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.
- 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?
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)
I would like to know whether recurring deposit is exempt under 80C if it is for 1 year?
my autitor said max one lack rupees only can adjust sec by 80c,
it is true, i spend lic insurance and home loan (principle only)total 127000
AM I ELIGIBLE FOR TAX BENIFIT IF I DO FIVE YEAR FD IN THE NAME OF MY CHILD.
can deduction under section 80 be from casual income
what are the provisions of tax exmption about employee contribution and govt.contribution for new pension scheme{nps}
Sir,
My wife’s investment in 80 C has crossed the limit of 1 Lac. Can I show the surplus of LIC premiums paid by my wife. The life policies is also in her name. Can i claim rebat under 80C.
Pleas help.
Dear Sir/Madam,
Exemption under sec.80c of Rs.1,00,000/- and conveyance allowance of Rs.800 p.m. from long time back. As per current economic growth on every field I feel the exemption amount will be increases.
I hope government take necessary action about this.
Thanks,
hello,
can any one suggest me to reduce income tax for 180000. i dont have pf and any insurance, and i need to submit documents in feb 2013.in which way can i overcome this problem.
I have a house which is under construction, taken a loan and repaying monthly both Principle & Interest to the bank.
Now I want to sell that home under construction, in this case what I am eligible to get the benefit of principle paid during the FY U/s 80C or not and what are the other liabilities of taxes comes like , capital gain on the sale proceeds of the home and any other …
Please advise me in this regard.
Hello,
I have purchased a flat in Nov-2009, agreement was done in the same year in December-2009, I got possession in Aug 2010, Can i claim tax benefit under 80c in stamp duty registration charges this year (12-13)
Hello,
I have purchased a flat in Nov-2009, agreement was done in the same year in December-2009, I got possession in Aug 2010, Can i claim stamp duty registration charges this year (12-13)
sir, can i know that if father paid insurance premium for himself then he can transfer this premium deduction u/s 80c to his child or not? & why?
Sir ,
In my company there is a limit of 15000/- that can be claimed under u/s 80. But what about the expenses more then this amount done on dependants ? Do we have any section where we can claim . Please advice.
Thanks in advance.
I want to know what proof is needed to claim income tax rebate for stamp duty & registration charges. Kindly help.
Moreover, the bank has done a loan insurance is it acceptable under section 80C.
Santosh
hi
my package is 2,24,700 and this time i have OT for 10,800 and tax has been deducted from my salary worth 1,178. so, i want to confirm will it be ok if i will take a FD from post office for 25,000.
please revert asap.
thanks
himanshu
Sir,
I have been deposited Rs.5000/- in post office during f.y.11-12. Can i claim these amount as deduction u/s 80C. Let me know please. Thanking you sir.
I received arrears of medical reimbursement allowance from previous years. Against same, I have already incurred enough medical expenses in those years.
can i claim set off now subject to limit of Rs.15000 per year ?
Sir, I have purchased a land and get Housing Loan from SBI, Jaipur. Please tell me can i get income tax rebate on this land purchase loan under Income tax Act under section 80 C & 24 for interest which i have paid to bank.
Thanking you.
dear sir can we get the benefit of tax exemption for principal and interest paid for a loan for house repairing purpose from a credit co-op society made up by government employees.
I have taken home loan from SBI. To cover the loan repayment SBI have deducted SBI life insurance. Whether this amount eligible for deduction u/s 80 C
With regards
Nilesh
Sir
I have purchased a Flat with possession date in Dec’13 along with my wife and younger brother.
We have taken a Home lone of Rs.5,000,000/- from PNBFL and started paying EMI of RS.51000/-, Please help me with the information about the income tax saving, is it possible to get any tax refund on principal and interest amount for three of us.
Looking for your kind support in this regards.
Regards
Ritesh
sir,
i am a govt employee. As per the New pension scheme (NPS), i wanted to know under which section i can apply for deduction.
interest earned by senior citizen beyond the exemption of 2.4 lakhs of income per year can a gift be given to the grand children for education or marriage?
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 ?
Taxguru,
I have a small doubt regarding Employer’s contribution towards PF.
Consider, My Salary = 10 L per annum.
My contribution to PF = 30000 per annum
Employer’s contribution to my PF = 30000 pa
Now, my contribution to PF is considered under section 80C for deductions for tax exemption. So, effectively, i can invest 1L – 30K = 70K for maximum tax exemption under 80C.
Question:
1. Am i correct here??
Now, Employer’s contribution to my PF account = 30000 pa. This is also a part of my salary as mentioned in my offer letter.
Questions:
1.Will this 30000 p.a. be taxable to me?
2.Will my taxable income reduce to 10L – 30000(My PF contri) – 30000(Employer’s PF Contri) = Rs. 9,40,000 considering i do not make any investments for tax exemptions?
3. Will this 30000 be considered in 80C deductions making my effective 80C limit as 1L – 30000 (My PF) – 30000(employer’s PF) = 40000?
Dear Tax guru,
I want to know we have purchased an under construction house in a building can that be claimed under 80 c deduction.
Dear Sir,
I have bought a Insurance policy of Rs.100000 base plan and with this plan a rider of Rs. 100000 and for that i have paid premium Rs 20000. Will i get 100% tax benefit of this premium amount
Sir,
I want to know whether limit of 100,000 allowed as deduction under section 80c has been increased to 2,00,000 for financial year 2012-2013
Do reply to my mail , pls do needful.
i want to know that my investment is exceed above 1 lac under sec 80 c ( LIC , Tuition fees, PF, loan principal amt) , what should be the best way to save tax.
hi,
i just want to know if we earn money from stock market and at the end of financial year we saw loss or profit than how can we show the same in ITR ……….
i would like to know if recurring deposit are taxable ? and whether it will fall under 80C for exemption?
if we buy a land for house than will stamp duty be considered under 80c?
dear sir, i m confused about my return. i get my salary as “prefessional fees” after TDS deduction already. now ione of my friend said that i can show my personal expenditure like travel or so in this return form to save tax…sir, in which column i should show my expenditure?? and hoe would i show the detail of that,i mean travel+ restaurant+other expenditure??? or what do u advise i should not show these in my return?? i m confused….help
If suppose housing loan interest not shown while preparing form 16 due to some problems but the loan is already taken in the previous assessment then whether it will be taken into account when filing the income tax refund
If I pay premium for my father’s LIC policy, will my father get 80C deduction?
R/Sir i am a govt empoley in railway i alloted a railway qatter [house] with i puracse a housing lone why rebat housing lone or qater rent rebat
If mother is paying the insurance premium for daughter, can daughter claim the insurance premium paid as an exemption from her income.
Hi,
I have taken a home loan against a 3 bhk flat around 4 years back.
I bought this flat from builder in pre-launched. Now I have done the entire payment (except stamp duty & registration) of my flat and got the possession.
When I am asking to get home loan rebate (on principle & interest), my employer is asking me to produce registered sale deed agreement.
Since all the flats are not completed yet I am unable to register my flat.
I wanted to know that is it really mandatory to have sale deed agreement in order to get income tax rebate on home loan. if yes do i have any alternate?
FYi. I have all documents except registered sale deed agreement i.e bank loan sanction letter, sale agreement, possession letter, Bank certificate for re-payment.
Deepak
is There any Additional deducation in Respect of INFRA BOND of Rs. 20000/-
Other Than ( rs. 100000/- Deducation in 80C)
Sir,
Life Insurance premium paid for grand daughter policy ,can be claimed deduction u/sec.80C.Please advise.
Whether NSC taken in the name of the Individual & mother qualify for IT under 80C fully for
the individual, if the mother is unemployed ?
arrear DA for the period from1/1/2009 to31/3/2011 credited to general provident fund can be considered for deduction under section 80C of income tax
Sir I have one question. I have taken a Endowment Plus ( T. No. 802) single premium plan for Rs 30000 with risk cover of Rs 45000. Can I get a deduction for the same within the limit of Rs 100000?
Why can’t I claim the insurance that I am paying for my parents..?
I am planning to buy a residential PLOT. Can i get registration charges & stamp Duty exemption under any section of I.T?
HUF FIRM PAID 120000 PREM OF KARTA,S INSURANCE . SIR THIS PREM IS ELIGIBLE FOR TAX REBATE, AND ALSO THIS POLICY’S MATURITY IS TAX FREE ?
i have drawn monthly salary as pay Rs15860+Gp 4200+D.A13039+HRA1003=Rs34102.But i have paid HRA@5000 pm.&p. taxRs2500 annually..Then what will be my monthly income tax which will be deducted from my salary .
Poornima: For the financial year 2012-13, you are liable to pay I.T on Rs.80000/-@10% if your salary is Rs.2.8 lacs/annum. You can invest upto Rs. 80000/- under section 80 c and avoid paying of taxes.
Soniya: if your salary is upto Rs.200000 annually you are out of I.T for the year 2012-13.
RK Menon (Financial Adviser)
my Salary is around 2.8 lac, how can ppf and nsc help me in tax savings.
Hello Sir,
I have a query to ask you regarding Investment in NSC.
My age is 27 yrs, If my Annual Income is 2,00,000 & I invest Rs.1,00,000 in NSC, then how much will be deducted u/s 80c ? I want to know the calculation. Will it be the whole Rs.1,00,000 to be deducted u/s 80c ? Or 20% of my Investment…?
Please help…Thanks