Details about Section 80C of Income Tax Act

What is Section 80C ?

In order to encourage the savings, on certain financial products the government gives tax rebates which is in under Section 80C of the Income Tax Act. Under such scheme the investment made are referred to as 80C investments. The total deduction under this section is limited to Rs. 1.50 lakhs maximum.  Under this section only to an individual or an HUF the deduction is available.

Instruments that can give you section 80C benefits are as follows:

Life Insurance Premium:

  • In section 80C deduction for individual policy must be in self or spouses or children can be included. All the premiums can be included if premium is for more than one insurance policy. Besides this investments in unit-linked insurance plans of LIC Mutual Fund e.g Dhanraksha 1989 are also eligible for deduction under Section 80C.
  • For HUF, it may be on life of any member of HUF.
  • Contributions to Notified Annuity Plan of LIC or Units of UTI or a Notified Mutual Fund are also included.

Employee’s Provident Fund & Voluntary Provident Fund:

By employer the provident fund is deducted directly from the salary with employer’s contribution which goes into retirement account along with employer’s contribution and towards section 80C investments the employee’s contribution is counted. By voluntary contributions an additional amount can be contributed. 8.5% per annum is the current rate of interest and interest earned is tax-free.

Public Provident Fund:

With a nationalized bank or Post office PDF account can be opened. 8% is the current rate of interest which is tax free and 15 years is the maturity period. Rs. 500 is the minimum amount of contribution and Rs. 70, 000 is the maximum.

National Savings Certificate:

With the rate of 8% interest this is a 6 year small savings instrument and is compounded half-yearly. Every year the interest accrued is liable to tax but the interest is also deemed to be reinvested and eligible for section 80C deduction.

Five-Year Bank fixed deposits:

Tax-saving fixed deposits of scheduled bank with tenure of five years are also entitled for section 0C deduction.

Equity-Linked Savings Scheme:

Mutual funds offer you specially created tax saving funds called ELSS. In equities these schemes invest your money and hence return is not guaranteed. For a period of three years the money invested here is locked.

  • Deferred Annuity/Pension Plan: For self, spouse or any child comes under section 80C.
  • Contribution by employee to a Recognized Provident Fund
  • Sum deposited in 10 year/15 year account of Post Office Saving Bank
  • Subscription to any Notified Securities/Notified Deposits scheme e.g NSS
  • Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.
  • Home Loan principal Repayment
  • Loan on house EMI have two components interest and principal. For deduction under Section 80C the principal part of EMI can be claimed.
  • Stamp Duty and Registration Charges for Home
  • At the time of purchase of house the amount paid as stamp duty and the amount paid for the registration of the document of the house can be claimed as deduction under section 80C. However, only in the year of purchase of the house this can be done.
  • In case before the expiry of 5 year the property is transferred from the end of financial year in which possession of such property is obtained by the person, the aggregate amount of deduction of income allowed for various years shall be liable to tax in that year.
  • Mutual Fund notified u/s 10(23D) are also claimed
  • The children’s education expenses paid at the time of admission or otherwise to any school, college, university or any other educational institution situated with India for of any two children can be claimed for deduction under 80C.
  • Subscription to Deposit Scheme of a PSU engaged in providing Housing Finance
  • Subscription to Equity Shares/Debentures of any approved eligible issue of capital made by a public company or public financial institutions

 

 

 

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