Section 80C of Income Tax Act

Section 80C of the Income Tax Act is a provision that allows individuals and Hindu Undivided Families (HUFs) to claim deductions from their total income for certain specified investments and expenses. Under this section, taxpayers can reduce their taxable income by up to ₹1.5 lakh in a financial year.

 

The eligible investments and expenditures under Section 80C include, but are not limited to:

 

1. Life Insurance Premiums

2. Employee Provident Fund (EPF)

3. Public Provident Fund (PPF)

4. National Savings Certificate (NSC)

5. Tax-saving Fixed Deposits

6. Equity Linked Savings Scheme (ELSS)

7. Principal Repayment of Home Loan

8. Sukanya Samriddhi Yojana

9. Senior Citizen Savings Scheme (SCSS),etc.

 

Taxpayers can choose a combination of these investments to maximise their deductions, but the total deduction under Section 80C is capped at ₹1.5 lakh. 

 

Section 80C is further classified into different subsections, namely 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2). You can claim a Section 80C deduction in a year while filing your income tax returns. Here's a look at the details about Section 80C of the Income Tax Act of India.

Section 80C of the Income Tax Act, 1961 has been divided into subsections based on different deductions. Refer to the table below to understand eligible tax-saving investments under the subsections of Section 80C:

There are various investment and savings scheme eligible for deductions under Section 80C of the IT Act. 

Tax Deductions under Section 80C on Savings Schemes

Section 80C of the Income Tax Act provides individuals with deductions on various savings schemes. Here's a brief overview:

It's essential to note that the total deduction under Section 80C is capped at ₹1.5 Lakh. Individuals can choose a combination of these savings schemes to maximise their tax benefits. Always check the latest tax regulations as they may be subject to change.

Tax Deductions under Section 80C on Investment Schemes

Here's an overview of tax deductions under Section 80C for investment schemes and associated details:

To claim deductions under Section 80C of the Income Tax Act, you should consider making investments or incurring eligible expenses before the end of the financial year. The financial year in India runs from April 1st to March 31st of the following year.

 

Here are some key points you should consider:

 

1. Invest early

2. Tax planning at the beginning of the financial year

3. Know the ock-in periods

4. Consider regular contributions

5. Verify eligibility criteria for deductions

6. Document and maintain records

7. File taxes on time

There is also a set of eligibility criteria for claiming deductions under Section 80C. Here’s a look at them and other details.

1. Life Insurance Premiums

Premiums paid for life insurance policies are eligible for deductions under Section 80C of the Income Tax Act. Deductions can be claimed for premiums paid on life insurance policies for yourself, your spouse, and your children. 

2. Public Provident Fund (PPF)

Both individuals and Hindu Undivided Families (HUFs) are eligible to claim deductions for contributions made to the PPF account. The interest earned on PPF is tax-free. It is calculated on the minimum balance in the account between the 5th and the end of the month, and it is credited annually.

3. Equity Linked Saving Scheme (ELSS)

Under ELSS, the investment is locked in for a period of 3 years. ELSS comes under the exemption category of Section 80C, and a maximum of ₹1.5 Lakhs deduction is allowed.

4. Senior Citizens Savings Scheme

Investments made towards the Senior Citizens Savings Scheme are eligible for tax deductions up to ₹1.5 Lakhs under Section 80C. Individuals over 60 years of age can avail of this tax benefit by investing in SCSS, where the amount is locked in for 5 years.

5. NABARD Rural bonds

Rural bonds offered by the National Bank for Agriculture and Rural Development (NABARD) are also under the tax deductions offered by Section 80C. The maximum deduction amount is ₹1.5 Lakh.

6. Unit Linked Insurance Plans (ULIPs)

Compared to conventional insurance policies, Unit Linked Insurance Plans have more to offer in the long term. Thanks to the Section 80C deductions, investors can avail a tax benefit of up to ₹1.5 Lakh on the invested amount.

7. National Savings Certificate

National Savings Certificate or NSC also comes under Section 80C deductions. Interest earned on NSC is compounded semiannually, and its maximum maturity period ranges from 5-10 years. You don't have to adhere to any limitation on your total sum invested towards NSC. However, like other investments, a deduction of up to ₹1.5 lakh is allowed under Section 80C.

8. Tax-Saving FD

Both banks and post offices offer tax-saving FDs. Here, the amount is locked in for 5 years. The maximum tax deduction allowed under Section 80C for a tax-saving FD is ₹1.5 Lakh on the principal amount. The returns of such investments are liable for tax.

9. Employee Provident Fund (EPF)

The returns earned from an EPF, including the interest, are eligible for Section 80C deductions. However, it is only applicable to those employees who have continued their service for at least 5 years. Voluntary contributions made towards an EPF account are also eligible for tax exemption under Section 80C.

10. Principal Repayment Towards Home Loan

The repayment amount paid towards the principal component of a home loan comes under the Section 80C deductions. Certain clauses must be fulfilled to claim these deductions. They are as follows:

• The tax exemption can only be claimed if the construction of the said property is completed

• Transfer of ownership within 5 years of possession will avoid tax exemption under Section 80C.

• If the transfer is made 5 years after the property ownership, any amount claimed as a tax deduction must be taxed in the year of the transfer. Failing to do this will also exclude you from the Section 80C deduction.

11. Stamp Duty and Registration Charges

While owning a property, stamp duty and registration charges are considered two of the most significant expenses. The government of India gives a tax deduction up to the limit as per Section 80C on the stamp duty and registration charges paid towards house procurement. This deduction can only be claimed in the year when these duties are paid.

12. Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a savings scheme specifically designed to meet the financial needs of girls' education and marriage. The parent/legal guardian of a girl child can open this account provided the girl is not more than 10 years of age. The parents of 2 or more girls (only twins) can also invest in this plan. According to Section 80C, the interest earned by this investment plan is eligible for tax exemption.

Section 80C offers tax benefits on a range of financial instruments that can be a part of every investor’s arsenal. There are a range of investment options available on Bajaj Markets, which are recognized under Section 80C such as tax-saving FD, ELSS, ULIPs, and more.