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)
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Hi Sir,
If I deposit 50k on 5 yr Post office scheme, how will it be calculated on this year’s tax?. Is it 50k itself or 10K ? .
Also If I join a LIC for 3 year scheme, is that same logic like above? .
Please let me know.
Thanks
Dear Sir,
I have joint Account with my brother can we show both in our books as well as ITR and take rebate on interest.?
I have booked a flat which is under construction. I have done registration of the flat on july 2015, and paid registration fees.I will get the possession of the flat next year i.e. after November 2016.can i avail benefit under 80c in current F.Y. 2015-2016
i purchased new flat for that payment (including service tax) is done on 24/03/2015 i.e financial year 2014-2015 and stamp duty for the same is paid on 5/06/2015 i.e financial year 2015-2016. Now my question is in which financial year i can get rebate for both stamp duty and tax on flat cost paid by me under section 80c
purchased LIC Endowment policy ,on my grand daughter name premium is 59683.00. pl inform whether can avail the premium amount under 80c benifit ?
Sir,would like to start an investment plan.Could you help
Hi,
I had purchased a house in June 2014 and have paid stamp duty and registration fees in Jun 2014. The possession of my house is in May 2016. Can I claim the stamp duty and registration fees under section 80 C this year?
Hi sir, My salarie as 600000 per year how much shuold show as tax 80c
I had fixed 250000/- in post office month of June 2015 for one year & My wife’s name
can i show in tax 80c, Sir please make now.
post office 5yr fd is Rs.500000 80c Covered but this amount. 80c deduction amount deducated yearly are one year deducating this amount.
Sir,
Please inform me whether I am retiring from service in month of feb 2017 and where amount deducted from my salary on account of PF/VPF is qualified for tax exemption as all my retrials benefits to be received on 01st of March 2017
if need any answer about income tax deduction us 80c contact this mail or 9066329789
I have opened sukanya samradhi account for my daughter and her mother is gardian in that account.
Can i take tax benefit under 80C(as i am depositing money from my salary)D T6 or only my wife is eligible for tax exemption?
i have a question regarding the medical treatment that is taken in clinic or hospital for the family and for self, has tax rebate in section 80c.Does it have any ceiling limit for the expenditure incurred upon medicals.
Hello
I have another question not entirely related. I would like to know that if i have only capital gains income from equity which is less than my investments in 80C than what is the tax implication. For example i have invested 1.5L in ELSS and my income from short term capital gain from equity is 1.4L. Do i need to pay any income tax at all??
HI,
my mother have FD and UPLI policy.i am paying premium for every month,can i tax debat for that.
Education Fees paid for higher education in USA of my child is exempted under 80c or not (within limit 1.5 lakh)
I have a question
Rebeat under section 80c 1(I), TAX REBEAT ON BANK FD
Is PF/Pension withdrawal (completely) is considered in income ? Kindly help me to understand.
Thanks,
Dhananjay
Kindly contact us for your tax related queries and assistance in filling income tax returns,
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My son has purchased the policy, Can i get income tax rebate on that policy’s amount . My son is in service and he is 40 years old.
I have a question regarding income tax rebate in section ATC. My son is in service. I am pensioner so I cant have an insurance. I want to get the insurance of my son so that I can have income tax rebate. Is this possible?.
An early response will be appreciated
I have paid Rs. 1.20 lacs as tuition fee for the education of my child during the FY 2014-15. Whether I can claim the full amount u/s. 80C or is there any ceiling for claiming the tuition fee?
i have purchased a resell house in oct 2014, can i claim Stamp duty and stamp registration fee u/s 80c. for tax benefit.
sir,
I have spent Rs.85000/- towards educational fees of two of my kids. will it qualify under 80c and if so, how much?
Sir, i want to buy NSC rS. 50000/- IN THE NAME OF MY HUF Can I do so.
Dear Sir,
I am depositing Rs. 10,000 every month in my mother’s PPF account . Can I also get any tax benefit for that.
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Amt paid towards repayment of Education Loan of son will qualify for deduction under sec80c?
Dear Sir,
I forgot to show my investment(LIC) made on Feb 2014, under section 80c last year(2013-2014. Is it possible to show it now for 2014 – 2015 March and get the 80c benefit.
i have an account of recurring deposit scheme in post office. will the same be claimed for income tax exemption.
sir ,
is registration and stamp duty fee paid on home purchase if paid from capital and not taken loan is exempted from 80cc pls clarify.
thankyou
Sir, I have a LIC in my name whose premium is 1,44,000. My total income in FY 14-15 is 856087. I have left my job in August 2014. This years premium has been paid by my parents as dont have that much money. Can I still use this amount in 80c to reduce my taxable income?
Hi sir,Myself Sukanya. My annual income is about 6,25,000 per year, and I am paying LIC Premium 20,000 per year, so how much tax I have to pay in 2015 under 80c.
This is regard to ppf account.I have deposited for financial year 2014-2015 twelve months Rs 50000.Ihad made a deposit every monthand complted 12 months.Now I want to turther deposit 50000 this month to avoid tax .If I deposit 50000this month will I get exempted from deduction of tax for 50000/-it will be 13 th instalment.
I have Grand child. She is dependent on me. I pay her school fees. Whether I am eligible to take Income tax deduction under 80 c of educaiton fees
Hi,
I have Question that I purchased 1 LIC policy for this polict premium payment is quarterly. but due to some personal problem i could not pay premium for last 2 quarters. but 1st 2 Quarters premium i have paid. can i take Income tax benefit for that paid premium?
Hi,
I have Question that I purchased 1 LIC policy for this polict premium payment is quarterly. but due to some personal problem i could not pay premium for last 2 quarters. but 1st 2 Quarters premium i have paid. can i take Income tax benefit for that paid premium?
Dear sir,
I have spent Rs.100000 for education for my children.This is inclusive of tution fees and books expense. Is it eligible book expense under 80cc?
Pls reply….
Regards,
NMS
sir I have paid Rs. 5 lacs towards tuition fees of my spouse. Sir is it eligible for exemption under section 80C, as the section talks about the tuition fees paid for children and not for spouse.
Thanks n regards.
Jatinder Singh
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.
Please reply
Hello sir, my income 324000 per year, and I am paying LIC Premium 14808 per year, so how much tax I have to pay in 2015 under 80c
T.T. Nair, Mumbai
Sir I am a retired person. I have invested 9 lakhs from my retirement benefit in the Post Office MIS Scheme The monthly interest is diverted to Cumulative Term Deposit ( 5 Years) for 5 years. I want to know whether the MIS interest is taxable or not; even though the same is deposited to 5 year CTD in the Post Office. Also On maturity of CTD, whether the amount is taxable or not. Please reply An early reply is highly solicited. ( 9967514381 )
Hi,
Just wanted to clarify one doubt.
Is Infrastructure bond still liable for tax exemption under 80C? I read on other sites and they have mentioned that its not considered since FY 2012-13.
Please clarify and update the post.
Nilesh
I got medical reimbursement is this income. This wil be shown as income or not please clarify it.
I an senior citision . I want to get benifit of 80-c with maximum rate of interest and less period with minimum TDS. pl answer me on m. no 9428246792
sorry for the trouble given to you
Thankyou
Sudip Kumar
your are eligible to lic premium under sec 80 c for the fy 2014 -15.
my LIC Premium due date is 31.03.14 but I was paid on 19.04.14. can I eligible for tax rebate for the fin. year 2014-15?
You are applicable for HRA Rent & House laon under sec 80c.if your house given to rent then income shows under income from house property.
you are applicable for HRA & Home laoan under 80 c.if house is given rent then income shows as income from house property.