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
Repayment of house loan during the FY comes to Rs 3lakhs as principal and Rs66000 as interest.GPF contribution is Rs60000 and Tuition fee remitted is Rs 24000.How can I distribute this amount for tax dedution
Sir if i deposit a amount in my wife PF account,
Tell me whether i am eligible for claiming deduction under section 80C of the amount deposited by me in my wife’s PPF account
I sold my house in November2014 in 9.5 lakh which I have bought in 2010,June in 9lakh. I am a government employee what is the procedure to show this in my income tax return and what is the calculation
Dear Sir,
My question is : I am working and avail HRA. Recently I have bought a ready flat in my home town (where I am not staying) for which I have paid stamp duty and registration charges and also have availed a home loan.
So can i avail the benefit of HRA against rent paid by me for my rented house & Can I avail the benefit / deduction under section 80C for the stamp duty and registration expenses and interest paid for home loan too?
Please clarification.
Dear Sir,
Kindly clarify whether the contribution made to my wife’s PPF account qualifies for IT exemption under sec 80c for me.
stamp duty fee is exempted under 80 c
Both or husband or wife avail to. deduction only both are divide to loan amt & give declaration to employer then any body who need are eligible to get deduction under 80c & 24.
If a loan is taken by husband and the payment is being made by wife and also wife is the owner of the property. Who is eligible for deduction u/s 24(b) u/h House property?
If husband has taken loan from the bank and wife is paying interest and principal amount.Who can avail the deduction related to this loan?
Can I get rebet car insurance premiums
Thanks for your this article! It is very helpful to save tax.
For filling IT details for finical year 2014-2015, its usually done in moth of Jan in our firm, I have a doubt, for Sec80C the PPF account which can be availed, but it can been shown till month of Jan only for month Feb and March it not able to show, I want to how can avail that benefit while filing the IT returns in month of July, what’s the procedure, documents required and date?
Pleae help me with it.
I have purchesed second flat. First flat is occupied by self & second flat is given on rent. Can I get the tax benefit on the stamp duty & registration charges paid for second flat. Is it covered under 150000/- or can apply seperatly.
Dear TaxGuru,
I am buying a flat for self use which is under construction and the posseion will be by Dec 2016. I will be doing my stamp duty and registration on 10 Feb2015. I would like to know whether I can show the cost of stampduty and registration in 80C for this finicial year.
Please guide me.
Thank you very much in advance.
Regards,
Salim
I a question can i save the tds by home registry stamp duty & registrar receipt
respected sir,
i’ve a question:-
In the IT form it is mentioned under ”7.DEDUCTION UNDER CHAPTER VI-A”- ”J. Tution fees for education of children”, but you’ve mentioned under ”others” that ”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.”, what do you mean by, ”children’s education expense” in this? whats the difference between this both.
Sir,
kindly tell me whether all type of SIP investment invested for more than one year are tax exempted u/s80 of IT Act or not?
with regards,
Khanjan JM
I want to know whether postal recurring deposit is eligible for income tax exemption.
R/Sir
I am taking decision to invest Rs 20000 under section 80 c , after maturity income is tax free.
Please suggest me better equity funds.
Thanks.
9850703483
Dear Sir,
I have query that in under construction House.If we have taken the loan.Can we claim principle amt and interest paid to bank if we have not get the possessions till now.
Pls revert.
Thanks
Ilesh
1. LIC insurance payment made by father in behalf of son (upto which age or there is age limit) while income tax exemption under 80C.
If yes then LIC Payment receipt is sufficient document, submit for proof?
2. If mediclaim/health insurance policy purchased in the name of son and premium paid by father is eligible for exemption under 80C or not?
3. In case of government employee upto which date we have to submit exemption document & how?
sir, i want to safe investment in u/s 80c & income also tax free pl.planing for above 15 lac salary. thanks mobile no 09415221371
Hi, I have puchase a flat with my wife as partner.My wife is in Govt,. secvice ,and she want 80 c deduction in tax saving as Registration and stamp duty. In the receipt the client name is as ” sandipan and other” and no name of my wife in receipt of registration and stam duty of as second owner.My she have to submit the certified copy of deed or xerox copy of sale deed where the name of second owner is dictated.
Either both can or only my wife can claim the deduction?
please give me suggestion…..
Dear siir
Is amount paid under rpmf of Rajasthan govt employees
Is rebatable under 80 c.
SIR,
qUESTON- IN SECTION 80 C KARNATAKA POWER TRANSPORT COMPANY LIMITED’S CONTRIBUTIONARY PENSION SCHEME WAS ELIGIBLE FOR TAX SAVING (like lic,pli,NSC…)..?
Hi,
Can i show my cousins LIC insurance payment under 80C section while income tax exemption, which is always done by me?
If yes then what document i need to submit for proof?
Regards.
Jay
Pl inform if HUF can take Life Insurance Policies for any coparcener ( Karta, Karta spouse, karta children , karta Grandchildren ) and whether this is exempt under Sec 80-C –
Pl inform if Life Insurance Policies can be taken by Grandparent for Grandchild ( child, minor , teenager ) – Is this eligible for exemption under Sec 80-C or not exempted. Sec 80-C is not clear .
Pl inform if Life Insurance Policies taken for Adult son / married daughter are exempt under sec 80-C – In sec 80C the point is not clear and hence clarification required.
Dear Sir,
My Question is that I Have Fix Deposit Amount Term is 3 years
Can I take Take this amount in 80c
Please advise me or please call on 09480428071
I am taking rebate on home loan since 2008 and I have taken again home loan in 2012 against extantion part construction (in same home) .Can I get rebate on both loans under section 80C& section 24.
dear sir,
i want section 80c
sir,
what is mean by when we say that a particular mutual fund scheme is with 80c benifit. Is it return wuold be rebated or money will be rebated that we going to pool in mutual fund.
sir, what comes under 80c of income tax in mutual fund is it return wuold be rebated or money that we going to pool in mutual fund. what will be rebated when scheme is ELSS when i will file ITR
Hello
Can you please tell me how to claim Section 80 IA deduction. What is the procedure for the same. Its my first time when I am handling this type of work. So what all documents are required for the claiming it
Thanks And Regards
Sir,
I have a question. sir, my husband has a policy for our child(last year) in his name but now he has left his job & i am paying his entire premium(quarterly). He has never claimed this insurance in his tax-benefit. I am also working. Can i show this LIC premium for my tax benefit scheme.
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I have complete financial solutions with proper “Tax Relief” under Income Tax Act. Best Investment Planning with relevent section like 80’C & 80’D.
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Respected Sir,
I already submitted Rs.1,50,000/- in my PPF account in 2014. This account opened in 2013. My questions are –
1. Can I invest my money in NSC? If the answer is yes, then is it tax free when I will get the mature amount after 5 or 10 years later on interests???
2. Will I have to pay tax on the interests of my PPF account after mature in the end of the year 2028???
3. Now how can I invest money???
Plz give me some suggestion….. I have till 5 months salary….. Now I want to invest the money of my next months salary…..
Note : I already saved Rs. 1,15,000/- in my saving account as Fixed Deposit with the help of MOD facility for one year in this year also…..
i want to know which mutual funds investments are tax free or which comes under section 80 c
what documents has to submit claim under section 80 c for property registration charges.
Please guide us regarding 80C, 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 inform me whether any person can claim for LIC premium paid by him for his Adult Son or Married daughter also? What are the guidelines?
Respected sir,
my self is a Senior citizen and income tax payer.
I want to know that the education fees for children is also entitled for claim rebate u/s. 80C.
Now my question is that, my grand son who is staying with us and i will deposit the education fees for Rs. 60,000/- for his higher studies, can i claim the deposit amount in the income tax rebate U/s. 80C.of the IT Act ?
the parents of the child is not claimed the Education fees in their income tax return.
plz clarified my doubt and give the answer in my mail ID – [email protected] at an earliest date
thanks with regard,
Satya Narayana N
Dear Sir,
I appreciate your social service of answering their queries and helping them.
My question is : I am working and avail HRA. Recently I have bought a ready flat (where I am not staying) for which I have paid stamp duty and registration charges and also have availed a home loan.
So while availing benefit of HRA against rent paid by me for my rented house where I stay, Can I avail the benefit / deduction under section 80C for the stamp duty and registration expenses and interest paid for home loan under section 24 ?
I would be obliged with your clarification.
Thanks a lot,
Warm Regards,
Vijay Chaudhari
sir
I am working in a PSU residing in quarters provided by the organization.My D.D.O calculated perquisite amount wrongly on higher side and deducted higher TDS. He issued Form 16 with the wrongly calculated perquisite amount. He is not willing to correct FORM 16. My auditor says Form 16 should be corrected otherwise we cannot claim refund. Till date I have not filed my I.T returns.please advise me
Sir, I have a query. I have purchased Rs.60,000/- NSC in this FY for investment purposes and tax rebate u?s 88. Now I want to take a loan against these NSCs from a bank by pledge it within same FY. What is the provisions of I tax. Can I take a bank loan and get benefit U/s 88 in same FY. Kindly advise me.
SIR/MADAM,
I DON’T KNOW THE TDS CERTIFICATE NO.
SO, HOW CAN I DOWNLOAD THE FORM 16.
PLEASE REPLY, AWAITING YOUR ANSWER.
THANKS & REGARDS
– See more at: https://taxguru.in/income-tax/download-online-tds-certificates-form-16a-nsdl-website.html#sthash.PK9Y5r4V.dpuf
kindly let me your views , in case of exemption of L I C. Now we have to pay also the service tax along with the insurance premium, It is my question ,whether we are entitled to claim the deduction for L I C along with service tax or without service tax. However in my opinion we cant not claim the deduction of L I C alongwith service tax, WHAT IS YOURS VIEW
C A K C AGARWAL< ALLD
My husband & I in a joint account took Housing Loan. For income tax purpose I produce annual statement of the bank.Now they asking ownership/co ownership document.How can I get this certificate? Who will give me this certificate ? Wether respective bank or panchayath or village officer?
what are the investments for a small businessman,if bank receipts upto 9laks. I am providing software services from my home so no majaor expenses.
Thanks
I am currently residing in a flat which is under House Building Loan of HDFC Ltd. since 2004. I had availed another loan in 2011 from Corporation Bank for a flat under a Cooperative Society, which is still under construction. Both banks provide me with EMI certificates every year. Am I eligible to avail deduction u/s 24(b) and/or 80c for both the mentioned house properties?