provident Fund (PPF) is exempt under Income Tax Act, 1961. Read more- Public Provident Fund Scheme, 2019- Detailed Analysis
iii. 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. Read More-Life Insurance Premium- Tax benefit on Payment and Maturity.
iv. 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. Read More-Section 80C – Investment in Equity Linked Savings Scheme (ELSS)
v. 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 the Income 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.-Income Tax Benefits from House Property and Loan
vi. 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.
vii. Sukanya Samriddhi Account :
Sukanya Samridhi Account’ can be opened at any time from the birth of a girl child till she attains the age of 10 years, with a minimum deposit of Rs 250. A maximum of Rs 1.5 lakh can be deposited during the financial year. Interest on this account is fully exempt from tax in the year of accrual as well as in the year of receipt. Sukanya Samriddhi Account meaning Girl Child Prosperity Scheme is a special deposit scheme launched by Prime Minister Narendra Modi on 22 January 2015 for girl child. The details of this scheme is as under:
- Per girl child only single account is allowed. Parents can open this account for maximum two girl child. In case of twins this facility will be extended to third child
- Minimum deposit amount for this account is ₹ 250/- and maximum is ₹ 1,50,000/- per year
- Money to be deposited for 15 years in this account.
- Interest is calculated on yearly basis ,Yearly compounded.
- Passbook facility is available with Sukanya Samriddhi account.
Read More- Sukanya Samriddhi Account Scheme, 2019- Detailed Analysis
viii. National Savings Certificate (NSC) (VIII Issue):
NSC is a time-tested tax saving instrument with a maturity period of Five Years. Interest is Compounded Yearly. While the minimum investment amount is Rs 1000, there is no maximum amount. Premature withdrawals are permitted only in specific circumstances such as death of the holder or on forfeiture by a pledgee or when ordered by a court. Investments in NSC are eligible for a deduction of upto Rs 1,50,000 p.a. under Section 80C. Furthermore, the accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues.
Read More- National Savings Certificates (VIII Issue) Scheme, 2019- detailed Analysis
ix. 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.
x. 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 means that the total deduction available for 80CCC and 80C is Rs. 1.50 Lakh. This also means that your investment in pension funds upto Rs. 1.50 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. 1.50 Lakh.
xi. 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.
xii. Senior Citizen Savings Scheme 2004 (SCSS):
Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Interest Senior Citizen Savings Scheme 2004 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. The account may be opened by an individual,
1. Who has attained age of 60 years or above on the date of opening of the account.
2. Who has attained the age of fifty-five years or more but less than sixty years, and who has retired on superannuation on the date of opening of the account.
3. Retired personnel of Defence Services (excluding Civilian Defence employees) shall be eligible to open an account under this Scheme on attaining the age of fifty years subject to the fulfilment of other specified conditions
Read More- Senior Citizens’ Savings Scheme, 2019- Detailed Analysis
xiii. Amount Contributed (for a fixed period of not less than 3 years) by a Central Government employee to his NPS (Tier –II) account (Applicable from the Assessment Year 2020-21):
A recent addition to section 80C list, the contributions made to Tier-II NPS account will become eligible for deductions u/s 80C of the Income Tax Act provided that the amount deposited is not withdrawn before completion of three years from the date of deposit. Further, please note that for other NPS subscribers (other than Central Government employees), there will not be any 80C benefits on contribution made to Tier-II account.
xiv. 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. Interest is compounded quarterly but paid annually. The Interest is entirely taxable.
xv. 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.
xvi. 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. All About Unit-linked insurance plan (ULIP)
xvii. 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 Section 80C.
B. So, where should you invest for Section 80C Deduction?
Like most other things in personal finance, the answer varies from person to person. But the following can be the broad principles:
Provident Fund: This is deducted compulsorily, and there is no running away from it! So, this has to be the first. Also, apart from saving tax now, it builds a long term, tax-free retirement corpus for you.
Home Loan Principal: If you are paying the EMI for a home loan, this one is automatic too! So, it comes as a close second.
Life Insurance Premiums: Every earning person having dependents should have adequate life insurance coverage. (For more on this, please read “Life after life – Why you should buy Life Insurance”) Therefore, life insurance premium payments are the next.
Voluntary Provident Fund (VPF) / Public Provident Fund (PPF): If you think that the PF being deducted from your salary is not enough, you should invest some more in VPF, or in PPF.
Equity Linked Savings Scheme (ELSS): After the above, if you have not reached the limit of Rs. 1,50,000, then you should invest the remaining amount in Equity Linked Savings Scheme (ELSS).
Equities provide the best, inflation-beating return in the long term, and should be a part of everyone’s portfolio. After all, what can be better than something that gives great return and helps save tax at the same time?
C. When to Invest for Section 80C deduction?
Many of us start looking for investment avenues only in February or March, just before the Financial Year is getting over. This is a big mistake! One, you would end up investing your money without putting proper thought to it. And secondly, you would end up losing the interest / appreciation for the whole year. Instead, decide where you want to make the investments, and start investing right from the beginning of the financial year – from April. This way, you would not only make informed decisions, but would also earn the interest for the full year from April to March.
(Republished with amendments)
Author Bio
Whether the life insurance premium paid by me for my dependent parents can be covered under section 80C
I and my husband are in higher tax income bracket. We own 3 houses in the same city. If we buy another 2 properties in my father in laws name, will I get the tax benefit?
I want to purchase a flat in mid march. will i get all the benefits of stamp duty, reg.tax under IT exemption in the FY 2010-2011 also. OR shall i wait till 01-04-2010 for the beginning of new financial year??
Pls reply
To the administrator, or any reader, of this forum…
1) For a “non-resident Indian”, who has made short term capital gains from sale of equity shares of Indian companies through SEs in India (and that is the only Indian income coming within the purview of Indian taxes) and who would like to file tax return in India, is the benefit of 80c available? i.e. can he invest upto Rs.1 lakh in ELSS and get exemption from payment of tax on that part of the total income (in this particular case, only short term capital gains) earned?.
2) Would a non-resident Indian who is a senior citizen, and seeks to file tax return in India, get the benefit of the more liberal slabs for tax calc?
Thank you for your time.
sir, under the CTC pattern of salary structure, er+ee contributions of pf are paid from ee salary.in this case, for computationf of 80c whole will be taken or exempting er portion, ee
portion will only be taken?
Read more: https://www.taxguru.in/income-tax/all-about-deduction-under-section-80c-and-tax-planning.html#ixzz0gjZVu7cr
sir, under the CTC pattern of salary structure, er+ee contributions of pf are paid from ee salary.in this case, for computationf of 80c whole will be taken or exempting er portion, ee
portion will only be taken?
Hi sandeep, a)1 lakh amount can be claimed are Only stamp duty charges?or it includes both stamp duty and registration charges ? b)I have taken home loan of 20lakh for an underconstruction house.loan amount disbursement will start from April 2010 (i.e. next financial year). so if I pay only Pre-EMI interest in this year will I get Income Tax exemption for that amount? c) please Advice me How to get maximum tax Exemption In this Case of home loan? Should I start paying Principal amount before getting possesion of flat(i.e. before disbursement of total principal amount.)
Hi,
I have buy Underconstruction flat in Feb.2010 and I will get possesion of flat by next year. I have paid Stamp duty charges 120000 lacs. can I claim 120000 for income tax exemption for year of 2010 (this year).
I have deposited Rs.50000 in LIC’s ULIP plan in dec.2007 and claimed a decuction for Rs. 15000 in 2008. Can I claim deduction for the balance amount this year? The lock in period is 3 years for the ULIP.
1) Can i get the claim for House Property Insurance Premium.
2) Can i get the claim for Gifted proerty Registration charges .
WHETHER FULL AMOUNT PAID FOR MORE THAN ONE ISTALLMENT
OF A SINGLE LIC POLICY PREMIUM IN ONE YEAR WILL BE DEDUCTED UNDER 80C?
AMIT KUMAR,MHRD
I have purchased a property on loan in the current year. However, have’nt received the posession. Can i claim HRA in the current year and simultaneously also claim the Stamd duty and registration charges u/s 80C as the same have been paid in the current year.
Sale of agricalutural land taxable or not.
Limit of Tution fee amount under section 80C
Dear sir my wife is taking education and i have submited fee for education . can i get rebate in incom tex for me under 80c
I am contributing LIC premium for My son who is 25 years old & working with a company. Wheather i will get the deduction U/s 80C.
hi
Myself and my wife are working. I had LIC policy under my name.
2 I HAVE PURCHASE A FLAT IN MY NAME
Can this be used for my wife’s tax deductions under Section 80C?
WAITING FOR UR REFLY
my elder daughter is doing CA and b.com.
can i claim her collge fee and also her ca coaching fee plus exam fee as deducation under 80 c limit of one lakh.
If i taken NSC in the name of my son, does it will qualify for deduction under section 80C
My uncle’s brother have purchase Property and his father is Co-Applicant for borrowing home loan and EMI starts from Jan-10 can his father shows Saving for repayment of Home Loan EMI in his Form 16 if his son not showing in his Form 16.
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). Current rate of interest is 8.5% per annum (p.a.) and is tax-free.
I think that the tax free interest rate is 9.5% instead of 8.5%
Currently I have paid 105000 as principal amount for the housing loan.I was told that there is a limit of 20000 on principal amount repayed on housing loan for tax rebate (sec 80C). that means although I have paid 105000, only 20000 will be considered as part of the 1 lakh limit. So does it mean that I still have to show savings proofs for 80000?
Thanks in advance
I have paid stamp duty for purchase of house property and it shows in Form 16 in last year I have to fill up ITR return which form i should fill up ITR I or ITR II.
I am unmarried female, can i claim the insurance i pay under the name of my parents?
registration fee of land is tax saving under 80c ?
Limit under 80 C is 1 lakh.
By mistake if investment under 80C exceeds the say upto 1,20,000. Will it be treated as fraud, even if amount claimed under 80C is limited to 1,00,000 ?
Please reply [email protected]
HAI!THIS IS RAVI,I HAVE A DOUBT WHETHER I CAN SAVE MY TAX U/S 80C IN LAST YEARS TERM DEPOSIT OF RS 55000 AND THIS PLANS TERM IS FOR 3 YRS
Sir,
I am living in pune and paying a housing loan, My wife is staying in Nasik , Can I show Nasik rent and the hosuing loan both at one time,
As my wife is dependent on me and I am paying her rent as well as housing loan both.
sir,
i was appointed 2007 march goverment teacher of tamilnadu state,was given 6 th pay arrear of Rs.10973 on sep 2008 year.but my IT was nil that year.but this year im getting IT can i claim deduction for the previous year arrear Rs.10973 and two terms of DA arrear of 1600 n 1474 this yera n my dads paying LIC housing finance loan can i show that for my Tax deduction since he’s not working n dependent on my salary.plz help me out.
I’ve purchase a flat in the joint name with my wife in Gurgaon. For this I’ve availed a loan from HDFC in the joint name with my wife. How much deduction I’ll be getting on the basis of the following loan repayment for the period from 1/4/09 to 31/3/10:-
Principal component 26,877
Interest component 50,973
Pre-EMI interest 15,696
I have purchased a flat and availed loan jointly with my wife. For the year from 01/04/09 to 31/03/10 the following is the break up of the amount into
Principal component 26,877
Interest component 50,973
Pre-EMI interest 15,696
Questions
What relief will be available to me and to my wife under income tax for the above payments.
Whether the deposit made by the father in his major sons ppf account, will qualify the father, to claim income tax rebate on the same amount.? Please also guide, If father is entitled then how to get authentic proof /document so that the officials can be made satisfied. I shall be highly obliged.
I still await your advices please.
I HAVE BOUGHT THE PROPERTY ON LOAN AND THE PROPERTY WILL BE READY IN 3 YEARS RIGHT NOW I AM LIVING IN RENTAL PROPERTY CAN I TAKE THE TAX EXEMPTION
UNDER hra
and under loan principal and intrest
anand
9911220471
My brother is working with L & T Pune and he is taken housing loan from Bank, our building is under construction and my question is whether interest on housing loan is exemption from tax. (As per my company circular after submitting completion certificate they are allowing exemtion} Please guide.
Whether the deposit made by the father in his major sons ppf account, will qualify the father, to claim income tax rebate on the same amount.? Please also guide, If father is entitled then how to get authentic proof /document so that the officials can be made satisfied. I shall be highly obliged.
Sir,
I pay the LIC premiums for my parents who are depending on me & also i am not yet married, can that premium be claimed for tax deductions. Also for the case of rebate, is there any need for a certificate proving dependency of my parents on me.
I took a Life Insurance Policy on my wifes name for which i am paying the premium as she is housewife and have no source of income. Will i get the benefit under section 80C of Income Tax Act
My father has taken home loan and i m co-borrower in that. my dad is paying installment from his account but i am depositing money in his account from my salary. my father’s income is not covered under tax slab but my income comes so can i get benefit of sec. 80c here in this case ?
In reply to Mr Reddy above, it has been said that exemption for stamp duty applies only to residential property. Does it include a residential site/plot to construct a house.
regards
if i start repay education loan from this year, only this year interest will be exampt or till date interest will avail for exempt
I bought some land. The registration charges went up to 50000. Will it be possible to show them under 80C tax savings??
Can we show stamp duty & registration fee under “Loss from house property” Becasue I have bought a house where I paid 2.5L of stamp duty/ registration fee. However, as per information on this site, we can claim this amount under section 80C( 1L limit) so, what about rest of the amount I paid that is 1.5L? it is a loss for me.
Hi,
I have a question. Under “Income form House Property” we can also show loss from house property. However, what kind of loss it is? This has been given in section 71B “Carry forward and set off of loss from house property”.
In continuation to my earlier question, as in the book the word minor is mentioned so the officials are not allowing rebate on this account, please clarify the querry so that we can proceed further. thanks
Whether the deposit made by the father in his major sons ppf account, will qualify the father, to claim income tax rebate on the amount deposited by him in the PPF a/c of his son.?
What is the maximum permissible exemption for Home Loan Principal payment? I mean, if I don’t invest in any of the items under sec80C and just in Home Loan. Will I get the complete 1,00,000 exemption or is there any clause?
Recently, I understand that the upper limit of investment in PPF has been kiked inline with sec. 80 C to Rs. 1 Lac, please confirm and commwnt on it and if right make necessary amendmant in the interest of readers
I have planned my savings U/S 809c) upto Rs.1 lakh.My income is purely from salary.But still there is some amount of tax payble.What more I should plan to reduce tax?
does home loan and interest on it comes under section 80 c?
i have a question regarding the filling up of the form -16 in the assessment year 2010-11 that
i have invested 6000 rupees in NSC,from Jan, 2008 @ 2000/- per month during 2009-10.
so, how much of its interest of NSC will be added in the income?