Section 80C

Section 80 C of Income Tax Act allows deductions up to Rs1.5 Lakh per annum. Under the section, individuals can invest in multiple savings schemes and claim deductions on their taxable income.

Saving + earning= Section 80C

What is Section 80C? :

Section 80C of the Income Tax Act is basically allows certain expenditures and investments to be exempt from tax. If you plan your investments well and divide them intelligently across different investments such as PPF, NSC, etc., you can claim deductions up to Rs.1.5 lakh, thereby lowering your tax liability.

Deductions under Section 80C of Income Tax Act :

  • Provident Fund:
    • It is automatically subtracted from monthly salary. Any contribution made by the employer and employee towards PF is exempted from tax. The contributions part of PF is eligible for deductions under Section 80C. Voluntary Provident Fund or VPF as it is called, is also eligible for tax deductions under Section 80C of the Income Tax Act.
  • Public Provident fund :
    • It is one of the popular instruments as it offers assured returns. Interest earned on provident fund is compounded annually. The maturity period of Public Provident Fund scheme is 15 years. The minimum investment one can make in public provident fund us Rs 500 and the maximum allowed Rs 1.5 Lakh.The amount you contribute towards PPF is eligible for tax deductions under Section 80C of the Income Tax Act.
  • Life Insurance Premium Payment:
    • If you have purchased a life insurance policy for yourself, your spouse, or your children, all the premium paid for the same annually is eligible for deduction under Section 80C of the Income Tax Act. In case you are holding multiple life insurance policy, you can club all the premiums and claim deduction up to Rs 1.5 Lakh per annum.
  • Equity Linked Saving Scheme:
    • There are some mutual fund saving schemes designed especially for the purpose of tax saving. These are known as ELSS. Investment made under the same allow investor to get deduction under Section 80C of the Income Tax Act.
  • National Savings Certificate:
    • It is also known as NSC. The maturity of the same varies between 5-10 years. The interest earned on this scheme is compounded semi-annually. The minimum amount of money that you can 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 invest in National Savings Certificate comes under Section 80C of the Income Tax Act, subject to a maximum of Rs.1.5 lakh per financial year.
  • Sukanya Samaridhi Scheme:
    • Individuals can open SSY account for a girl child anytime from the date of birth to the day she turns 10 years old. The minimum amount that you can invest in the Sukanya Samaridhi scheme is Rs.1,000 and the maximum is limited to Rs.1.5 lakh in a financial year. The interest earned on SSY is calculated annually and compounded on an annual basis. The interest you accrue through this scheme is eligible for tax deductions under Section 80C of the Income Tax Act.
  • Unit Linked Insurance Plan:
    • It is also one of the popular tax-saving schemes. It not only helps in saving money but also offer tax benefits under Section 80C of the Income Tax Act.

The Deductions available under Section 80D :

The EMI paid as principal of home loan repayment is also tax deductible under Section 80C of Income Tax Act 1961. The home loan repayment has two components, while the interest part of the repayment cannot be claimed as deduction under Section 80C of the Income Tax Act. In case you purchase a home or a property and make payment for stamp duty and registration, these amounts can be claimed as tax deductions under Section 80C of the Income Tax Act.

NABR Rural Bonds : National Bank for agriculture and Rural Development offers two type of bonds, viz. Bhavishya Nirman Bonds and NABARD Rural Bonds.

Senior Citizen Savings Scheme : The Senior Citizen Savings Scheme is one of the best investments for senior citizens. The returns are relatively lucrative in comparison with other schemes. The interest is paid only on a quarterly basis. All individuals who are above 60 years can make investment in this scheme and claim tax benefit.

5 Year Tax-saving FD:

Post office deposit schemes are a lot similar of fixed deposits offered by banks. The duration of these schemes could range from 1-5 year, but only the interest earned on five-year post office time deposit schemes are eligible for tax deductions under Section 80C of the Income Tax Act.

Various sub-sections and the investments that can be used for deductions :

Section Deduction on Deduction Limit
Section 80CCC Amount deposited in LIC or other insurer's annuity plan for a pension from a fund mentioned in Section 10 (23AAB)
Section 80CCD (1) Employee's contribution to National Pension Scheme account (up to Rs.1. lakh)
Section 80CCD (2) Employer's contribution to National Pension Scheme account. Up to 10% of the salary
Section 80CCD (1B) Additional contribution to National Pension Scheme account Rs 50,000
Section 80TTA (1) Interest income from savings account Rs 10,000
Section 80TTB Exemption of interest from post office, banks, etc. (only applicable to senior citizens) Up to Rs 50,000
Section 80GG Rent paid when House Rent Allowance 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 Education Loan Interest paid for 8 years
Section 80EE Interest on home loan (applicable to first-time homeowners) Rs 50,000
Section 80CCG Rajiv Gandhi Equity Scheme Rs.25,000 or 50% of the amount invested in equity shares, whichever is less.
Section 80D Medical Insurance Rs.25,000 for self, children and spouse, and Rs.50,000 for parents above 60 years of age
Section 80DD Medical treatment for handicapped 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 80%
Section 80U Self-suffering from disability Rs.75,000 in case of mental retardation or physical disability (including blindness), and Rs.1.25 lakh for individuals suffering from severe disabilities
Section 80G Contributions to organisations for social causes Donation of up to Rs.2,000 made by any mode except cash
Section 80GGB Any contribution made to political parties by companies. The amount contributed
Section 80GGC Any contribution made to political parties by individuals. The amount contributed
Section RRB Deductions on income by way of royalty of a patent The income earned or Rs.3 lakh, whichever is less.

Frequently Asked Questions

  • Is company also eligible for the benefit of Section 80C?
    No, Section 80C applies solely to individuals or Hindu Undivided Families (HUFs).
  • Can I claim HRA also under Section 80C?
    Yes, you can claim HRA as it is a part of your income. You can claim the same as rent paid under Section 80GG. However, the maximum deduction per year must not exceed Rs.60,000.
  • Under EPF schemes is the entire contribution eligible for deduction under 80C?
    No. In EPF only the half paid by the employee is eligible for benefits.
  • When it comes to provident funds, both EPF and PPF are eligible to claim tax deduction?
    If you are contributing towards an EPF and are investing in a PPF at the same time, you can claim both investments under 80C.
  • When one claim 80C Deductions?
    One can claim 80C deductions at the time of filing IT returns before assessment year ends.
  • What is the limit to claim deduction under Section 80E?
    The law does not specify an upper limit for claiming a deduction under Section 80E. Therefore, the actual interest paid over the year can be deducted.
  • Does 1.5 lakhs limit mean that I can invest in more than one instrument and claim benefits?
    No, 1.5 Lakh must be the combine of investments. It means that all the investments you have made under 80C is of total Rs. 1.5 lakhs.