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
Sir,
Short term mutual fund (non ELSS) gain is taxable? What about long term mf gain?
Dear All,
Pls tell me whether i can avail tax exemption for stamps duty and registration charges for purchase of land. If yes which section of the act.
with regards
Prashanth Pai
morgage loan came under 80C ?
pls tell me whether birla sunlife is eligible for deduction under section 80 c
Dear sir / Mamadam
I have submitted may ppf withdraw from in my previous company virgin mobile ltd on feb 11 still it is pending as norms it takes sum 45 working days and I have spoken in virgin mobile they have told me that they have submitted the form in pf office on 28 mar 2011 but still it is pending
D/Sir,
plz let me know that in which investment i will save tax
Sir/Madam
Can you please clarify if Govt.’s New Pension System(NPS) qualifies for tax benefit under 80C?
I WANT TO INVEST MY SALARY ON CULTIVATION SHALL I DEDUCT FROM MY TAXABLE INCOME.
I think ELSS should be placed higher in the list, particularly for young professionals who will prefer moderate-to high risk investments with much higher returns. FD, PPF are more logical to middle aged professionals.
DEAR NAMRA,
AS FAR AS THE DEDUCTION OF REPAYMENT OF PRINCIPAL OF HOUSING LOAN YOU SHOULD BE THE OWNER OR DEEMED OWNER OF THAT PROPERTY ON WHICH LOAN IS TAKEN AND THE PROPERTY SHOULD BE ONE WHICH CAN BE TAXED UNDER THE HEAD OF INCOME FROM HOUSE PROPERTY.
If I purchase a shop on loan basis will it be considered for getting deduction same as housing loan….
Sir,
I wish to claim rebate of Rs 150,000/- on the interest paid against house loan. I am submitting the return online on form ITR1, but see no colum to claim this rebate (section 24(b). Will you please suggest, if I have to deduct it from the total salary and then fill it, or there is some other way of doing it.
Kindly reply.
Thanks,
Kamaljit singh
Professor
Dear Sir
Under Deduction 80c can i claim refund of an amount Rs 22745=00 which is paid for admisson to college but the bill is collected as Managment fee for PCME (subjects) by college total amount collected for year 2010-2011 is Rs 25500
i have paid TDS amount under which can i claim this refund
Management fee PCME (subjects) Rs 22745-00
College Fee Rs 1255-00
Corpus Fund Rs 1000-00
College Fee (language Hindi) Rs 500-00
Total Rs 25500-00
Please sir would you kindly Reply me urgently
THANKING YOU
sir,
i have to pay rs 70000=00 being tution fee to my daugter doing b,des
from indian university,i want to know whether i will get rebate for
the the amount mentioned above in full or there is some limit because
one can save only 1 lac for financial year 2011-12
thanks
pl reply me soon
Sir,
I want to go for LIC’s Jeevan Anand policy for an amount of 5 lacs and for a period of 20 years.The sum of all the annual premium turns out to be more then the sum insured.What are the rules for getting the tax rebate as someone suggested that for this policy under revised taxation rules for 2011 we cannot get tax rebate as the premium amount is more then the sum insured and some other reason too.Kindly confirm and reply asap.
Thanks
Sourav
Can A Father Take An Insurance Policy Due On Earning Son And Avail Tax Benefit.?
Eg :
Father Age = 68
Son’s Age = 44
Can Father Aged 68 Take A Policy On His Son Aged-44 And Claim The Tax Benefit U/S 80c For Life Insurance Deduction??
Hi, I have invested in year 2005 for a plot for Rs. 5,00,000, since there was some issue with land allocation, they returned my principal amount of 5 Lac in year 2009 and last year interest for 4 to 5 years.
My query is that is interest income taxable and need to be added to my main salary or I can avail any depriciation.
Thanks
sir,
i am purchase aviva polciy dtd 31.3.11 but ch. pass in my a/c dtd. 15.4.2011 pls till me i can taken tax benfit in F.Y. 2010-11
OVER ALL LIMIT UNDER SEC 80-C IS RS.1,00,000/- AND ADDITIONAL LIMIT OF RS.20,000/- IS ALLOWED FOR INFRASTRUCTURE BONDS. Is there any chance to increase this limit ?
Will it be possible that father will give loan to his son for purchasing house.
if i paid to insurance policy pension plan premium of my dependents,
is this value help me in tds deduction
Hi,
I paid an insurance premium on March 29, 2011 and I did not claim that premium for FY 10-11. Can I use that premium for 80C benefits this year, i.e., FY 11-12?
Thanks,
Mangesh
I will be paying fees for my cousin brother for his MBA in India.
Can i claim deduction on the same.
in case i withdraw money of icci prudential LIC before maturity then loss on that will be allowed as deduction from income from other sources?
Sir— Can I claim short term capital loss on shares dealing on delivery base, from my income of business and profession or from interest recd. from banks on FDs ?
Thanks . K H Mahajan
How to Value FOC Stock
I want 2 know the tax deduction list of every policy….plz rply me
sir, i have been just recruited in a govt. job. my annual income is 2.23 lacs. what do you suggest me for tax saving.
i already have lic policy of monthly premium 2300.
Sir,
I am an NRI who plans to settle in India. I have Insurance policies in UAE and wish to continue to pay the premiums for the same even after settling in India? How can I remit the payments towards premiums from india ?
Hi,
Kindly advise the liability of Sevice Tax on Cargo handling service provided for agri product, which is providing to Singapore base Company.we have also received remittance in foreign currency.
Thanx in advance
Actually i donate every month 5000/- PM to handicarft school and my anuual income is 3.4 lakh means i donate yearly 60,000/- PA. My qus is how many amt i save to showing this donation.
Hi,
I have paid Life Insurance premium from my credit card account.
Can my wife claim income tax exemption for this premium under 80C?
Please advise.
Dear Sir,
If a tax payer is getting heigher education. will the fees of education cover under section 80 c.
Regards,
Kumar Ashish
CAN I TAKE THE BENEFIT OF SEC 80C ON DEPOSIT OF TUITION FEES OF MY YOUNGER BROTHER
Dear sir,
Kindly advice me concern Tax benifit as I purchaged a house with NRI MONEY and the rent will give by person in IR-9000/- monthly and depositing in local bank. I had PPF A/C and yearly some what I deposite 30000/- wife and kids LIC 30000/-yearly 15000/- in post office 20000/ on health insurence, 25000/- daughter insurence 50000/- sbl life insurance etc.
advice me for the Tax on money I recieved from rent can my all above saving can come under it.
Regards
Kailash
Dear sir,
I want to know that if I invest in this financial year (say in ELSS). But from next year after new tax law ELSS are not exempted. Will the investement done in this year be eligible for tax exemption.
Regards,
Harsh
CAN I TAKE THE BENEFIT OF SEC 80C ON DEPOSIT OF TUITION FEES OF MY YOUNGER BROTHER
How much eligible to tution fees of 2011-12 ass.year
Sir ,
I have taken a Bhima Bachat Policy , a single premium policy from LIC with the single premium of Rs. 1,00,155/- the Sum Assuerd policy value of Rs. 1,50,000/-. 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. 30,000/- instead of Rs. 1,00,155/- . I feel it is not as per rules. so please clarify it. If he is right then I want to know wether I can get tax benifit of another 20% for next 4 years.
dear sir
i have taken lic policy in april 2010, total sum assured is Rs 150000 and for that i have paid one time single premium of Rs.100155. As per incomtax act, only 20% of total sum assured is refundable u/s 80c i want to know wether i can get tax benifit with same policy for next 4 year also ?.(20%x5)
dear sir
is the premium of rose valley in 80c?
Highly Appreciable Steps for I.T. Return
Is there any change in VPF eligibility criteria for qualifying investment under section 80c.
what is the relaxation limit under section 80c
To,
Dear Sir,
i have purchase const house and paid stamp duty & registration charges pl advice exem under section 80c.
sir/Madam
I have purchased the flat in Maharashtra,Iam presently working in Gujarat.
Beside paying STamp duty ,Registration Fees I had paid VAT TAX also
DOes THIS VAT TAX EXAMPTED FROM /FOR INCOME TAX> IF SO PLEASE LET KNOW
THANKS & Regards
S K GARUD
Dear Sir,
I have a Unit link single premium pension plan, having complimentary SA of Rs. 1000/-.
Now i have opportunity to pay unlimited top up in it.
If i do so, can i get 80’c’ benefit on top up?
Kindly reply on my mail id.
Regards
Amit.
Dear Sir,
We have two property
Ist propert – it in joint name me and my wife who is govt employee. I have take staff loan from my company and paying eniter emi. My wife is not paying any amount towards loan repayment.
2nd propert- taken in my wife name and her income is quite sufficient to meet emi requirment. But due to bank requirement, bank has made me co-applicant, however i am not co owner of 2nd house. Entire emi will be paid be paid by my wife throuth her salary account.
Pls let me know the tax treatment. How can we both get the maximum benefit.
Rgds
Narendra
Wanted to know whether persons living with HIV have any special tax rebate as that under 10i etc.?
I have a query, If wife is dependant and studying. Can her husband claim rebate on her tuition fees under section 80c