Home  »  Tax Planning  »  Section 80c

For this article, we will discuss Section 80C in detail along with all the exemptions under it.

We will guide you about how you can avail these deductions and exemptions for your next assessment year.

Are you looking for ways to save taxes? That might be a vague question as everyone of us find ways to reduce our tax burden.

However, if it can be done with tax-saving investment schemes, nothing like it, isn’t it? So, here in this article, you will learn about the most popular Section of the Income Tax Act 1961, Section 80 C.

Section 80C allows you to reduce your tax burden by exempting various investments from your total income.


About Section 80 C of the IT Act, 1961

Under section 80C, you can claim deductions for your payments towards various life insurance policies, tax-saving investments schemes, PPF, mutual funds, and many other options are there.

Section 80CThese deduction benefits help you save or reduce your tax burden. Supposedly, your total income is Rs.300000 a year.

However, you pay a premium of Rs.50000 towards your life insurance premium.

Now your taxable income would be Rs.250000 as you can deduct the amount you pay towards life insurance premium from the total income.

Apart from the life insurance premium, deductions can be availed on ULIP, PPF, FDs of 5 years (tax saving), and others which we will discuss later in the article.


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    What are the Sub-Sections of 80C?

    We generally talk a lot about section 80C, however there are various sub-sections under this single section that go unnoticed. Let us go through each of them now –

    Section 80C : To begin with, Section 80C can be termed as the most important section here as multiple investments fall under it.

    You can get deductions on PPF, insurance premium, ELSS, NSC, EPF, home loan principal repayment, SSY and SCSS, and others.

    Section 80CCC: Under this section, you can avail of deductions on your payments towards mutual funds and pension plans. You can avail upto Rs.1.5 lakh worth deductions.

    Section 80 CCD (1): As per this section, you can claim a deduction for your investments in government-aided schemes like Atal Pension Yojana or National Pension System, and others.

    Section 80 CCD (1B): Under this section, investment in the National Pension Scheme or NPS is considered for deductions or exemption.

    Though there is a limit on the amount here and it has to be less than or equal to Rs.50000.

    Section 80 CCD (2): If your employer contributes to NPS then you can avail of deduction on the same. However, the contribution must not exceed 10% of the basic salary along with DA.

    So, these five are the sub-sections of Section 80C which you can use to reduce your taxable income and also make some good investments.


    Which are the investments eligible under Section 80C?

    Here we will discuss all the investments that are eligible under section 80C of the Income Tax Act, 1961 in detail.

    It will help you understand how many deductions you can claim under this section.

    Let’s start with the basic:

    • Life Insurance Premium
    • PPF
    • NABARD Rural Bonds
    • ULIPS
    • NSC
    • Tax Saving Fixed Deposits
    • Employee Provident Fund
    • Infrastructure Bonds
    • Equity-linked Saving Schemes
    • Home Loan Principal Repayment
    • Stamp Duty and Registration Charges
    • Sukanya Samriddhi Yojana

    Life Insurance Premium

    Individuals and HUFs can claim deductions for their premium payment towards life insurance.

    The insurance must be held by yourself, your spouse or dependent children, and others in the family (dependent members).

    For the HUFs, the claim can be done on the policies of any family members. Earlier the amount of deduction was 20% of the sum insured as premium.

    However, now you can only avail of deduction up to 10% of the total sum insured.

    PPF

    PPF which stands for Public provident fund is also exempted under this section. If you invest in PPF or your company’s PF (voluntarily) both are exempted under section 80C.

    You can get an exemption up to Rs.150000.

    NABARD Rural Bonds

    National Bank for Agriculture and Rural Development (NABARD) sells bonds to accumulate funds. If you purchase these bonds, you can claim deductions under section 80C up to Rs.150000.

    ULIPs

    Unit Linked Insurance Plans, or UPIPS as we commonly call it are also eligible for deductions. Investors in the plan can avail of up to Rs.1.5 lakhs of exemptions.

    ULIPs have been popular over the years because they return higher profits than normal insurance plans.

    NSC

    National Saving Certificate is another great investment vehicle under the government’s schemes. This is a risk-free investment and you can earn interest on the same.

    The interest is compounded twice a year and the maturity ranges from five to ten years. You can invest any amount in this scheme but you can claim a deduction up to Rs.1.5 lakhs.

    Tax Saving Fixed Deposits

    Have you invested in these FDs then you can avail of Rs.1.5 lakh deduction on the principal investment. The interest you earn will be taxed as that’s an extra income.

    This FD has a maturity of five years or you can say lock-in period. This is offered by any nationalized banks and post offices across the country.

    Fixed Deposits can b used a Ta benefits under Section 80C.

    Employee Provident Fund

    In the earlier section of PPF, you have read that the contribution in PPF and PF is exempted. Now, the return you earn from EPF along with the interest is also eligible for exemption.

    However, the employer must have worked for the organization for more than five years.

    Infrastructure Bonds

    Infrastructure bonds are long-term investments. These bonds are circulated by the government. If you invest more than Rs.20000 then you can avail exemption on the invested amount.

    There is no cap on the investment amount. However, the maximum amount eligible for deduction is Rs.1.5 lakhs.

    Equity-linked Saving Schemes

    Commonly known as ELSS, if you invest in it, you can get an exemption up to Rs.1.5 lakhs. The ELSS has a mandatory lock-in period of three years which you need to keep in mind.

    ELSS is one of the famous used instrument to be used for Section 80C tax benefits.

    Senior Citizens Savings Schemes

    People above sixty years of age, you can invest in SCSS. You can also invest after the age of fifty-five in case you have taken voluntary retirement.

    This investment can be deducted from your taxable income. The lock-in period for the investment is five years. The maximum deduction available is Rs.150000.

    Home Loan Principal Repayment

    Supposedly you have taken a home loan for constructing your home. Now when you repay the loan, the principal amount you repay can be exempted from tax.

    You can deduct the principal amount repayment from your total income.

    Stamp Duty and Registration Charges

    If you have paid stamp charges and registration for obtaining any property, then you can deduct the same from the total income of yours.

    This will reduce taxable income. Under section 80C, these payments are eligible for exemptions.

    Sukanya Samriddhi Yojana

    When you have a girl child and you want to secure their future by investing in this scheme of the government, then you can also get an exemption from tax.

    Yes, you can invest for your child who is not more than ten years old. You can open an account for more than two girls if there is one twin.

    Here, the interest you earn is also eligible for exemption.


     

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    What is the Total Deduction available under Section 80C?

    Often we get confused checking the individual exemption limit under all the sub-section of the 80C.

    However, the cumulative deduction which is allowed under section 80C is only Rs.150000. For instance, you have an investment in –

    • PPF – Rs.50000
    • Mutual Funds – Rs.100000
    • NPS – Rs.25000
    • Life Insurance Premium – Rs.50000

    So, your total investment stands at = Rs.225000.

    Although, you can deduct only Rs. 150000 out of this Rs. 225000 under section 80C cumulatively.


    Section 80C – Conclusion

    To conclude, we can assume that you have understood Section 80C of the IT Act well to avail the exemptions.

    This is undoubtedly the most important section of the Act which reduces your tax burden.

    However, you must invest as per your suitability and not just because of getting exemption under section 80C.

    You must choose your investments wisely and then avail the deductions accordingly.


    Section 80C FAQs

    Ques: Is term insurance premium eligible for deduction under section 80C?

    Answer: Yes, it is eligible for deductions under section 80C of the IT Act. You can claim up to Rs.150000 as a deduction.

    Ques: Is the interest earned and reinvested eligible for the deduction?

    Answer: The interest earned from most of the investments mentioned under section 80C is not eligible for deductions.

    However, if you reinvest the interest earned on NSC (only), then it will be available for deductions.

    Ques: What are conditions imposed on exemption of home loan principal repayment?

    Answer: The construction of the home must be completed if you have taken the loan for construction purposes.

    If you transfer the property before the completion of the 5 years of possession, then you won’t get any deductions.

    If you do so, then the amount which was deducted in earlier years will also be taxed in the fifth year.

    Ques – What are the items covered under 80c?

    Answer – There are various sub-sections under 80C, which are – section 80CCC, section 80CCD (1), section 80 CCD (1B), Section 80 CCD (2). These five subsections taxpayers refer to in order to trim down their taxable income and also seek beneficial investments.

    Ques – How does Section 80c work?

    Answer – Section 80C works in the benefit of those taxpayers who are seeking for tax deduction from their gross total income of up to the amount of Rs 1.5 lakhs on the various expenses of the payer.  Taxpayers can avail a maximum deduction of up to 10% of the salary.

    Ques – How is 80c calculated?

    Answer – The section 80C is calculated by taking your gross taxable income after taking in note all the eligible tax deduction leaving the deduction from section 80C amount invested/paid by you to claim deduction under section 80C.

    Ques – Can I invest more than 1.5 lakhs in 80c?

    Answer – The budget that has been kept for the section 80C is around 1.5 lakhs. However, there are no restrictions given about the amount one can invest under the section 80C.

    Ques – Is LIC under 80c?

    Answer – Yes, any premium on the Life Insurance can be claimed as deduction under the section 80C.  Thus, the LIC premium payments can be claimed as a deduction. However one must remember that the payment under premium must be less than 10% of the sum that is given under section 80C.

    Ques – Is PF considered in 80c?

    Answer – Yes, the provident fund also is granted a tax relief or break under the section 80C of up to a limit of 1.5 lakhs.

    Ques – What is Section 80c and 80d?

    Answer – Section 80C is one those important tools that help in tax relief.  At present the section 80C grants deduction from the gross total income of a total of 1.5 lakhs per annum on eligible expenses or investments made by the taxpayer.

    Ques – How can I save my tax after 80c?

    Answer – There are various ways through which tax payers can save after the implementation of section 80C.  Section 80C covers the insurance premium payments, stamp duty or registration charges as well as it also helps the citizens save from their provident fund.  Thus, section 80C has been proven to be a major boon when the concern of tax relief arises.

    Ques – How can I save tax beyond 1.5 lakhs?

    Answer – There are various ways one can save beyond the 1.5 lakhs limit set under the section 80C. Taxpayers can invest an additional of amount Rs 50,000 in national pension scheme which can later be claimed as tax deduction under the section 80CCD.  You can also use it under section80E for the interest on education loan.

    Ques – What is the best investment for 80c?

    Answer – There are various investment options which citizens can refer to under the sec 80C few of them are – the PPF ( Public Provident fund) , EPF (Employee provident fund), NPS ( National Pension System), NSC  (National Savings Certificate).


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