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
KINDLY SHOW GUIDE LINES TO GET MORE Deduction, SAY 150000 OR MORE.
Very much helpful. WSish ur advice all along.
URS Dr.R.K.JENA
Recently in Nationalised Banks the retirees were given SECOND PENSION OPTION and for that they have to pay certain amount towards PENSION FUND GAP .
Whether this amount is exempted from income-tax? If yes then it is full amount or a limit?
I think this information will be useful to entire community of bank retires opting for second pension option.
Please write to me , even at:-
[email protected]
Thanks a lot in advance.
M.B.Desai
No,deduction u/s 80c to 80u are not available for short term capital gain
can we save short term capital gain with invest in 80c
can i invest Rs.1 Lakh in NSC
Dear Sir
If Housing Loan in both husband and wife name, Can both claim proportionate amount of Housing Loan Principle and Interest. Both are workings.In this case husband want to claim the portion of the principle and portion to wife.
Please advise.
Thanks & Regards
V V N Murthy
Under Life Insurance Premiums i am not clear about the sentence “If you are paying premium for more than one insurance policy, all the premiums can be included”
Plese can anybody explain
can I claim rebate on fees other than tuition fee of children’s education expense under 80c?
My question is whether any nationalised Bank will accept the senior citizen’s scheme 2004 at Chennai?
Sir,
Where I can invest in Chennai in the senior citizen’s scheme 2004. Can it be done in any nationalised Bank?
Hi,
Please advise if a NSC or a FD in my name would be valid for my husband to declare as savings under 80c.
Thanks
Randeep
i have rd in a post office for the 5 year can rd is under 80c saving scheme
Sir,
Recently i bought a Residential site(220 sq yards) at Kakinada. I have paid around Rs 58000/-(8.5%) as registration charges for this property(stamp duty)
Now, i would like to know from you that: Is it Eligible for Sec 80c Exemption? If Yes pls let me know what is the Limit?
My mail ID is [email protected] & [email protected]
pls inform as early as you can.
Regards
Kamesh.
sir,i want to get exemption other than 1 lakh
i heared about the IDFC infrastructure bond,just tell from where i can buy that bond and what i heared is rigth or wrong
Hello All,
can you tell me pls criteria of LiC premium for Parents
Sir,
If a home loan EMI is more than Rs. 1 lac is fully deducted or not
what about infrastructure bonds is their deduction over&above one lac
IS INVESTMENTS IN MUTUAL FUND ATTRACTS DEDUCTION U/S 80C
Kindly let me know the investments eligible under sec 80c described in dtc
I have taken home loan in my wife’s name and I stood as co-borrower. When my wife approached for tax benefit for home loan, the employer said that only 50% of the amount repaid towards Principal and Interest will be taken into account and the remaining 50% should be claimed by me since both of us working.Is there any such Income Rules says so. Please clarify me.
Sir can u please tell me can i claim deduction in respect of rent paid by my father..if yes wat is the limit
Dear Sir
1.property is in the name of my father and i repay the housing loan through my account. so who will be eligible to get deduction u/s 80C
2.NCD Is under 80C or not
Contribution to ELSS got the deduction u/s 80CCB.not u/s 80C.just chk it out..
If NSC was on two persons name my & my mother name, amount paid by me, is it applicable under 80c for my Tax saving?
Tax Saving bonds/NSC/POKVP taken in the name of my parents will be considered under 80C or not.
I want to buy IDFC Infra Bond for Rs.20000/- in the name of my wife who is a housewife. Please tell me this amount can be claimed for rebate in income tax by me.
can a mother gift her property to her daughter in law(son’s wife). is there is any provision to get tax benifit
can a mother gift her property to her daughter in law(son’s wife). is there is any provision to get tax benifit.
NCD Is under 80C or not
I Invest In NCD It is Exempt In 80C or not
I invested in LIC policy for my only grand son who is 8 years old for his education and his parents capacity. Am i eligible for deduction under 80C
Thanks
Dear sir, i bought a flat in Naini allahabad and paid stamp duty & registration of rs 81000/-. the property registred on 30/06/2006. How and what amount can be claimed as income tax benefit.
My question is if grandson is life to be assured,father is proposer & grandfather is Payer can grandfather take the tax benefit for u/s80c
Thanks & Regard
Vikram Singh
Haridwar (U.K)
sir
property is in the name of my father and i repay the housing loan through my account. so who will be eligible to get deduction u/s 80C
Sir,
Our Business Income is 216000/- in A.Y. 2010-11. Our Home Loan Interst is 24365/- and I will Pay 8000/- Per Month as a EMI on House Loan. Lic Premium is 5000/-. What amount can be claimed as deduction and calculate income tax on such income.
Thanks
sir i want repplai
dear sir, i bought a flat in navi mumbai and paid stamp duty & registration of rs 183000/-. the property registred on 30/08/2010 and possession is being given on dec 2010. how and wat amount can be claimed as income tax benefit.
thanx
sir i taken home loan from SBI for purchase house but i cant get pussetion how i get tax examtion.
Hi,
I am staying in rented house chennai and getting HRA exception (Under Sec 10) by submitting rent receipt.
I would like to buy a house at my hometown for my parents by taking housing loan.
So, can i get benefits of both HRA exemption (Under Sec 10) and Housing Loan (under sec 80c for Principal and Sec 24 for Interest)?
Thanks in Advance,
Sampath
I want to purchase a house in the name of my wife to save stamps on registry. She is a house wife.
I have applied for house loan from HDFC Bank, will I be eligible for tax rebate on house loan.
Read more: https://www.taxguru.in/income-tax/all-about-deduction-under-section-80c-and-tax-planning.html/comment-page-4#comment-29738#ixzz0yLWXyKs3
I want to purchase a house in the name of my wife to save stamps on registry. She is a house wife.
I have applied for house loan from HDFC Bank, will I be eligible for tax rebate on house loan.
Dear All,
I have purchased a residential plot jointly with my cusin.My query are:
1. How much amount can i claim u/s 80 C for the payment of stamp duty.(is it 50% of total value of stamp duty or full value.)
2. I have sold the plot in same financial year. Even then can i calim the tax exemption U/s 80c for the payment of stamp duty.
thanks in advance.
Pankaj
thank you
Deduction U/Sec.80C can be availed by the individual only on the insurance premium paid by such person only on the name of Self, Spouse and children.Hence, Mr.Sunil u can claim deduction on the amount which u hve paid for ur wife’s Insurance policy.
i want to all update about tax & bussines related rules & regulation
I took a Life Insurance Policy on my wifes name for which i am paying the premium as she is housewife and have no source of income. Will i get the benefit under section 80C of Income Tax Act
i am paying mba fees of Rs. 10000=00 can i claim for deduction u/s. 80c ?
Hi,
The property is in my dads name, now i am planning to take a home loan on that property for construction purpose. He is retired and not working, I will be paying the EMI, will i be eligible for tax benefits/ savings.
Thanks in advance,
Murali
under section 80c let me know zero tax amount for year 2010-2011