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 purchased icici pru tax growth on 30 march 2011 from icici bank, mira road, with clear instructions that i want this for fy2011-2012, now they have completely disregarded my instructions and have given the units as of april 2012, the clerk of icici bank says his CA friend says that i can claim deductions for fy2011-2012 as the cheque given to them is dated 30.03.12 as it takes time to process , but the intention was clear for the product for the fy11-12. I need clarification for the same.
Thanking you,
Edison
hi….
i m earning above twenty thousnd whch wuld my best deal to save tds and tax.
If their is only on child and his Tuition Fees paid Rs. 100000/- then what is exumption amount unde section 80 c ?
Dear itsjiny, you can get extra exumption on Interest on House loan uptill Rs. 150000/- and this amount is apart from 80C’s deduction of Rs. 100000/- so overall you can get 2.5 lac exumption from this scheame.
sir, somewhere i had seen section 80CCA. Pls tel me about that
I have a housing loan on my mother’s name.
cant i produce that for tax exemption.
HI,
If the income is around 4 lacs. What is the best investment under 80 C?
if i take housing loan and get deduction under it upto 1 lac – is it over and above the investment i make in ppf (70 K)?
Pl guide. Thanks.
Sir,
I Have a LIC Policy for 18000/- per year. Can I claim for Rs 5000 for myself and the rest 13000 for my wife income tax under 80C.
Thank You
My mother is not working. My father is working. His salary is 5,000/-. So can I use my Mother’s and Sister’s LIC amount for my Income Tax Return filing under 80C deduction..
Both my mother and i file separate income tax. i am married and independent.now,my mom took a insurance policy in my name and paid vide cheque 50000/- from her account.can she claim 80c exemption on it?
Dear All,
My annual income is 120000 .is it required to submit income tax return.
Does Mortgage Loan comes under 80c for Tax Deduction.
Is Mortgage / Housing Loan, is one and same.
regards. SIva Kumar
i have lic premium rs.50000/-annual and gpf rs. 50000/-annual. therefore 100000/- limit under section 80c is over. can i avail children education allowance deduction rs.2400/- for two children?
I want to fill my ITR, So Please send me complete deduction details as per income tax
Dear sir, I have deposited Rs. one lack in deccan gramina bank, hyderabad for the period of 7 year & 7 days, is it helps in tax saving?
I am PSU employee. Whether can I get the benefit of NSC purchased by me in the name of my wife in the F.Y. 2011-12 U/S 80 C of the Income Tax Act.
dear sir,
My query is through which portal I can enter my investment details under 80CC?
Hi sir, I have a query regarding LIC policy payment through cheque.I have made a payment through cheque on 31st march 2011 and have got the premium receipt showing dated 31st march 2011 but the cheque was encashed by LIC on 7th April 2011 through my Saving bank Account. Will i be eligible to claim deduction under section 80C for the financial year 2010-11? Thanks a lot for spreading your valuable knowledge.
Regards shyam
dear sir,
I would like to ask “is the increase in ppf limit to rs. 1,00,000 will be applicable to A.Y2012-13 for the purpose of deduction under sec 80C, if not then from which financial year,
i wiil waiting for the reply
i have paid stamp duty registration fees on 17/01/2012. However i am taking possession on 01/04/2012. Can i avail the deduction in F.Y. 2012-13? I have taken the housing loan for this house purchase the repayment has already started. from which year i can start availing the benefit of that?
hi to all tax payer i can help you to deduction from 80c from income tax act just buy an insurance policy that can give you 70percent returns and you life also will will be cover from risk but be care full that if you want to invest in such know the all details and i will help you from this you can contact my 91 8546992056 and shahidtherobinhood @gmail.com for all are welcome
Bangalore(karnataka)
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Sir,
I am investing 1500/- per month as RD in Post Office, the total tenure period is 60 month cum 5 years. One year investment comes as 18000/-.
Can I show this amount to the Form 16 A for the IT filling. Please advice.
If so, then please share the printed notification shared by the Income Tax Department.
if i will take national saving certificate joint name with my sister ,then can i get tax exemption under section 80C??
Dear Sir,
I have already home loan & it’s shown tax benefit but I have purchase one more home this year hence we have claim this new home registration & Stamp Duty for I.T benefit. u/s 80 c
Please update me.
Thanx & regards,
Ravindra
Sir
just i want to know that is their any limits for fixed deposit in Income tax.?
If the life insurance premium & Post recuring is paid by son by his account or ecs systems for his father then son can’t claim the deduction, but can father claim deduction for this investment?
I have contribute to Employees State Insurance Corporation (ESIC) through my salary, guide me for deduction claim u/s 80C or 80D
Sir,
I have purchase Falt in Jan-2012, please tell me and i have paid Stam duty to govt.can i take banifit against Income Tax exemption under 80c.
Please update me.
If I invest Rs. 37000/- in single premium of LIC’s BIMA BACHAT Policy, am I entitled to get full exemption on the premium paid under 80C? Accounts Deptt of my office says that I will only get 20% of the premium as tax rebate.
Kindly enlighten me on this issue please.
D BOSE
the write up is good for general knowledge but not for calculation purpose. what are the limits applicable for each type of investments?
the write up is good for general knowledge but not for calculation purpose. what are the limits applicable for each type of investments?
the write up is good for general knowledge but not for calculation purpose. what are the limits applicable for each type of investments?
the write up is good for general knowledge but not for calculation purpose. what are the limits applicable for each type of investments?
how to get these updates to my mobile
how to get these updates to my mobile
how to get these updates to my mobile
Sir,
i am getting my 50% HRA from company & same 50% is paying to company for giving accommodation. But sir, my parents are also living at rent and i am paying rent for his rents. Can i save my income tax, please suggest.
I invest rs. 50,000 as Term Deposit for 5 yrs. in SBT during february. I claimed this amt as exemption under section 80 c. is it admissible? will the interest to be included in next years income? what are the consequences if I withdraw the amount before 5 yrs.
I invest Rs. 50,000 as Term Deposit for 5 yrs in SBT on February. I claim this amount for deduction under 80 c. Is it admissible. Will the interest to be added in next years income. what are the consequences if we withdraw the amount before 5 yrs.
Sir, my total income per month is 50075/-. how much should be my saving for claiming income tax benefit. Please let us know the celing limit for LIC, Medical bills, Health Insurance, PPF, Housing loan, Infrastructure bond.
Thanks in advance
Dear Sir, I want to claim tax on capital gains from sale of land through purchase of house. Is the saving applicable even when new asset is financed through loan or I need to repay the loan from the proceeds of sold land to claim exemption.
Also let me know how to claim exemption on record(through I-T return filing ..? or what)
thanks
Dear Sir, Kindly provide information about income tax exemption under section 80C or other sections for the amount paid on service tax 2.25% and vat 1% (on the aggrement value of Flat) in the present financial year 2011-12, the possession is also in this financial year 2011-12. Your expedited reply would be helpful to me.
I am maintaining a D-mat account with my wife name. Can I claim IT tax rebate on infrastructure bonds held in the name of my wife.
I am maintaining a D-mat account with my wife name as 1st holder. can I claim IT tax rebate on infrastructure bonds held in the name of my wife as 1st name and my name as 2nd holder.
sir 1 lakh has been deducted from my basic salary by section 80c still 11910 is deducting as tax from my salary how can i save it
Last 15 years I am depositing regularly in PPF A/c. Can I continue the same PPF A/c ? Can I get income tax exemption on that investment.?
At which case limit u/s 80c is from 100000 to 120000
Is it possible to show my car loan interest under 80c?
we purchase resale flat of rs.2381000/- and pay the stamp duty, registration, so could we get the excemption u/s 80c
if yes, then how much excemption