Section 80C - Deduction under Section 80C

Easily the most popular section for tax saving under the IT Act of India, Section 80C of Income Tax Act is wide and comprehensive in scope. It covers numerous instruments that the government wants to encourage taxpayers to invest in.

What is Section 80C?

Section 80C of Income Tax Act is the primary section enlisting tax deductions. It includes an exhaustive list of popular savings and investment instruments like PPF, NSC, ELSS, and payments like tuition fees and home loan repayment. There are certain terms and conditions for each of these deductions.

Deduction under Section 80C - Terms and conditions

  • The total amount of deduction under Section 80C that can be claimed is Rs.1.5 lakhs. Prior to 2014, this limit was Rs. 1 lakh.

  • You cannot claim deductions for different 80C instruments separately. It has to be an aggregate of Rs.1,50,000.

  • The deduction limit for Section 80C is clubbed with that of Section 80CCC and Section 80CCD. An additional deduction of Rs.50,000 can be availed under Section 80CCD (1B) for investments in the National Pension Scheme, making the cumulative limit for 80C deduction + section 80CCD deduction Rs.2,00,000.

  • In most cases - except for reinvested interest in NSC- interest earned on the listed instruments is not covered under 80C deductions.

Eligibility for Claiming Deductions under 80C

  • Deduction under Section 80C can be availed by individual taxpayers as well as HUFs (Hindu Undivided Families).

  • These are not available to companies, partnership firms, or other corporate bodies.

Popular tax saving investments under Section 80C

Instrument

Description

Taxation rules

Employee Provident Fund/ Voluntary Provident Fund

A retirement savings scheme for salaried employees

Under Section 80C, contributions made to the Employee Provident Fund are tax deductible

Public Provident Fund

Long term saving instrument for salaried as well as self-employed individuals

Under Section 80C, all contributions made to the PPF are deductible

Equity Linked Savings Scheme (ELSS)

Mutual funds designed for tax saving

Principal amount invested in the ELSS qualifies for deductions under Section 80C.

Senior Citizens' Saving Scheme

 

Government backed savings scheme for individuals above 60 years of age

Amount invested is deductible, as per Section 80C.

 

Sukanya Samriddhi Yojana

Savings scheme for girl child

Investments are deductible under Section 80C.

Tax saving fixed deposits

Bank FDs with tax benefits

FDs maintained with banks or post offices with a five year lock-in period are tax deductible

National Savings Certificate

Fixed income investment scheme which can be opened with any post office

Principal invested and interest reinvested are deductible

Unit Linked Insurance Plans (ULIPs)

Investment-cum-insurance products

Under Section 80C, premiums are deductible

*The tax treatment given for each of the investments listed above is relevant only to Section 80C of the Income Tax Act. Some of the financial instruments given above would also likely qualify for exemptions under other Sections of the ITA.

Claiming 80C deduction

  • Once you fill your details in ITR1, you have to enter details of deductions under Section 80C to 80U.

  • These claims can be made on income before levy of income tax.

  • If you are filing your returns online, these details will be auto populated from Form 24Q (TDS returns filed by employer)

Different payment options under Section 80C

  • Life insurance premiums qualify for 80C deduction. These payments can be for life insurance policy of self, spouse, or children. However, the premium amount can not be more than 10% of the sum assured. If you're looking for a life insurance policy to save taxes, don't select one without scrutiny. Go for a comprehensive, wholesome plan like the Bajaj Allianz Life Smart Protect Goal, available on Finserv MARKETS. It offers a massive cover of Rs.1 crore at a minimal premium of Rs.13 per day! There are attractive benefits like cover for 55 critical illnesses and child education riders. Unlike traditional term plans, this plan also has a return of premium option. There are 4 different variants of the plan that you can choose from depending on your family's financial needs.

  • Tuition fees for upto two students pursuing their education in India qualify for deductions under Section 80C. The fees have to be for a full-time course.

  • Repayment of home loan principal amount is also eligible for deduction under Section 80C of Income Tax Act. The home loan could be for financing purchase or construction of a residential property.

Subcategories of Section 80C

Sub-section

Deduction

Limit

80CCC

  • Deposit in LIC

  • Deposit in pension annuity plan of any other insurer from funds listed under Section 10 (23AAB)

 

80CCD (1)

Employee contribution to NPS (National Pension Scheme)

Upto Rs.1,00,000

80CCD (2)

Employer contribution to NPS

Maximum 10 percent of salary earned

80CCD (1B)

Contributions to NPS (additional)

Up to Rs.50 thousand

Conclusion

Section 80C of Income Tax Act can be extremely helpful not just for saving taxes, but also for better financial planning. The only thing that one would have to ensure is not to invest hastily when the return filing season approaches. Take your time to scrutinise and select investments at the beginning of the year itself. This could ensure better returns. While it is paramount to be cautious and make an informed decision, ensure you do so before the deadline of March 31st.

A lucrative option to consider for a Section 80C income tax deduction is the term life insurance policy on Finserv MARKETS. In addition to Section 80C benefits, the payouts received under this policy are also exempted from taxation, under Section 10(10D) of the Income Tax Act. If you choose to opt for the Critical Illness Rider, you will be eligible to receive additional tax benefits of up to Rs. 25,000, as per Section 80D of the ITA. Opt for the term insurance plan on Finserv MARKETS

and avail of the two-pronged benefits of, both, a safety net for your family, as well as tax benefits.

FAQs

  • ✔️Does an LIC policy qualify for Section 80C deduction?

    Yes, LIC policies qualify for 80C deductions.
  • ✔️Can NRIs claim 80C deductions?

    Yes, both residents and NRIs can claim these deductions.
  • ✔️Is personal accident insurance covered under Section 80C?

    Yes, all types of life insurance premium payments are covered, which include personal accident insurance.

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