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 Purchasing a Flat in mumbai, the stamp duty paid for the same is allow for the deduction u/s 80C, my question is, if i pay the stamp duty in current year i.e on 27.03.2011 and register the agreement in next year i.e 05.04.2011, am i allowable for the deduction of stamp duty in current year and registration charges in next year.
Your immediate reply will be highly appreciated.
Regards
Dinesh
Is Surrender leave encashment has an excemption for incom tax under 80C?
I am not able to understand how or which amount a senior citizen can claim deduction u/s 80c in the senior citizen saving scheme ( post office ) ?
sir my annual income is Rs.422200.I WANT TO KNOW TAX REBATE U/S 80C. HOW MUCH REBATE WILL GOT.IF I HAVE 4 LIC POLICY.ME,MY HUSBAND AND MY 2 CHILD
what is the limit of lic premium exempt from i tax 80c
is there any exemption on following
1 RELIANCE DIVERSIFIED POSER SECTOR FUND-RETAIL GROWTH PLAN-GROWTH OPTION
2 RELIANCE REGULAR SAVING FUND – EQUITY PLAN – DIVIDEND PLAN
KINDLY SUGGEST ME.
my daughter is studying in college. she is assessed to income tax and having the income from bank on deposits.Now i want to know if she pays her tution fee from her own account then whether she will be ekigible for 80 C
dear sir
my daughter is stuyding in college and she is tax payee and assesee to income tax.
she has income from bank interest now i want to know if she payes her tution fee from her own account the whether she will be eligible for deduction u/s 80-c
Sir,
I am presently working for government of India since Sep 2010. During my PG(2007-2009) I took Education Loan of 1 lack and now i am repaying it through EMI of Rs 2400 from Dec 2010. So can I avail any Tax exemption in this regard …… please convey it to my E mail ID
If two person take the housing loan on combined basis so can both the person get the deduction under 80c and under section 24 on pro rate based.
to Chandra Sekhar
He may purchase Rs. 10,000/- NSC.(Please consult tax-consultant for correct information)
my income is 170000.due tax 1000.how much amount of nsc i have to purchase to save this tax
i want a tax rebate on 1000.how much amount of nsc i have to purchase for this.
Hi,
I’m planning a start-up of my own. That will need an investment of something like 1L for me individually. Will that be counted in as an investment?
Cheers,
Prash
My CA claimed Rs.48,000/- as a rent for the shop for the year ended 31-03-2010.Actually Stamp Duty(Rs.84,000/-) and Registration(Rs.14,000/-) are yet to be paid.Thereafter I will take the possession.then I paid Rs. 5513/- as INCOME TAX as calculted by him.If I pay Stamp Duty & Registration Charges and avail tuition fee (Rs.100,000/-),I need not pay Income Tax this year.Am I correct.Secondly, can I NIL rent for the shop as income.
Hey Rafael.
I have a similar issue as yours..
Did you get a solution to your problem ?
Please let me know when you get to know anything about it..
Thanx..
I am a single parent (female) of twins age 5 yrs. Can you please advise me how I can save tax except tuition fees. I need the best way where I can earn maximum profit with less risk. Is it possible to save tax which has been already deducted this year from my salary? Please answer ASAP.
no you can not claim tution fees paid to personal coaching classes under this section because 80 c deduction included tution fees paid to only reco. education centre like college,school.
yes you claim emi deduction u/s 80 c in two units but max. limit is 100000 only
you can purchase merdiclaim policy
Hello,
My yearly income is 6lacs. I invest in PPF, Life Insurance upto 1lack and 20thousand in infra bond and top of that have mediclame also.
My query is if i go for home loan and if my EMI is Rs18 thousand how much will be i able to save more on income tax. i.e already i am saving tax on 1.20 lacs by investment in ppf lic ect. will i get more tax benifit if i go for housing loan.
yes, u can take the benefit of tax relaxation u/s 80C of the income tax Act.
no education loan is required at all.
I have purchased a house which is under construction and hoping to get possession in coming year 2011, I have paid stamp duty on nov 2010, so can I claim this amount under 80C this year or the year when I get possession. Please suggest.
Yeah, you can encash but you may lost interest of
this, FD can be discounted before maturity.
Dear Sir/Madam
Sir/Madam,
I would like to know whether the post office MIS is exempted from the income tax under 80C.
secondly, my wife has been gifted a plot of 1200 Sq Ft, the stamp duty charges can be included from exemption from income tax.
Thanks for this article.
I would like to know whether deduction in respect of amount deposited in Recurring Deposit Account of Post Office whose term is of 5years will be allowed U/s 80C or not.
Please clarify.
Sir ,
I have taken a Bhima Bachat Policy , a single premium policy from LIC with the single premium of Rs. 84,000/- the Sum Assuerd policy value of Rs. 1,10,000/-. My Drawing & Disbursing Offcier says that only 20% of the sum assued Or the premium amount paid , which ever is least is only eligible for tax relief under section 80C. So he allowed only Rs. 22,000/- instead of Rs. 84,000/- . I feel it is not as per rules. so please clarify it.
I booked a flat & paid stamp duty & registration charges & flat is under construction,can i take a deductionof stamp duty charges under section 80 C
Please reply me.
Hi.
I am claiming for exemption under section 80C – “Stamp Duty and Registration Charges for a home”My company is not excepting the same. They sya it should be claimed after possession of the house. Kindly guide me.
Thanks,
Kavita
Whether the post office recurring deposit scheme is elegible for deduction U/S 80C?
please mail me various section under income tax for a salried person in detail& obluge
Hi,
I paid Rs.50,000/- in SBI ULIP. Can show full amount in 80c?
Rgards
Jayasankar.
i am a saliried person i am suffering from ulcerative colitis i claim the medical bill from my institution as per income tax rule excess of rs 15000/- is tax able i.e will add in my income as income from other soursces
can i exempted under sec 80dd or 80ddb i mean to say my problem ulcerative colitis is eligible for Rs 40000/-
Yes, subject to codn. that u have not taken deduction in MArch’11.
Sir,
I have taken a loan from HDFC in joint names(me and mywife) and i was pay the principal amount to the bank. Bank was taken the payment through ECS on my account only.
So please tell me about
1.i was good for me because i was pay principal amount to the bank or i pay only interest to bank.
2 it was possible my wife was taken the tax benefit on behalf of me.
How can I benifited from tution fees & what is the process to take the benifit from tution fees.
Sir,
Does the registration & stamp duty charges done in Feb 2011 can be claimed in April 2011 under 80c of IT?
Whether deduction under income tax act is available for leave encashment at the time of retirement ?
Hi,
Repayment of housing loan but said housing property under construction than can i get 80 C benefit on repayment.
also can i get benefit U/s 24 for Interest on hosiung loan which property is under construction.
thanks,
jai
disability benifit in income tex
dis ability deduction under 80cc
hello
i had done a coarse in NIIT and APOLLO coaching centre.will it deduct in it.
please reply
hi sir,pls clear me for 80c deduction for childern education limit and ppf limit and home loan principal amt.
and
80D medical insurance benifit for self and mother/father limit.
please repply me
thanks sir
kya 80c mai 20000 rs bond ki deduction extra hai a.y.10-11 mai
I booked a flat & paid stamp duty & registration charges & flat is under construction,can i take a deductionof stamp duty charges under section 80 C
Please reply me.
Hi, I have savings more than one lakh to get exemption u/s 88. One of my friend told me that i can invest 20,000 over above one lakh under this section. Please inform me how i can purchase infrastructure bonds. What is the minimum amount that I have to spend on this item.
Dear Prabhakar,
As per my view, Interest paid on preconstruction or under construction prop.; or interest paid till the property is not occupied the interest paid is capatilised.
Thus only deduction u/s 80c is available.
I am salaried, my father is retired from govt. Can I show his LIC and bank Fixed deposit as exemption.
Please suggest..
Rgds
Neeraj
Sir
My personal income tax assessed from March to Feb. I paid my insurance premium during March. Can I claim the premium deduction in the Month & year of payment
Thanks
D Durairaj