Section 80C of the tax Act allows for deductions up to Rs.1.5 lakh p.a. Under the section, individuals can invest in a number of savings schemes to claim deductions on their taxable income.

What is Section 80C?

Section 80C of the tax Act came into effect on 1 April 2006. It basically allows certain investments and expenditures to be exempt from tax. If you deal with your investments well and spread them intelligently across different investments like PPF, NSC, etc., you’ll claim deductions up to Rs.1.5 lakh, thereby lowering your liabilities.

Deductions on Investments under Section 80C of the Tax Act

Here are some different investments you’ll make to save lots of tax under Section 80C of the tax Act:

  • Provident Fund: Provident Fund is automatically deducted from your monthly salary. A worker and his/her employer both contribute towards Provident Fund. While the contribution made by the employer is exempt from tax, the contribution made by the worker is eligible for subtraction under Section 80C of the tax Act. Employees also are allowed to form voluntary contributions towards the Provident Fund Account. Voluntary Provident Fund or VPF because it is termed, is also eligible for tax subtracted under Section 80C of the tax Act.
  • Public Provident Fund: Public Provident Fund may be a popular investment instrument because it offers assured returns. Interest is compounded on an annual basis and therefore the maturity period of the scheme is 15 years. The least that you simply can contribute towards PPF is Rs.500 and therefore the maximum contribution allowed is Rs.1.5 lakh. The amount you contribute towards PPF is eligible for tax subtracted under Section 80C of the tax Act.
  • Premium payments towards life insurance: If you’ve got purchased a life insurance policy for yourself, your children or your spouse, the premiums you pay towards it are eligible for subtracted under Section 80C of the Income Tax Act. In case you’ve got multiple life assurance policies from different insurance providers, you’ll club all the premiums and claim deductions up to Rs.1.5 lakh p.a.
  • Equity Linked Savings Scheme (ELSS): Certain investment fund schemes are designed especially for the aim of tax savings. Equity Linked Savings Schemes, or ELSSs as they’re generally called, allow investors to say tax subtracted to the extent of Rs.1.5 lakh under Section 80C of the tax Act.
  • National Savings Certificate: National Savings Certificate or NSC because it is understood in its abbreviated form, is one among the foremost popular tax-saving instruments available to Indian citizens. The maturity period of the scheme is 10 years and 5 years. The interest in this scheme is compounded semi-annually. The minimum amount of money that you are allowed to invest in this certificate is Rs.100 and there is no maximum limit on the amount of investment you can make in NSC. The amount you spend in National Savings Certificate is eligible for tax subtracted under Section 80C of the tax Act, subject to a maximum of Rs.1.5 lakh per financial year.
  • Sukanya Samriddhi Individuals can open a Sukanya Samriddhi account for a woman child anytime from the date of her birth to the day she turns 10 years old. The minimum amount that you simply can invest within the Sukanya Samriddhi scheme is Rs.1,000 and therefore the maximum is restricted to Rs.1.5 lakh during a fiscal year . The interest during this account is calculated on an annual basis and compounded on an annual basis too. The interest you accrue through this scheme is eligible for tax subtracted under Section 80C of the tax Act.
  • Unit Linked Insurance Plans (ULIPs): hese insurance plans offer coverage to the policyholder and supply substantial returns within the future . One of the most reasons why these plans became so popular in recent times is that the proven fact that they not only help in saving money, but also provide tax benefits under Section 80C of the tax Act.
  • Repayment of home loan principal amount: he EMI amount that goes towards the repayment of the principal amount on your home loan is too eligible for tax deductions under Section 80C of the tax Act. The repayment of your home equity credit amount has two components, viz. the principal amount and the interest. While the interest a part of the repayment can’t be claimed as subtract under Section 80C of the tax Act, the repayment of the principal amount certainly is.
  • Registration charges and stamp duty for a home/property: just in case you buy a home or a property and purchase stamp tax and registration, these amounts are often claimed as tax subtracted under Section 80C of the Income Tax Act.
  • Infrastructure bonds: Infra bonds as they’re commonly called, Infrastructure bonds are issued not by the govt but by infrastructure companies. In case you invest in these bonds, you’ll claim tax subtraction up to Rs.1.5 lakh under Section 80C of the tax Act.
  • NABARD Rural Bonds: NABARD, or the commercial bank for Agriculture and Rural Development, offers two types of bonds, viz. Bhavishya Nirman Bonds and NABARD Rural Bonds. However, only the latter qualifies for tax subtracted under Section 80C of the tax Act, and therefore the maximum amount that you simply can claim as subtract is Rs.1.5 lakh.
  • Senior Citizen Savings Scheme: The old person Savings Scheme is that the best possible investment scheme for senior citizens. The returns are relatively lucrative as compared with other schemes, and therefore the interest is paid on a quarterly basis. Individuals who are above 60 years aged can invest during this scheme and claim tax benefits up to Rs.1.5 lakh under Section 80C of the Income Tax Act.
  • Five-year Post Office Time Deposit Scheme: Post office deposit schemes are tons like fixed deposits offered by banks. The duration of those schemes could range from one year to 5 years, but only the interest earned on five-year post office certificate of deposit schemes are eligible for tax subtracted under Section 80C of the Income Tax Act.

When should I Invest to assert Deductions under Section 80C of the Tax Act?

Most people tend to start out making investments towards the top of a fiscal year just to say tax deductions. Tax experts suggest that investments are best when made at the beginning of a fiscal year as doing so wouldn’t only mean that you simply are making informed decisions, but also ensuring that you simply earn the interest for the entire year from April to March.

Deductions on Investments under sub-sections of Section 80C

Since we’ve already covered the investments that are eligible for deductions under Section 80C of the tax Act, let’s check out the varied sub-sections and therefore the investments that can be used for deductions:

Section Deduction on Deductible Limit
Section 80CCC Amount deposited in LIC or other insurer’s premium plan for a pension from a fund mentioned in Section 10 (23AAB)
Section 80CCD (1) Worker’s contribution to National Premium Scheme account (up to Rs.1. lakh)
Section 80CCD (2) Worker’s contribution to National Premium Scheme account Up to 10% of the salary
Section 80CCD (1B) Additional contribution to National Premium Scheme account Rs.50,000
Section 80TTA (1) Interest earnings from savings account Up to Rs.10,000
Section 80TTB Exemption of interest from post bank, banks, etc. (only applicable to old people) Up to Rs.50,000
Section 80GG Rent paid when House Rent contribution has not been received from the employer Least of either Rs.5,000 per month, rent paid less 10% of total income, or 25% of the total income
Section 80E Interest on student education loan Interest paid for 8 years
Section 80EE Interest on house loan (applicable to first-time house owners) Rs.50,000
Section 80CCG Rajiv Gandhi Equity Scheme Rs.25,000 or 50% of the amount spend in equity shares, whichever is less
Section 80D Medical insurance Rs.25,000 for self, spouse and children, and Rs.50,000 for parents above 60 years of age
Section 80DD Medical treatment for disabled dependents Rs.75,000 in case the disability is more than 40% but less than 80%, and Rs.1.25 lakh in case the disability is more than 81%
Section 80DDB Medical expenses The costs actually earned or Rs.40,000, whichever is less in case the individual or his/her relative is less than 60 years of age, and the costs actually incurred or Rs.1 lakh just in case the person getting treated is over 60 years old
Section 80U Self-suffering from disability Rs.75,000 in case of mental Blind or physical disability (including blindness), and Rs.1.25 lakh for individuals suffering from severe disabilities
Section 80GGB Contribution to contribution parties by companies The amount contributed
Section GGC Contribution to contribution parties by individuals The amount contributed
Section RRB Subtractions on income by way of royalty of a patent The income received or Rs.3 lakh, whichever is less

Frequently Asked Questions:

  1. Does the limit of Rs. 1.5 lakhs mean that I can invest Rs. 1.5 lakhs in additional than one instrument and claim benefits?No. The limit of Rs. 1.5 lakh means after taking into consideration all the investments you have made under 80C, the most advantage of Rs. 1.5 lakhs can be claimed.
  2. What is the definition of a old person for the old person savings scheme?A old person under this scheme is either someone who is quite 60 years aged or someone who is quite 55 years or age but less than 60 years but has taken voluntary retirement under a selected retirement scheme.
  3. When it involves provident funds, will investments in EPF and PPF be eligible if investments are made in both?If you’re contributing towards an EPF and you are investing during a PPF at an equal time, you’ll claim both investments under 80C.
  4. Under EPF schemes is that the entire contribution eligible for deduction under 80C?No. In EPF only the half paid by the worker is eligible for benefits.
  5. If i would like to grab into tax savings, which options should i’m going in for?The options would be dictated by a mess of things like your age, risk appetite and therefore the amount that you wish to take a position but some basic ones that you should consider investing in are life and insurance policies, mutual funds, fixed deposits and provident funds.
  6. Is the interest earned through these instruments also eligible for tax subtracted under 80C?No. The interest earned in most cases is responsible for tax under other sections except within the case of NSCs where if the interest is reinvested, it becomes eligible for deduction under 80c for the year that it’s reinvested in.
  7. If I take a loan for repair/renovation of a house, am i able to claim deductions under 80C?A regular home equity credit is eligible under 80C but one take from repairs and renovation isn’t .

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