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Tax Savings Under Section 80C

Section 80C Provides deduction in respect of specified qualifying amount paid or deposited by the assessee in the previous year. 

One of the most common deductions available under the Income-tax Act, 1961 is Section 80C. It allows for a maximum deduction of up to Rs. 1.5 lakh every year from an investor’s total taxable income.

Who can claim deduction under section 80C Deduction under section 80C is available only to an individual or a Hindu undivided family. on the other hand, if an individual opts for the new concessional tax regime, then the individual will not be able to claim deduction under this section. 

Subsection of Section 80C

Under the Income-tax Act of India, deductions under Section 80C are divided  

Tax Saving sectionsEligible investments for tax exemptions
Section 80C Investing into very common and popular investment options like LIC, Employee’s share of PF contribution, NSCs , Children’s Tuition fee, Principal Repayment of home loan, Investment in Sukanya Samridhi Account, ULIPS, ELSS, Sum paid to purchase deferred annuity, Contribution to notified Pension Fund set up by Mutual Fund or UTI, Subscription to Home Loan Account scheme of the National Housing Bank, Subscription to deposit scheme of a public sector or company engaged in providing housing finance, Subscription to equity shares/ debentures of an approved eligible issue, Senior Citizens savings scheme etc.
Section 80CCCContribution to certain pension fund, as well as tax saver Mutual funds.
Section 80CCD(1)Atal Pension Yojana and National Pension Scheme Contribution
Section 80CCD(1B)Investments of up to Rs.50,000 in National Pension Scheme
Section 80CCD(2)Employer’s contribution towards NPS ( up to 10% comprising basic salary and dearness allowance, if any ) is exempted under this category.

Note:- The Aggregate amount of deduction under section 80C, 80CCC and 80CCD(1) cannot exceed Rs.1,50,000. However, employer’s contribution towards NPS (up to 10% of salary) shall not be considered for the ceiling of Rs.1,50,000.   

Gross qualifying deduction amount is the aggregate of the following:-

  • Life Insurance Premium- Premium paid towards life insurance policies are eligible to receive tax benefits as per Section 80C limit. in the case of an individual, policy should be taken on his onw life, life of the spouse or any child ( child may be dependent / independent, male/ female, minor/ major or married / unmarried ).
    In the case of a Hindu Undivided family, policy may be taken on the life of any member of the family.     
    Currently, an annual premium of up to 10% (of the insurance policy’s total sum assured) is tax exempted under this scheme. this clause has been revised on 1st April, 2012, Prior to which premiums of up to 20% ( of the sum assured ) was liable for tax exemption under Section 80C deduction. 
  • Payment in respect of non-commutable deferred annuity.
  • Any sum deducted from salary payable to a Government employee for the purpose of securing him a deferred annuity (Subject to a maximum of 20% of salary).
  • Contribution (not being repayment of loan) towards statutory fund and recognized provident fund.
  • Contribution ( not being repayment of loan) towards 15-years Public provident fund.
  • Contribution towards an approved superannuation fund.
  • Subscription to National saving Certificates, VIII issue or IX issue and deposit Sukanya Samriddhi Account. 
  • Contribution for participating in the unit-linked insurance plan ( ULIP ) of Unit Trust of India. 
  • Contribution for participating in the unit-linked insurance plan ( ULIP ) of LIC Mutual Fund (i.e Formally Known as Dhanraksha Plan of LIC Mutual Fund)
  • Subscription towards notified units of Mutual Fund or UTI.
  • Any sum Paid as tuition fees (not including any payment towards development fees/ donation/ payment of similar nature) whether at the time of admission or otherwise to any university / college / educational institution in India for full time education of any two children of an individual. 
  • Any instalment or part payment toward the cost of purchases / construction of a residential property to a housing board or co-operative society  ( or repayment of housing loan taken from Government, Bank, Cooperative bank, LIC, National Housing Bank, assessee’s employers where such employer is public company / public sector company / university / co-operative society ).
  • Public Provident Fund- Any contribution toward public provident fund (PPF) can be filled for tax deduction under section 80C.  Public Provident Fund came with a maximum deposit limits of Rs.1,50,000, allowing an investor to claim the entire deposited amount as an exemption under this Income-tax Act.
    Any voluntary contribution made by the employee towards the provided fund is also eligible for tax deduction under Section 80C of Income-tax Act. 
  • Equity-Linked Saving Scheme- Equity Linked Saving Schemes, or ELSS, falls under Section 80C’s exemption category for up to its maximum limit (Rs.1,50,000). These investment schemes come with a mandatory 3 Year lock-in period. 
  • Senior Citizens Savings Scheme- Any investments made towards Senior Citizens Saving Scheme, (or SCSS) is eligible for tax exemption up to the maximum allocated 80C limit, i.e Rs. 1,50,000.
    Individuals above the age of 60 ( people opting for voluntary retirement scheme is eligible to participate in SCSS after the age of 55 Years ) years are eligible to get benefit from SCSS, Which has a minimum lock-in tenure of 5 Years.  
  • Principal repayment made towards home loan- Only the repayment made towards the principal components of the home loan EMIs are eligible for deduction under Section 80C. However, the borrower has to fulfil certain clauses to avail of this benefits. these are –
    I. Exemptions can only be claimed if the construction of the property is completed.
    II. Transference of the property within 5 years of possession will exclude it from the tax exemptions provided under Section 80C of Income-tax Act, 1961.
    III. Any amount claimed as a tax deduction should be taxable in the transfer year if a handover is made after 5 year of the property’s possession. Failing to meet this clause will also render it excluded from 80C’s guidelines. 
  • Stamp duty and Registration Charges- Stamp duty and registration charges can be considered as the two largest expenses made towards taking ownership of a property. The Government of India allows a deduction of tax liability till 80C limit on the stamp duty and registration charges paid towards house procurement.
    However, exemption can only be claimed in the year that these duties are paid; otherwise is will not be eligible for consideration under Section 80C deduction.   

Disclaimer:- “All the information given is from credible and authentic resources and has been published after moderation. Any change in detail or information other than fact must be considered a human error.”

Dheeraj Kumar Singh
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