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
I have made FD in the name of my wife for Rs. 150000/- can i claim this in sec- 80c
Sir,
I have booked a flat which is under construction. I have done registration of the said flat and paid the registration fees and stamp duty. I will get the possession of the flat next year ie after May 2015 tentatively. Can I avail benefit under 80C in current financial year.
Regards,
Prasenjit Roy
Hi ,
My father has passed away and my mum is a house wife, i am paying my sisters tuition fees in Gov College which is around one lac annually can i claim deduction?
CAN I TAKE REBATE UNDER SECTION 80 C FOR education fees for SELF also instead of children
I have taken an Fixed Depoit from SBH,during August 2013,for 66 months(5.5 years).I have not claimed excemption under 80C during financial year 2013-14.Can i claime excemption during 2014-15?
please explain new rebate under section 80c for 2014-15
I have query regards the fixed deposite for 5 year. i had done FD in 2010 of Rs- 1,00,000/- but that perticular year i cant take benefit of 80C, can i take the same in the current year.AY 14-15. kindly suggest me?
i got INR 585971/- as a sallery in 13-14. and declared interest again education laon 32000/- rent 72000/- , however my company deduct tax 37084 as whole. as i can not submiteed my rent receipt on time could you please help me out how i file return and pay genuine Tax.
Can we get any tax benifit if I have bought a piece of land under taluka panchayat, karnataka?
is there any standard deduction for the AY 2013-2014.
how much deduction is allowed for loan taken for renovation of house.
how much deduction is allowed for loan taken for renovation of house
Excellent Post. Thanks Much
can an employee under govt get 80c benefit for his da arrears amount credited to gpf
sirs,
my doubt is whether ican get the rebate under 80 c
for my dearness allowance credited twice annually
i have an amount 24000/- credited to my gpf
my total 80 c amount is only
76000/-
can i add my da arears to 75000/- figure for tax rebate of maximum 100000/-one lakh
First of all thanks for posting this article. Earlier concept was not appropriate. Because Service Tax amount is not income of assesse and TDS should be deducted from income.
I am paying RD in a bamk shall i take exemption in 80c
If an employee pay notice pay to his employer while resigning from the services, the amount of such pay should be deducted from his taxable income while computation of tax or not?
LIC Premium paid by my parents for me, i mean the LIC policy is on my name but installment is paid my parents. So in this case can i avail Tax rebate on this policy ?
i and my wife are govt. servant.my wife invested 10000 Rs in national saving certificate,can i take the rebate in section 80 c instead of my wifr
Am planning to take a housing loan in Joint Name ( myself & my working wife). Pl suggest how I should be Splitting (any % agreement to be executed between both of us )so as to claim tax benefit for both (for our appropriate portion…)
Also pl clarify if total value of property is <40 lacs & can we take loan for 30 Lacs (15 each assume) and even then it will qualify for 80EE as same stipulated loan amount to be < 25 lacs… (if it is per joint loan applicant / on the whole)
thanks in adavance,
regards,
siva
After VRS , I am getting pension and also now earning monthly consolidated pay on Contract basis from a Pvt Co.. Even the pension is shown as consolidated amount in Pension. In that case, pl advise how to assess my IT . Whether I have to show the entire amount as salary for calculating Tax. Kindly guid me.
I have purchased HDFC 8Yr Fixed Deposit i just want to know can we take tax benifits u/s 80c or any other section
i had purchased 1 acre agriculture land in my native place during the 2013-2014 period & had the sale deed got registered in my name for which the stamp duty & registration fees i have paid .
my query is can i claim the stamp duty registration exemption under 80c
Is mobile allowance taxable?
sir,
1. i am state govt employee.rs 100/- are being deducted from my salary every month towards SFMS(self fund medical scheme ). is it eligible for deduction?
2.in case of state govt employee ,is medical reimbursement amount eligible for deduction?(it was reimbursed by employer )
As per my knowledge deduction limit has been raised upto 1.25 lacs u/s 80c.
Hi,
Can the premium paid of Jeevan Sathi (Joint Plan) policy of LIC shown seperately/individually by both husband as well as wife u/s 80c of Income Tax for one financial year..??
Thank you.
Reply to 634.Prithwiraj Pramanik :-
Dear Prithwiraj Pramanik ,
pls understand that sec 80c for Replyment of Loan which u pay in EMI basis. and we Know that EMI consists of both A portion of principal and Interest.Principal paid in one FY can be claimed in 80C Maximum upto 100000 and Interest portion can be claim U/s 24(b)-Limit is 1,50,000
Is 5-Yr bank fixed deposits (FDs) made for dependants(parents) too can be accounted in Tax claim.?
or it should be only self?
hi, im dr harshal doing a job at xyz hospital and taking part time education from a govt. undertaking university, is there paid tuition fees benefits me under 80c sec. for tax saving.
Is a regular school teacher of non-gazetted rank working in Municipal Corporation of Delhi school, drawing salary in scale of pay of Rs 9300-34800 with Basic Pay Rs 19680 and Grade Pay Rs 5400, eligible to receive yearly Bonus or not ? If eligible to get bonus, then under what service rule. Pl help and guide me.
Please answer immediately,
If an individual assessee pay the amount of life insurance premium as on 29.03.2013 (F.Y. 2012-13) by cheque
and got receipts also as on 29.03.2013. The cheque cleared as on 03.04.2013 (F.Y. 2013-14) . Now my question is that can we claim the deduction u/s 80-c for F.Y. 2012-13 or not ?
I am paying for LIC inthe name of my daughters children living abroad.Can I include the amount under 80c
Dear Concern
I want to weather a grand parent can propose a policy to their grand child and will he eligible for 80c tax rebade
Please let me know what is meant for education fees.
I spend Rs-7000/- for my daughter’s admission to School. Is this expenses is eligible entirely for deduction u/c 80c ?.
Sir,
i have one doubt about 5 year bank deposit. Is it taxable whrn getting back the same after 5 year
This year i had paid 2 year premium of Rs 100000/- (50000*2) in my ULIP policy. kidly confirm can i take tax benefit of Rs 100000/- under sec 80C. my basis premium is Rs 50000/- and my insurance amount is 250000/- which is 5times of my premium.
Kindly confirm.
Are GPF contributions made on account of return of refundable advance, taken out of one’s GPF Account, eligible for deduction under Section 80-C?
Hi. I am getting 18000 per month a salary. I am also paying in LIC of rs 28 thousand per annum. How much can i able to reduce the Income Tax from my salary using the LIC amount.
Post office RD is covered under Income tax Section 80C yes or no
Can a stamp duty deduction be claimed on a house under construction and when there is a difference in the possession date of the house and the payment of the stamp duty? eg. my possession date is June 2014 and i paid the stamp duty in March 2013
sir, under 80c 100000/- exemption. i showed 75,000. so still i can eligible for 25,000 right. i paid 50,000 tax for govt in my salary. so i want to take p.p.f if so, 1. how much can i invest and 2.how much return i can get. If i invest under p.p.f 50,000
Dear Sir,
During year 2010, I have booked one flat. Builder is executing the sale deed and giving possession this year (March’13). Can I claim deduction for payment of Stamp Duty, this f. year?
Further, I had claimed deduction for payment of Stam Duty for purchase of earlier house in another city during 2008-09.
Can we claim deduction for payment of stamp duty, any number of times?
1. Whether the life insurance premium paid by me for my dependent parents(mother and father) can be covered under section 80C of income tax?
2. Is there any other way to covered deduction tax of the life insurence paid by me for my dependent parents (mother/father/both)?
I HAVE HOUSE WITH NAME OF MY MOTHER. & I GET THE HOUSE REPAIR LOAN SHOULD THE INTEREST OF MY HOUSE REPAIR IS RELIEF UNDER 80 C.
i am eligible for wife tuition fee under 80 c exemption
A PERSON HAVE A HOUSE PROPERTY WHICH IS BY NAME OF HIS SPOUSE. TAKEN ON LOAN WHICH IS JOINT A/C WITH HIS SPOUSE. SPOUSE IS NO INCOME AND LOAN REPAY BY INCOME OF HUSBAND. CAN HUSBAND CAN CLAIM DEDUCTION OF INTEREST AMOUNT UPTO RS. 150000/- U/S 24 AND PRINCPLE AMOUNT OF LOAN U/S 80c UPTO LIMIT OF RS. 100000/-
TAXGURU DOES NOT REPLY ! WHATS THE USE !!! NOT EVEN ONE REPLY FOR THREE YEARS !!!!
WAKE UP TAX GURU !!!! IF YOU CAHRGE ONE RE. PER REPLY ALSO YOU WOULD HAVE MADE LOT OF MONEY WITH INTEREST …. ALSO IF YOU INVEST IN PPF TAX FREE EARNING!!! TAX GURU ARE YOU THERE !!!!
can i claim income tax rebate of my wife’s LIC.the premium of the policy was paid by her. She is working as a teacher in mcd