Summary: Section 80C of the Income Tax Act provides tax-saving opportunities for individuals and Hindu Undivided Families (HUFs) by allowing deductions on specific investments and expenses. Eligible investments include Employee Provident Fund (EPF), Public Provident Fund (PPF), Life Insurance premiums, Unit Linked Insurance Plans (ULIPs), Equity Linked Savings Schemes (ELSS), National Savings Certificates (NSC), and Sukanya Samriddhi Yojana (SSY), among others. Additionally, expenses like home loan principal repayment and stamp duty charges are also covered. The maximum deduction under Section 80C is capped at INR 1,50,000, which also includes contributions under Sections 80CCC and 80CCD(1). However, deductions under Section 80CCD(1B) and 80CCD(2) for contributions to the National Pension Scheme (NPS) can be claimed over and above the INR 1.5 lakh limit. This comprehensive tax-saving provision is instrumental in reducing taxable income and can be complemented by other deductions, such as under Sections 80D (health insurance) and 80G (charitable donations). Understanding and utilizing the various options under Section 80C can help taxpayers effectively manage their tax liabilities.
Section 80C of the Income Tax Act provides deduction towards specified investment and specified expenses. Importantly, only individuals and Hindu Undivided Family (HUFs) are eligible for claiming deduction u/s. 80C of the Income Tax Act.
Taxable income is reduced by the amount of deduction available u/s. 80C. Thus, it enables individuals to reduce their tax liability.
The present article covers list of investments which qualifies for deduction u/s. 80C of the Income Tax Act; deduction limit u/s. 80C, 80CCC, 80CCD(1) and 80CCD(2) of the Income Tax Act and some relevant frequently asked questions (FAQs).
List of investments which qualifies for deduction under section 80C of the Income Tax Act –
List of qualifying investments eligible for deduction u/s. 80C with specified features thereof are briefly explained in the table below –
| Eligible investment for deduction u/s. 80C | Features thereof |
| Employee Provident Fund (EPF) | Employee Provident Fund is a mandatory retirement savings in case of salaried employees;
Here, contribution is done by both employee as well as employer; Notably, contribution by employee is eligible for deduction u/s. 80C and contribution by employer is exempt from tax. |
| Public Provident Fund (PPF) | Public Provident Fund is a long-term government backed investment instrument;
Minimum contribution limit is INR 500, whereas, maximum contribution limit is INR 1,50,000; It is one of the most important investment instrument under 80C. |
| Unit Linked Insurance Plans (ULIPs) | This insurance plans combines life insurance with investment options;
It has minimum lock-in period of 5 years. |
| Life Insurance Corporation (LIC) premium | Premium amount paid towards life insurance held for self, spouse and children is eligible for deduction under section 80C. |
| Equity Linked Savings Scheme (ELSS) | ELSS are the mutual funds that invest in equities. They have potential for higher returns as compared to other investments;
Notably, there is a lock-in period of three years. |
| National Savings Certificate (NSC) | National Savings Certificate is most popular tax saving instrument. Maturity period ranges from 5 years to 10 years;
Interest in this scheme is compounded semi-annually; Minimum contribution limit is INR 1000, whereas, there is no maximum contribution limit. |
| Sukanya Samriddhi Yojana (SSY) | This scheme is designed for financial empowerment of girl child;
Minimum contribution limit is INR 250, whereas, maximum contribution limit is INR 1,50,000; Notably, interest earned under this scheme is eligible for tax exemption u/s. 80C. |
| Senior Citizens Savings Scheme | Investment made under senior citizens savings scheme is eligible for deduction u/s. 80C. |
| National Bank for Agriculture and Rural Development (NABARD) | Investment in Rural Bonds by NABARD are eligible for deduction u/s. 80C. |
| Fixed Deposit | Investment in fixed deposit with lock-in period of 5 years or more is eligible for deduction u/s. 80C. |
| Post Office Time Deposit Scheme | Post Office Time Deposit Scheme is just liked fixed deposits;
Notably, five year lock-in deposit is only eligible for deduction u/s. 80C. |
| Repayment of principal amount of home loan | Payment made towards principal amount of home loan (EMIs) are eligible for deduction u/s. 80C;
Notably, payment towards interest amount of home loan is not eligible for deduction u/s. 80C. |
| Stamp duty and registration charges for home | Stamp duty and registration charges paid towards property purchased is eligible for deduction u/s. 80C. |
Deduction limit under section 80C, 80CCC, 80CCD(1) and 80CCD(2) of the Income Tax Act –
Deduction limit u/s. 80C and sub-sections 80CCC, 80CCD(1) and 80CCD(2) along with eligible investment options is tabulated hereunder –
| Particulars | Eligible investments | Eligible deduction | ||||||
| Section 80C |
|
INR 1,50,000 | ||||||
| Section 80CCC | Contribution towards specified pension funds | INR 1,50,000 | ||||||
| Section 80CCD(1) | Contribution towards APY – Atal Pension Yojana or other government notified pension schemes |
|
||||||
| Section 80CCD(1B) | Additional Contribution to NPS – National Pension Scheme
[Notably, this deduction is available over and above maximum deduction of INR 1,50,000 as specified u/s. 80CCE] |
INR 50,000 | ||||||
| Section 80CCD(2) | Employers Contribution to NPS – National Pension Scheme
[Notably, this deduction is available over and above maximum deduction of INR 1,50,000 as specified u/s. 80CCE] |
|
Importantly, provisions of section 80CCE of the Income Tax Act clarifies that deduction under section 80C, 80CCC and 80CCD should not exceed INR 1.50 Lakhs. However, this doesn’t not include deduction available u/s. 80CCD(1B) and 80CCD(2) of the Income Tax Act.
Frequently Asked Questions (FAQs) –
Some of the relevant Frequently Asked Questions (FAQs) with regard to deduction u/s. 80C of the Income Tax Act are highlighted hereunder –
1. What is covered under section 80C?
Various investment options like Public Provident Fund; National Savings Certificate; Unit Linked Insurance Plans; ELSS; fixed deposit; repayment of home loans; etc. are covered under section 80C.
2. Can I claim both 80C and 80CCD?
As per section 80CCE of the Income Tax Act, total deduction u/s. 80C, 80CCC and 80CCD cannot exceed INR 1.50 Lakhs. However, additional deduction is available u/s. 80CCD(1B) and 80CCD(2) of the Income Tax Act.
3. Does PPF comes under 80C?
Yes, investment in PPF is allowable as deduction under section 80C of the Income Tax Act. Maximum contribution limit under PPF is INR 1,50,000.
4. Can I claim both 80C and 80D?
Yes, claiming deduction under both section 80C and section 80D of the Income Tax Act is possible.
5. Which is best under 80C?
Life insurance premium; PPF; EPF; ELSS; NSC; Sukanya Samriddhi Yojana; etc. are best under 80C.
6. What is the maximum limit of 80C?
Maximum limit of 80C is INR 1,50,000, however, it also includes investment made u/s. 80CCC and 80CCD(1) of the Income Tax Act.
7. How can I save tax if 80C is full?
If 80C is full, one can invest in health insurance for deduction u/s. 80D; interest on education loan is allowable as deduction u/s. 80E; charitable donations are allowable as deduction u/s. 80G and NPS investment is allowable as deduction u/s. 80CCD(1B).
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