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
if i paid my wife L.I.C. premium weather i will tax exemption benefit if my wife is salary employee
whether i can get rebate under 80 c for policy on my husband’s name ?
My investment in 80 C has crossed the limit of 1 Lac. Can I allow my wife to show the surplus of LIC premiums paid by me on my life policies as her investment to claim rebate under 80C
My investment in 80 C has crossed the limit of 1 Lac. Can I allow my to show the surplus LIC premiums paid by me on my life policies as her investment to claim rebate under 80C
3,00,000 Per annum,
Have 20,000 NSC & 18,000 in LIC. Should I need to show more Investment so that tax may not get deducted.
Please reply
BOTH HUSBAND AND WIFE WORKING IN GOVT. SERVICE. WE TAKING HOUSING LOAN FROM H.D.F.C BANK IN JOINTLY . BOTH SHALL DEDUCT PRINCIPAL AND INTEREST FULLY.
whether gratuity deducted from salary is eligible for deduction u/s 80 C?
whether grandfather can claim insurance premium of his grandson for IT purpose
Will I get Tax benefit on Stamp duty and Reg fees for this year (2011-12) under sec 80c if possession is after 1 year(Next financial year)? And Im also paying VAT and Service tax on property. Are they also exempted. if yes under which section?
sir, in want to know that whether my father in law will get the benefit of section 80c under income tax act, if he pays the life insurance premium of my policy as well as of my wife’s policy ?
Sir
1. Are 5 years bank fixed deposite interest amount is taxable?
2. If yes, the interest amount is calculated as income per year OR on maturity?
How to calculate ?
I have personal loan from my salary account bank. Shall I get tax exception for this?
I have taken a housing loan which is in joint names of mine and my wife. My wife is also a working lady. The house property is also in joint names. The EMI is being paid totally out of wife’s salary account due to operational convenience and household expenses are being met totally out of my account and there is an understanding to this effect between us. Can I claim benefit of tax under Section 24 & 80C for the whole amount of interest & principal.
sir,
i have saved up to Rs.o1 lac for income tax benefits during current financial yr…kindly communicate whether section -80c of deductable items such as ulip inked insurance plans of sbi is included in the margin of Rs.01 lac.. or not.?
02) sir, .if it is beyond the limit of Rs one lac what is time limit for submission of return?
sir,
i have saved up to o1 lac for income tax benefits during current financial yr…kindly communicate whether section -80c of deduction is included in the margin of Rs.01 lac.. or not.
I have purchased a flat in non municipal cooperation (gram panchayat) and have not taken loan from any bank. I have an agreement with the builder for paying the amount as EMI and at 0% Interest. Can I claim it as housing loan payment under 80C. If yes what document do i need to submit to save TDS.
I had gon all the comments mentioned above but didn’t found answer of the below question Can husband get tax benifit on the premium paid for the wife’s life insurance policy.The policy is on the name of wife.But the name is before marriage name and contains the address same as of me? .If yes what documents needs to be submitted.
Kumar Ashish ,
I am also looking for the same information.
property/loan is on both wife and husband name and EMIs have been paid by husband from citi bank can my wife claim tax exemption u/c 24 or 80c ??
if no , what are the penalties for claiming interest like that ?
Regards
Anil
sir, i am doing mba is it fees recipt is help full in tax diduction
Dear Sir,
Gretting for the day.
A query regarding housing loan. If husband and wife both are working in private sector and come in tax. Housing loan had taken on the name of husband and wife. But payment made by husband bank account. Interest component are above 2 lacks. Can husband and wife both take deduction on the interest component.
Regards,
Kumar Ashish
Best.
For Application of All Infrastructure Bonds (80CCF) Contact – Amit Surpuriya – 9850873688 – Pune
KSHITIJ FINANCIAL SERVICESMutual Fund | Infrastructure Bond | 54EC Capital Gain Bonds | Company Fixed Deposit | Medi-Claim
Kindly intimate me :
1. Money invested in the name of parent/children –
Does the money received is taxable in the hands of parent/children ?
2. IIn case, the money is invested in joint name with parent/children (1st holder) & taxpayer (2nd holder): Can the income on investment be shown as income of 1st holder & the 2nd holder can get rid of tax burden?
regards
In a 5 year Fixed Deposit in bank is the principal and interest taxable on maturity
Hi,
My father was expired and my mother is a housewife and i am paying LIC for her as she is dependent on me, can i take tax exemption by providing her LIC Receipts of her if yes is there any document i need to attach for that.
Me and my wife have taken a home loan. Also we have SBI Life Insurance (SBI RINN Raksha) for Funding of Home Loan Insurance Cover. Please advise can we claim exemption for paying the Premium amount.
This coverage is paid against another loan by the same banker that of home loan. We are paying interest for the Insurance Loan. Can we get exemption for both the premium paid and the interest for the insurance loan ?
Invested in post office monthly paymnet 1500. is it deducted u/s 80c?
hi, how much amount will invest in elss m.f. in this assessment year?
Regarding Stamp Duty and Registration Charges –> Can husband and wife both claim the Stamp Duty and Registration Charges, in case of joint home laon?
I am purchasing a site from BDA and shall pay registration charges and stamp duty of Rs 2 Lakh , will the amount paid for registration charges and stamp duty for site purchase extemted under section 80 C , Please advise.
Me and my wife have taken a home loan. Also we have SBI Life Insurance for Funding of Home Loan Insurance Cover. Please advise can claim exemption for paying the Premium amount.
This is coverage is paid against another loan by the same banker that of home loan. We are paying interest for the Insurance Loan. Can we get exemption for both the premium paid and the interest for the insurance loan ?
Hi, whether Grand parent has a benefit of 80c , for taking insurance for granddaughter.
Hi
can i show my husbands lic policy for tax deduction.As he is remitting 30000each in 4 installments.can we both show the same policy in deduction(as 2 installments for me2 installments his)
For Infrastructure Bonds processing, please call me at 9241545354 (for bangalore
only)
can a HUF claim exemption U/s. 80/c if HUF give cheque to karta,s PPF Account
Hi, can premium paid for a pension plan by father for major earning child qualify for deduction under section 80CCC. Please guide.
Hi
It is mentioned stampduty for purchase of residential property can be claimed under 80C.
Is that applicable for purchase of residential site(KHB) ?
Next need suggestions for best option which will help in tax saving as well as my parents and child.
Thanks.
hi,
this is sathish, i planned invest Saving s certificate in Indian bank for Rs. 50000 for the 5years period. This certificate comes under 80c. i have some questions regarding tax. please clarify the following points.
How much amount will deduction on 50000. whether whole amount or some percentage of amount only.
can i show savings certificate for next year also, is that possible.
please advice some best plans for tax savings.
Thanks in advance
sathish
Dear Sir,
I have a question about investment.
If husband and wife both are working (private sector) and tds deducted of both. Will husband show the investment for tax exemption, if the investment as like LIC is on the name of his wife. His wife will not show the investment in her organisation.
Please reply as soon as possible.
Regrds,
Kumar Ashish
Hi,
I am paying ULIP in my spouse name. Can I show that for Income Tax Exemption?(she is not filing IT)
in which section agriculture income comes?
Infra Bond gives an additional deduction of Rs.20,000 under Section 80CCF and not under 80C.With this the total deduction will be Rs.1,20,000(1,00,000 from 80C and 20,000 from Infra bonds)
Kindly confirm that how many limit amount can be claim from Tution Fee for rebate under 1 lakh excemption
Hello Sir,
Recently i have bought a house,for which i had to pay 8 lacs and then remianing was loan from Bank.My EMI’s have not started yet and will start in next financial year.Please let me know if the rs 8 lacs can have the benefit under section 80C.Thanks!
Shyam
can i claim tax benefit u/s 80C and 24 if i take loan on land + construction from finance company.
WHICH FORM I HAVE TO FILL TO GET TEX deduction under Sec 80C AND WHERE I WILL GET THE FORM( IT RETURN)
is it right if people are showing all atc’s, deduction on what basis u r cheacking? that
Hey,
I would like to know whether Education loan is consider in 80C or not?
I am paying 60k p.a. and also 18k for life insurance.
Thanks.
hi ,
i want to know twinkal is under 80 c taxbenifit?
sir i want to know that if wife paid LIC premium of his husband, should wife get deduction of that premium on his IT return