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)
hi
I am salaried person and staying on rent. From April the rent amount has increasd to 10500/- pm. am i supposed to deduct TDS on rent. i don’t have any TAN as of now. will i be required to apply for it.
I have two housing loan.Cani claim the pricipal of both the loans under sec 80c.In one hous i saty where the annual principal is 31000 and second house i would get the posession in coming june with annual principal of 38000…can i claim both put together 68k under sec 80c where the max limit for sec 80 c is 100000/-.
i want to know whether the limit of aggregate savings under section 80C is Rs 100,000 or Rs. 120,000 for the financial year 2010-2011.
Hi,
I have bought a plot/site in 2008 and been out of India till last year.
Today, I got a statement from ICICI Bank Housing Loan titled:
STATEMENT FOR CLAIMING DEDUCTIONS UNDER SECTIONS 24 (b) & 80C (2) (xviii) OF THE INCOME TAX
ACT, 1961
I was under the impression that only residential property is eligible for claiming any deductions/benefits. Can anyone explain please?
Hi,
I wanted to inquire if it is possible for both me and my wife to claim tax benefits under HRA. The property is rented out only in my name though. Is there any way possible we both can avail this?
Dear Sir,
i am having a tax benefi mutual fund, i want to know whether i would be getting tax benefit on sum received on maturity of that mutual fund,kindly explain.
Sir, I am having shares in my trading account from the last more than one year and due to some misunderstanding by the broker, he sold my shares on one day and repurchased on the second day. Thereafter after 2-3 months,if the same share gains by 50 rupees, and if I want to sell my shares, in that situation, whether I shall be entitled to the benefit of long term capital gain or have to pay the tax for short term capital gain for the mistake done by the broker.Please guide me. I shall be highly obliged. Thanks.
Pl enlighten me the provisions of Section 54 of Income Tax Act. This is regarding Capital Gain.
Hello,
I have booked a underconstruction flat in Feb 2010 in Navi Mumbai and done stampduty, registration 29th March 2010.
My question is , Can I show stampduty, registration amount in my next year IT i.e. 2010-2011 ? whould i get tax benifit in this year or how can i claim it.
my father bought a property(50L) in his name by selling old property(30L). Remaning 20L is from Housing Loan. My father(2nd holder) and myself(1st holder) sharing the housing loan. Can i able to claim Principle and interest.
Whether Income tax rebate available u/s 80C for Life Insurance Premium paid during Apr to Nov 09, when policy is closed in Dec 09
Also, if my monthly PF deduction is already 1,441 amounting to 17,292 for a year.
In that case, i have to invest for the rest 82708..right?
I want to knw if i invest:
1. 70k in PPF
2. 15k in Bank RD. and
3. 15k in Life insurance.
Will that be perfect to get an exemption upto 1Lac.
Plz suggest if you have any amendments for me for the above mentioned.
Thanks!
Sir, I am having shares in my trading account from the last more than one year and due to some misunderstanding by the broker, he sold my shares on one day and repurchased on the second day. Thereafter after 2-3 months,if the same share gains by 50 rupees, and if I want to sell my shares, in that situation, whether I shall be entitled to the benefit of long term capital gain or have to pay the tax for short term capital gain for the mistake done by the broker.Please guide me. I shall be highly obliged. Thanks.
I have availed a Housing Loan from Bank and purchased flat in my wife name and paid Rs. 61000 towards EMI and Rs. 35000 towards Interest. My wife will not claiming exemption the said payment in her annual returns. Please let me know shall claim housing loan EMI and Interest under section 80-C?.
I have LIC which premium is 10,000 per year. it can be double exempt under sec 80C i.e.20,000/-.
i have taken property mortgage loan. can i claim under house property income .otherwise under which head can i claim deduction
sir
i want advise to unclaimed stampduty spend in the year ended 2008-09 in the month of march-08 that stamp duty & reg.charge can be claimed as deduction u/s 80C of the income tax Act 1961 for the year ended 2009-10.,
I have invested in ELSS Mutual Fund, the first holder being my wife (who is a house wife with no income) and I am the second holder. Am I qulified for any deduction under sec. 80c of income tax act 1961.
Kindly let me know. My e mail id is [email protected]
i have purchased own house jointly ( me and my wife) and i will do the stump duty and regestraion fees on the name of my wife, should i get this expeses under 80c
My dad is a retired person getting Govt. Pension.
Shall we include my mom’s medical expenditure bills under 80 C deduction ?
If so , what is the maximum ?
Dear sir,
I had utilised my upper limit of deduction u/s 80c i.e. 1L & also i claimed exemption u/s 80D of rs 15000 but i’m under large tax liability.Plz suggest me inventments which are not covered u/s 80c & on which i can claim further deductions. plz suggest…
I have a Life Insurance Policy of Bajaj Allianz Life Insurance Co. Ltd. since last 4 years. Now I want to Sell the units of said policy, so what will be Tax Implications.
Please guide me.
i and my spouse both invest Rs. 1,25,000/ – in Elss jointly. Can we both
claim and share deduction for amount
I have retired from government service in May 2009. I have deposited sum of Rs.3,00,000/- in post office MIS for period of six years- whether the said deposit is covered under the provisions of section 80C
Dear Sir,
kindly provide me detail what will be covered under Section 80C.
Dear,
CA Sandeep Kanoi
CA Ritesh Jain
I have already paid my Rs. 70,000/- limit in my PPF a/c.
My wife also has her own PPF A/c. But she has paid her PPF premium of Rs.40,000/-only.
I wanted to know whether I can deposit in my wife’s PPF account Rs.30,000/- and claim income tax rebate on the same amount in my name so that my Rs.1,00,000/- EXEMPT under 80c gets completed?
I shall be highly obliged.
I have paid stamp duty and registration fee of Rs.65,000/- during October-2009 for a house under construction. Possession is expected in Feb-2011. Whether am I eligible to claim deduction of Rs.65,000/- under Section 80 C during the financial year 2009-10 itself. Please confirm.
i’m salried and also doing higher study 4 which i’m paying 65000 annualy can this amount be rebated on tax
I purchased a flat taking housing loan from LICHFL.I have made registration of the UDS(undivided share of the land)and paid Rs.55000/-as registration charges in OCT2009.Can I get deduction of this amont U/S 80C for the year 2009-10(AY2010-11)
hi,
I have purchase a flat in Feb 2009, the construction will be completed by May’10. I am paying EMI (not P-EMI) from the first day.
Between Apr’09 – Mar’10, I will be paying 70000 (as principal),170000 as interest and 4,800 as Pre-EMI.
Please let me know how much I can deduct from my taxabale income this year.
I want to know about the clubbing provision under section 64(1)(Vi) when individual transfer any property to his/her spouse and subsequently if that spouse transfer that property to his/her son’s wife than income arising on that transfer would be taxable under whose hand?
I want to know about the taxability criteria of gift received in kind from non relative?
Eg. If i receive during a financial year(after 1-10-09) any gift of two immovable property of fmv 40000 each wound the entire amount will be taxable or the transaction would be regarded as single transaction and no amt would be taxable as each is less than RS 50000 ?
Are grand parents eligable to claim under 80C if they are paying life insurance premium of grand childrens.
Gopalakrishnan,
Yes you are eligible to claim it.
Provided your daughter is not claiming the same from her income.
Shall the investment made on my daughter’s name in ICICI Prudential life insurance(u/s 80 C) be eligible for deduction from my income(Salary/Pension)
If someone purchased a house in name of his wife through a house loan in joint name with his wife.
Where wife is a house wife and have no source of income. Whether He will be eligible for thr income tax exemption.
My query is my father took a home loan. There is 4 more years left in it and my father had retired, so the repayment is now made by me. Am i eligible for tax deduction.
Jeet,
As u have mentioned that u had set up a warehouse & let on lease to someone.
But here u have to make clear firstly that whether you have started a new business of lease or u are having a old business of lease. Than only we can decide about claiming the deduction under 35D of the act.
And as it is clearly evident from the section 35D which read as under.
35AD. (1) An assessee shall be allowed a deduction in respect of the whole of any
expenditure of capital nature incurred, wholly and exclusively, for the
purposes of any specified business carried on by him during the previous year in
which such expenditure is incurred by him :
Provided that the expenditure incurred, wholly and exclusively, for the purposes
of any specified business, shall be allowed as deduction during the previous year
in which he commences operations of his specified business, if—
(a) the expenditure is incurred prior to the commencement of its operations;
and
(b) the amount is capitalised in the books of account of the assessee on the
date of commencement of its operations.
And note also here that if you once claim deduction under this section than you will not be able to claim deduction under any other provisions of the act and in any other previous year..
for ex. depreciation..
Deepak,
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. But make a note over here that it is subject to a maximum deduction of Rs. 100000.
i have purchased a residential land for which i have paid Rs 90000/- as a stamp duty. under sec 80c can i claim deduction on this amount?
i want to bye National Sving Certificate in 10 march 2010.can i eligible for tax deduction for the year 2009-10
i want to bye KVP in march 2010.can i clime duduction for this year ie 2009-10
Hello,
Please advise whether I can take the whole amount(including service tax) on Insurance premium payemnts for 80 C deduction ?
sir
i have set up a warehouse and let it on lease. will i be able to claim deduction under section 35AD.
can i take tax benefit for amount of national savings certificate which is purchased on the name of my minor child plz give information
i have purchased a residential land for which i have paid Rs 90000/- as a stamp duty. will this amount be eligible for deduction under sec 80c?
Pls help. I woke up late to save tax.. Around 20000 amount need to shown in investments/medical bills etc.. can I pay LIC premium of april(due) in march & claim it as investment for this FY..
I have taken a house loan in the joint name of my wife and myself. My wife is a house wife and have no source of income. Whether I am eligible for thr full tax exemption.
family planning allowence is taxable income or not ?