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
Are premia paid for critical illness covers of life insurance policies tax deductible under 80C or 80D any CBDT circular on this issue?
if my dad pay LIC premium can i get benefit of deduction u/s 80C & premium is paid through cheque of dad bank account
Sir,
I am ankit i m having govt job and a personl loan EMI of 8000/- and having agriculture income too. having expenditure on it too. and my son is outside of city for education so please tell me that what con be a good financial planning for me. my monthaly income is 22000/-.
Thank You
I have made investments in Ulip in my parents name. Can I claim income tax benefits for that?
Intimate exact deduction for 2010-11 for 80 C to be saved.
Can a person claim income tax benifit on the principle or interest amount of the Home Loan which is in the name of the spouse only?
Can i get income tax rebait on mortgage housingh loan
My second question is can the investment made in the name of wife under section 80c can be clubbed with the investment made in the name of husband while submitting retun by husband. If the wife’s earnings are not taxable.
Is it applicable for vice versa too?
Hi
If interest earned on my saving bank account(salary account) was 5000/- then will I have to add this in earnings and caluculate the tax accordingly.
If yes then can I revise my return for the assessment year 2008-2009 to add the earning from my saving bank account in the year 2008-2009.
Hi,Can i avail benefit to take policy for my father u/s 80c in HUF.
Hi,
I have a apartment under construction and it would ready in Dec 2010.
I had been paying intrest and prinicipal on it for last 5 years but since I am not having any income in India I didn’t file any returns for last 4 years.
1) Now is there a way I can file return to show the intrest paid for last 4 years and account for it as CFL ?
2) Also is there any way to get any tax benefit on principal already paid ?
3) If yes to any of the 2 above which ITR form and which area of the form shall I show intrest and principal under ?
4) If I get it registered under my brother’s name ( or add my brother’s name) now – can he claim the intrest portion for last 4 years as he has income in India.
1)Can i get tax benefit for property insurance which is already included in emi or it already taken care in emi amount of bank certificate of loan repay
2)can i get tax benefit for life insurance cover and under which section like where to mention in itr1
As stated under this section given below:
“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. ”
My wife was paying premium for one of the LIC policy till last year and i wish to continue from this year onwards since she has resigned and decided to be a house wife.
The organization i work had stated they will not accept this premium for 80cc deduction on my income tax since it not on my name. Please advice, If we have a document ( IT ACT / Rule) which i can provide to my company to substantiate this.
Interest paid during the year will be allowable.
Assessment year 2010-11
FYE 31st March 2010
80 C Investment static at 1 lakh or hiked to 3 lakh
Hi, I have an LIC which is in my name. I have paid 4 quarterly installments in the financial year 2009-2010 and I have claimed the amount for 3 installments under section 80C.I have got my form 16 as well. I would like to know whether my husband can claim the remaining amount for the 4th installment in his income tax return?
Thanks a lot for your time,
Praseeda
Dear Sir,
Please confirm whether SBI MAHA ANAND II covered with tax benefit u/s 80C.
SBI Life – MAHA ANAND II
Please confirm does the investment on above scheme have tax benefit u/s 80C.
In case of Joint Housing Loan in f/o of Husband & Wife, the Housing Loan Principle under Section 80-C & Interest payment u/s 24 can be partly claimed by both or not.
What is limit of Housing loan interest in tax rebate for salry person
1) I had taken loan only to purchase a plot.
2) Last December I have taken another loan to purchase a Flat which will be registered on my name in the coming month.
For both the cases EMI had started. Shall I get tax benefit on Principal and Interest amount paid, for last F.Y ? pls reply.
Thank you Sir.
Regards,
Rajat
My annual income is Rs. 2,16,000. And I don’t have any investments so far except for a personal loan from HDFC bank for Rs. 1,17,000; and my child’s education fees. According to the slab I have to pay 10%, i.e. Rs. 21,600/yr as tax. What are the best investments that I can have to save this amount? I am interested in Life Insurance/ NSC/ ULIP.
How much do I have to invest as a whole or which investment gives me the best benefit to save this tax amount?
I am an amateur in this field so kindly advice.
Looking eagerly to hear from you soon.
Anoop S.
I have taken 150000/-personal loan than am I eligible to save my incom tax?
If yes tan please guide me.
Thanks.
Uttam Kumar.
Jsr.
simply i want to know k hum kitne lakh tak ek sal me kisi project(property) me laga sakte hai taki taxed na ho as i dnt come under taxtation income till now…
I want 2 buy a underconstruction flat in noida which over all cost of 13.5 lakh i want to know that if i m capable 2 pay 50% of the whole amount in Flexi payment plan do i get taxed as my salary is 14kper month only and i m doing this through the help of my mother and myself and all the payment partly done through my account only….plz tell…
I have purchased land, can i show registration fee under 80c exemption?
Can one claim HRA & also home loan interest exemption U/s 24?
Please clarify……
ya you can claim deduction, but you should claim u/s 24 not u/s 80c
Hello!
I have booked a underconstruction flat in Sept-2009 in Mumbai and done stampduty, registration (Rs.3,50,000) on Jan – 2010 possession expected in year 2011
Can I claim payment of stamp duty & Reg Charges payment u/s 80 C in F.Y 2009-2010, even though I have not received the possession?
Some one told me that you will not get any benefit u/s 80C, since you do not have possession
Thanks
sir, i have received LIC maturity amt on 08.06.2009, wether this was a taxable income under the head “Income from Other Sources”. or any othe head.In previous year’s i was claim deduction u/s-80C for premium payment on the same LIC Policy.
i got maturity amt rs. 106000.00 whether this amt was included in total income of computation plzzzzzz tel me imediately
sir,i have sold my agriculture lands by dividing them as sites/ plots.. will i get exemption u/s 54 capital gain ?? if no , wt are the other ways to get exemptions??
I have taken loan from my employer(Govt.department) where the principal amount is recovered first and then the interest will be recovered later.The property is not completed. Ihave taken loan in the FY 2009-10.Can I claim accrued interest on housing loan in my tax return i.e. assessment year 2010-11.
I have taken loan from my employer.(Govt.Department)where the principal is recovered first and then interest will be recovered.The property is under construction. Whether the accrued interest can be claimed under Income from house property in my tax returns for the assessment year 2010-11. Please let me know at the earliest.
can registration expenses of residential land purchase admissible under section 80c
Dear Sir,
Our building is recently got redevloped under 33(7).our society is already formed.
Society is of 17 members.builder had promised corpus fund of rs.65 lacs.is that amount taxable in the hand of society? or shall we take it on an individual basis.
sir my wife is doing MBA. should i get deduction of tuition fees under 80C.
I HAD CONSTRUCTED (THROUGH A BUILDING CONTRACTOR) ON THE LAND PURCHASED BY THE SAME CONTRACTOR A HOUSE AND FOR THE SAME I HAD TAKEN HOME LOAN. THE LAND WAS PURCHASED IN 2005-06 AND HOUSE COMPLETED IN 2006-07. NOW I WANT TO SALE THE SAID HOUSE. I HAD TAKEN CLAIM OF 80 C FOR REPAYMENT OF HOUSING LOAN THROUGH OUT THE PERIOD.
MY DOUBT IS” WHEN I SALE THE HOUSE NOW, WHAT WILL BE THE TAX LIABILITY APART FROM THE LONG TERM CAPITAL GAIN.
PLEASE CLEAR MY DOUBT AS SOON AS POSSIBLE WITH DETAILS.
THANKS
Dear Sir,
I payed Rs 32,000.00 as a top-up amount towards my traditional type (not ULIP) insurance policy of Bajaj Allianz Life Insurance Company..Is this amount liable for Income tax Deduction under Sec 80C ? If yes, Do I need Tax Benefit Certificate for this amt seperately or the receipt is suffice. pls reply.
hi ,i want to invest some money inho jeevan saral . my agent says the amount invested in jeevan saral is exmpted from tax but some other says it is not . please clarify the matter .
if a person say Mr. A has taken lic poicy and beneficiaries are his spouse and childrens an iF in a particular year if such premium is paid by his spouse (Mrs. A). can Mrs.A claim it under 80C?
I am investing 1 lakh every yr under section 80c. having done so still the tax on my income comes upto 20k aprox. can i save this 20k also? can i invest this 20k somewhere?
I have leased a house for Rs. 6 lakhs and want to claim exemption under HRA/Rent. I am aware about Tax exemptions for rented house is based on actual rent paid or HRA. I need clarification on possible exemption on leased house and how much exemption can be claimed. Thanks!Jana
Hi,I bought house and got registration on March-21-2009,I want to submit IT returns for stampduty and registration charges,would you please let me know what all documents I need to submit for stamp duty & reg charges under 80C.Thanks & Regards
Subrahmanyam
I have also deposited 3lacs in the local bank for tenure of 2years. But it seems this kind of investment has a lock period of min 5 years. So can I change the tenure of my FD now from 2 to 5 years so that I can get tax benefit on this investment. And if I want to withdraw this total amount before pre-mature how would it affect on interest rates. Will there be any problems should I face/loss in terms of money. Please advide here too.
I want to invest 2k everymonth in SIP-Mutual funds for about 3 years. SO can i get tax exemption on this kind of investments? Is there any limits on this investments. Please advice.
I have purchased a house in noida in 2000 by taking loan from my deptt in which i am residing.
Now i have recently purchased a house in lucknow by taking loan from hdfc bank in which i am not residing.
I want to know whether i will get benefit on both the loan.
i have a ULIP plan having a three years locking period. now after this period i can sureender the policy. Now the big qestion is weather IS there is any lock in period for the premium paid in the last two years for which i have allready benifit under sec.80c. I”ll be highly obliged if you answer this on my mail id.
I have paid Rs 24000 LIC premium in the month of april 2010 having due date in march 2010.Can I show this premium in the calender year 2010-11 ang get benifit.
The limit of rent has been enhanced to Rs 15000/ ie Rs 180000/pa which is sought to be made effective from July 2010. We will have to wait for passing of the bill.
sivadas chettoor
siva208@yahoo.com
Suppose i did stamp duty & registration in previous FY & i got possesion in this FY. Can i claim Stamp duty & registration this year?