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
I am having a home loan for a flat purchase, which is under construction. it was suppose to be get occupied in dec 2010, but still it is under construction only, so it is not occupied, I do not have occupation letter from builder. I have bank statement (bank certificate) from a nationalize Bank, having all priciple amount (Rs. 178000.00) and interest amount (Rs. 80000.00) paid for this financial year.
Can I get tax benefit on this home loan ? Please suugest.
Thanks
Prabhakar
I am having a home loan for a flat purchase, which is under construction. it was suppose to be get occupied in dec 2010, but still it is under construction only, so it is not occupied, I do not have occupation letter from builder. I have bank statement (bank certificate) from a nationalized Bank, having all priciple amount (Rs. 178000.00) and interest amount (Rs. 80000.00) paid for this financial year.
Can we get tax benefit on this home loan ?
Thanks
Prabhakar
Hi,
I want to do TimeDeposit for five years in the post office for my tax planning. But I am hearing from few of the Post office employees that this policy can’t be exempted under 80C section. Is it true? Please clarify.
my wife is income tax assessee and paying tax. and she has opened ppf account and paying minimum contribution. she was unable to contribute more amount in ppf since 80c was over flow. in this connection, i may kinly be clarified if i invest maximum rs 70000/- im my ppf account. the said amount will be taken to my husband income under 8c in his return. kinly clarify
Dear Team,
I am a salaried person, during current year i have purchased a residenital vaccant plot, which i have planned to start construction during next year. Whether i will be eligible for claiming the stamp paper and registration charges as deduction under section 80 C
Is Loan taken on site is eligible under sec 80c(2). The loan taken on site and house not constructed on this site.
Is the interest amount eligible for tax saving under 80c(2).
Regards
sreekanth M
Hi,
If I myself is pursuing higher education (Graduation), in that case tuition fees paid by me in cash (without any education loan) comes under tax relaxation or not?
there is a point of individual’s tuition fee under section 80C.
Please confirm
Hi,
I have 5 year tax saver FD. I opened it in year 2008. Can i show it every year tax exemption or do i need to open it every year.
Kindly suggest.
I Have invested nearly 36744/- in LIC and 5000/- in PPF and 5000/- in INFRA BONDS.
Please tell whether i have to invest further to save my tax.
My gross taxable income is 2.18Lacs.
please guide me through this.
can a person claim rebate of repayment of amount against housing loan taken for two separate properties, one in his name and secone jointly with hi wife for which the repayment in full is made by him only.
What are the options for tax saving other then the 100000 (chapter VI-A)? Please advise.
I had purcahsed home in Dec 2010 but I have not get the possesion yet so can I claim it for tax benefit under 80c for stamp duty and regeistration fee
whether 5 years tax savings fixed deposit scheme would be encashable after 1 year.
Dear,
I want to know if Stamp duty paid on purchase of Land can be considered under 80C??
Kindly suggest.
Regards,
Naushad
Sir, Can rebate for interest component of the EMI be claimed for more than House/Flat. In other words can this rebate be claimed for two units.
WHAT IS THE LIMIT FOR EDUCATION FEE TO AVAIL INCOME TAX BENEFIT. IS THE PERSONAL TUTIONS FEES PAID TO COACHING CLASS CENTRE LAIBLE FOR TAX BENEFIT.
Hi,
I have purchased a land recently (FY 2010-11) which is jointly registered in my wife’s name and my name. The Stamp Paper charge (8% of the land’s cost), Registration & Stamp Duty (1%) all together came around Rs. 1,57,000/-
I would like to know if I and my wife can use this whole proportion for tax rebate under sec 80C (Stamp Duty and Registration Charges for a home) for this financial year.
Note: Though it is a land, it is been purchased for housing/residential purpose but the construction will commence only after 2 years from now.
Kindly help me in this regard.
Thanks,
Rafael
I just saw an article that if thee insurance coverage under a particular life insurance policy is less thaan 20 times the annual premium then the premium paid will not be tax free and any income generated out of this policy will also be taxable? Is this true?
i wanted to know the maximum deduction of principal amount of housing loan available under section 80c
DEAR SIR,
I have taken a loan of 1.25 lakhs from a bank of which i am repaying it monhly from the last 18 months as deducted from my salary account of Rs 3575/- of which no reciept is there but my bank statement reflects it every month. Can i use this for my 80C deduction
SHAJU MATHEWS
Hi,
I am paying lic premium and mediclaim premium of my father. he is dependend on me. Is lic premium and medical primium of him granted to me as per 80c.
Dear Sir/Madam,
Will the tax percentage be decided based on the total income arrived at, after deducting the investments under 80C?
E.g. Assume my total taxable income is 5.5 Lac/annum which comes in 20% tax bracket, and if I invest Rs 75,000 under 80C how will tax percentage be decided? is it still on 5.5 lac or on 4.75 (5.5-75000) lac?
Regards,
Guruprasad
Respected Sir,
80C has the maximum limit of Rs.1.0 Lakh. Over and above can we take 80D for further deduction of Rs.15000 and 80CCF (Long term infrastructure bond) up to Rs.20000.
i.e. total Rs.1,35000.
Thanks
Kundanlal
Hi,
Is there any schema for which I can save tax, but the period of investment should be 1 year max and I can takeout the money after 1 year, even if I don’t get the interest rate.
If not, which is the minimum period investment scheme available.
Regards,
Dear Sir
If Housing Loan is in both real brothers name, Can both claim full amount of Housing Loan Principle and Interest. Both are workings.In this case both brothers want to claim the full principle and Interest amt. for tax saving purpose
Please advise.
Thanks & Regards
Manish Kumar
i have a own house can i show rent receipt for salary people
thanks
dear sir,
i purchase kisan vikas patra (kvs ) from indian post office, plz advise me kvs is avlable for decucton of undersection 80c for salary person.
regards,
suman kumar jha
pls inform me that which plans of the lic’s having deduction available
Dear Sir,
Suppose if our own residence under construction is in Vijaywada and iam residing in Secunderabad.Then am i not eligible to show the tax deduction for Home interest or principal repayment. And am i not eligible for the house rent for tax deduction. Eligible for Both or either of
Is there IT exemption for my daughter, who has paid Rs.50,000/- in the PPF account of her DEPENDENT mother?
which are the eligible investments, to recieve additional deduction of Rs. 20000 above Rs. 100000 under sec 80C
Dear Sir
If Housing Loan in both husband and wife name, is there any rule for claiming proportionate amount of Housing Loan Principle and Interest. Both are workings.In this case husband want to claim more portion of the interest to save tax
plse advice at early.
thankq
my son’s school is charged inclded an anual fee of Rs.2800.00. can i avail deduction u/s 80c for it?
kindly inform maximam saving can be made u/s 80c
Pl. let me know . can i deduct house rent from my income? and what is the limit.
I want to take new home on my wife name. Bank are ready to pay the lone to my wife . I will be gurantor for her. EMI will deduct from my salary account. Can i take the tax banifit 100%. Because House is not in my name but i ampaying th EMI as gurantor.
Sir,
Me and my wife have recently purchased home, She is second party and i am the first party to purchase. I have paid Stamp duty and registration fees from her account via DD. I wish to know that can she claim the Registration fees and can i claim other part of stamp duty.
please note EMI will be deducted from my account.
Secondly can she claim the whole stamp duty and registration fees.
hi,
I had invested 50000 in ELSS last year.I availed Deduction for the same. now i need money for some reason.
Can i Sell ELSS & withdraw money? (though there is a lock in period of 3 yrs, is there any provision about withdrawal in IT laws?)
Hi Srinivasarao you can show your parents LIC premium amount for tax exemption under section 80C.
Thanks,
Abhinay.
IF I MAID PAYMENT OF LIC PREMIUM FROM MY NRE A/C. IS IT TAX DEDUCTIBLE?
Post office senior citizens Savings Scheme: On maturity it can be extended for 3 years from the date of maturity. In such a case, kindly clarify whether whether the deposit extended will qualify for concession under 80-C
Regards
K Venkatachari
sir,
If I Paid life Insurence premiums for my father and mother, they are dependent on me whether it is exmpted under section 80C.
Sir,
I am an IT professional. My father got a home loan and now i am paying the principle. In the loan document me & my brother also signed for the repayment of the loan. Can this home loan is eligible for section 80C. Can i get the tax exception for this in my income.
Thanks,
Karthick M
sir,
i am state govt. servant,i have taken a policy in the name of my husband,now i want to take 80 c deduction on it.what documents will require for it,which show it my husband is not getting benefit of that policy u/s 80c. plz.help me
thanks
Other than Section 80c and 80CCC where I can invest so that I can get IT rebate/benefit
Hegde
Hi,
I have paid 20,000 for my kids school as registration fee and administration fee to a trust. I have got the reciept also. Is this 20 thousands will come under 80c will i get tax excemption on this, please let me know.
I am also paying tusion fee about 27 thousands, will this also comes unders 80c
Please let me know
Thanks,
Rag
pl.clarify whether senion citizens savings scheme opened at SBI which gives 9% interest and with a lock-in period of 5years qualify for tax exemption under 80c? The bank people or the postal staff do not commit to the question of tax exemption in this scheme while canvassing for it. I have invested Rs.1.00 lakh in it last month. pl.clarify.
My father is gvt employee..his income lies in tax slab at @20%..his saving cross 100000…in dfrnt.form..like GPF,LIC premium..can he save tax by diffrnt investment?..except dsaving limit?…plz tell as soon as possible…
my wife is a govt. employee. she purchased a plot.i am also a govt employee.Bank is ready to give me home loan.
can i save my income tax through this loan
PARVEEN GOYAL
MANSA(PB)
Dear Sir,
My Father’s income is 444800 p.a.We pay LIC premium of Rs 48000+NSC Rs15000+PPFRs5000 Please compute our tax liability & advice how to save tax ?
Yours faithfully
Shivani Joshi