If an individual falls in the 30% tax bracket and has exhausted the maximum limit of Section 80C, one can save upto  Rs 46,800 in taxes.  We runs you through the provisions of Section 80C. However, we highlight those schemes that are little known and which many investors avail of sparingly.

Stamp duty and registration charges

The first and foremost provision that many taxpayers are not aware of is stamp duty and registration charges. According to the law, ‘the amount paid towards stamp duty, registration fees and other expenses for the purpose of transfer of house property to the owner also qualifies for tax exemption’. This is over and above the principal payment that qualifies under Section 80C. But deduction u/s. 80C for  total amount including Principal Loan Repayment and stamp duty and registration charges can not exceed Rs. Rs. 1.50 Lakh .

Exemption for interest payment towards home loan is permissible under another section hence the above limit of Rs 1.50 lakh does not apply to it.

Let us take an example, Mr A purchases a house property of Rs 32 lakh and takes a home loan of Rs 25 lakh at 10%. His stamp duty and registration charges on this work out to approximately Rs 1.75 lakh. The interest for the first year comes to Rs 2.48 lakh and principal payment comes to Rs 41,376.

Thus, Mr A can claim maximum tax exemption of Rs 2  lakh on his interest payment under Sec 24. The entire principal payment (not more than Rs 1.50 lakh) of Rs 41,376 can be claimed under Sec 80C.

Nonetheless, it still leaves Rs 1,08,624 to be invested in other tax-saving instruments to reduce overall tax liability. In reality, buying a house is quite often an expensive affair, leaving little cash with the home buyer. On top of it, if one has to make additional investment to save on tax, it becomes difficult.

But with the inclusion of registration and stamp duty fees under Section 80C, it not only reduces tax liability but also saves the property buyer from further cash outgo. As in this case buyer has not to invest further Rs. 1,08,624 in tax-saving instruments to claim Full deduction U/s. 80C as his Payment of Rs. 1.75 lakh towards Stamp duty and registration charges also qualifies for deduction Under Section 80C.

Fixed-deposit with HUDCO or any housing board
Another provision that would be eligible for exemption under Section 80C is ‘any sum paid towards fixed-deposit schemes of HUDCO or to any housing board, which is constituted in India for the purpose of planning, development or improvement of cities or towns’.

Typically, these schemes are promoted by state housing boards to promote long-term social sector objectives, or for infrastructure development of city.  In fact, principal payment towards home loans taken from Housing and Urban Development Corporation (HUDCO) also qualifies for exemption under Sec 80C.

Even subscription to a home loan account scheme of the National Housing Bank (NHB) or contribution to any notified pension fund set up by the NHB also meet the requirements. Hence, if these two offer home loans at competitive rates, one can avail loan from them as well.

Contribution to a non-commutable deferred annuity plan

Further, contribution to a non-commutable deferred annuity plan is also an option to avail tax exemption. In normal parlance, this is nothing but a standard pension plan eligible for tax exemption under Section 80C.

This includes schemes such as Jeevan Suraksha by LIC or Pension Plus plan by HDFC Standard Life. Contribution to an approved superannuation fund is also a way to claim tax benefit.

Typically, large organisations maintain superannuation funds and contribute to them. In case employees want to make a higher contribution; they can do so to the extent of 15% of basic plus dearness allowance. Besides these lesser-known options, the other commonly used options are contribution to employee provident fund, life insurance premium, or payment of tuition fees. Five-year tax saving fixed deposits issued by banks can also be bought.

These FD’s have an edge over NSC with a one-year lesser lock-in period. However, the NSC has an edge because of the fact that interest accrued is also eligible for 80 C limit for the first five years that is not the case with FDs.

Equity-linked savings scheme MF or Ulips

Besides, these low risk options, one can go for high-risk return schemes such as equity-linked savings scheme MF or even Ulips. ELSS usually provides a higher return in the long run than small savings schemes and carries a lower lock-in period of three years.

Small savings schemes offer a lower return of around 8 to 9.3%. Further, there is a relatively long lock-in period -15 years for the PPF and six years for NSC. The advantage with these schemes is that they offer a guaranteed return unlike equity-based products where there is no guaranteed return and one can lose money like when the markets tumbled in 2008.

Risk profile and investment strategy are the key determinants for allocating funds to any scheme. Also, one must consider inflation-adjusted returns before taking a decision.

Also Read- Lesser Known Tax Saving Tips / Deductions

10 lesser known Income Tax Deductions

Deduction we use to forget while computing taxable income

(Republished with Amendments)

(Update on 23.06.2018)

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Company: Taxguru / Sandeep Kanoi & Associates
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53 responses to “Little known schemes u/s. 80C of Income Tax Act”

  1. Swapnil says:

    I have paid Registration and Stamp duty charges on 26th March 2017 and got the flat possession on 5th Aug 2017. Is there any way to update/rectify last FY year i.e. 2016-17 IT return?

  2. deepti says:

    my dad bought property in year 1994 on power of attorney in almora bcz that time seller was below 18 so was not able to do registry. now my dad want to do registry of that property,transaction had made in the past..does the seller will come under tax for the property which is sold in the past??

  3. Niraj Modi says:

    hi tax guru,
    i have purchased property in 2015 and got the same registered in Feb 2016; can i claim under 80C in 16-17 ta deduction or i will have to stick to 15-16 window only

  4. Shammi says:

    I have got a Pre-approval for a Home loan where my wife (as a house wife) is a Primary applicant along with me ( as a secondary applicant ) in the loan application, the reason to made her Primary applicant as there was less amount paid for processing as compared if i become Primary. She has no income and entire loan amount has been sanctioned based on my salary and proofs.

    We have identified a property and going to register that as soon as Legal on the property documents get completed by Loan Legal / Technical department.

    Loan department provide a go-head in next couple of days, we shall be going to register the property jointly where she would be primary and i would be secondary.

    1. As the entire payment on Stamp Duty would be aprox 2 Lakhs+, Would i be able to get a Tax exemption under sec 80C in this Financial year upto 1.5 Lakhs if limit is not exhausted and further more the EMIs would be going with our joint account where i shall be transferring the amount via NEFT from my Salary account to another joint account and then the EMI would be getting debited via ECS to Loan company.

    2. Should i be getting full rebate on my interest and principal , Since my wife has no income and EMIs are only getting paid by me via a Joint Bank account.

  5. Shammi says:

    I have got a Pre-approval for a Home loan where my wife (as a house wife) is a Primary applicant along with me ( as a secondary applicant ) in the loan application, the reason to made her Primary applicant as there was less amount paid for processing as compared if i become Primary. She has no income and entire loan amount has been sanctioned based on my salary and proofs.

    We have identified a property and going to register that as soon as Legal on the property documents get completed by Loan Legal / Technical department.

    Loan department provide a go-head in next couple of days, we shall be going to register the property jointly where she would be primary and i would be secondary.

    1. As the entire payment on Stamp Duty would be aprox 2 Lakhs+, Would i be able to get a Tax exemption under sec 80C in this Financial year upto 1.5 Lakhs if limit is not exhausted and further more the EMIs would be going with our joint account where i shall be transferring the amount via NEFT from my Salary account to another joint account and then the EMI would be getting debited via ECS to Loan company.

    2. Should i be getting full rebate on my interest and principal , Since my wife has no income and EMIs are only getting paid by me via a Joint Bank account.

  6. Sudhir says:

    We have booked a flat and paid stampn duty and registration charges and will be getting possession in the month of May 2016. Can we both can claim exemption under Section 80C of the IT Act, and what would be limit for Assessment Year 2016-1017?

  7. Nishant sharma says:

    Hi,
    Can stamp duty & registration exemption under 80c be claimed if the I buy a flat in resale?

    Thanks & Regards

    Nishant

  8. Ashwin B S says:

    Hi

    We have purchased a apartment in 2013 and the possession is due for Jan 2016 , if the project gets delayed by another 6 months from Jan 2016 – Can I still claim Interest under 80cc as I understand from sources that there is a lock in period of 3 years from the time of sign of agreement or disbursement of loan and we need to have the possesion within 3 years.

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