Section 80C Deduction for FY 2019-20

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Investments under Section 80C

A taxpayer can claim various deductions on their total income under Section 80C of the Income Tax Act to reduce the taxable income and thereby bring down the tax outgo. Further, in this article, we will elaborately discuss the important deductions under Section 80C that the individual can claim in order to save on taxes.

Tax Deductions which falls Under Section 80C of Income Tax Act

An individual and HUFs can claim deductions under Section 80C on payments made to the following:

  1. The premium for Life Insurance for self, spouse, or children.
  2. Deferred Annuities are payable by self and the Government.
  3. Contribution towards PPF.
  4. Contribution towards PFs operated by the Central Government.
  5. Contribution towards a Recognized PF.
  6. Contribution towards a Superannuation Fund.
  7. Subscription for a Government Deposit or Security.
  8. Subscription for Saving Certificates.
  9. Subscription to ULIP, 1971.
  10. Contribution towards ULIP of LIC Mutual Fund.
  11. Insurance company’s Annuity Plans including LIC.
  12. Subscription to Notified units of Mutual Fund.
  13. Contribution to the Pension Fund of Notified units of Mutual Fund.
  14. National Housing Bank’s Pension Fund.
  15. Subscribing to the Deposit Scheme of a Public Sector companies allocating long-term financing for housing.
  16. Tuition fees for a maximum of 2 children studying in India.
  17. Repayment of housing loan taken for a residential property.
  18. Subscription to Mutual Funds units recommended by Central Board of Direct Taxes.
  19. An FD from a scheduled bank with a minimum tenure of 5 years.
  20. NABARD notified bonds.
  21. Contributions to Senior Citizens Saving Scheme.
  22. Tax Saving 5 Year FD.

Section 80C Deduction of Income Tax Act, 1961 and Deductions Under Sub-sections of 80C

Section 80C Deduction on Investments

An individual can claim up to a maximum deduction of Rs.1.5 Lakh from the total taxable income under Section 80C of Income Tax Act 1961. This tax deduction under section 80C can be claimed by individuals and Hindu Undivided Families (HUFs) while filing an income tax return.  The income tax department refunds the excess money to the bank account of the individual. 80C deductions include insurance premiums, ELSS mutual fund, tax saving FD, PPF, ULIP plans, and many other schemes. 

You may also like to Read: Section 80D Deductions

Subsections of Section 80C, Income Tax Act, 1961

Subsections were created to give clarity to the taxpayers regarding which deductions they are eligible for.

Section 80CCC- Insurance Premium

The premium paid towards the life insurance policy up to the maximum limit of Rs.1.5 Lakh is applicable for tax exemption under Section 80C of Income Tax Act. Section 80CCC also offered a tax deduction to the individuals on any amount deposited and paid in any LIC annuity plan or annuity plan of any other insurer. The pension received under the annuity plan or the amount received in case of surrendering the annuity plan, including the bonus accrued and the interest on an annuity, is taxable in the year of receipt.

80CCD- Pension Contribution

The 80CCD deduction is applicable for the contribution to the pension plan.

Employee’s Contribution Under Section 80CCD (1)

An individual can claim tax deduction under Section 80CCD of IT Act if they make a deposition in the pension account. In case, the taxpayer is an employee then he/she can claim a maximum deduction of 10% of the salary. If the taxpayer is self-employed then he/she can avail tax benefit of 20% of the gross total income or up to Rs.1.5 lakh, whichever is less.

IT Deduction for self-contribution to NPS under Section 80CCD (1B)

This is a new section which has been introduced under which an additional deduction up to Rs.50,000 is applicable for the amount deposited by the individuals to their NPS account. The contribution made towards the Atal Pension Yojana is also eligible for tax deduction under section 80CCD of IT Act.

Employer’s contribution to NPS under Section 80CCD (2)

The employer’s contribution towards the NPS account is also eligible for tax deduction under Section 80CCD of IT Act. However, the contribution made towards the NPS account should not exceed 10% of the basic salary + dearness allowance.

*The returns on NPS account are tax exempted until maturity. At the time of maturity, 40% of the accumulated sum is tax-free.

Section 80CCF

Tax deduction under this section can be claimed by both an individual and HUFs on investments made in Government notified long-term Infrastructure Bonds. The maximum deduction of Rs.20, 000 can be claimed under this section.

Section 80CCG

Under this section only specified individuals can claim a maximum benefit of Rs.25,000 against investments made in Government notified Equity Schemes. Deduction claimed cannot be more than 50% of the invested amount.

Section 80TTA- Interest on Savings Account

Section 80TTA deduction from the gross total income is applicable for the interest on the savings bank account.  

He individuals and Hindu Undivided Family (HUFs) can claim a maximum deduction of Rs.10,000 against the interest earned from the savings account of a co-operative society, bank, or post-office. It is important to keep in mind that the deduction under Section 80TTA is not applicable on the interest income earned from the recurring deposit, fixed deposit or interest earned from corporate bonds.

Popular Scheme Eligible for Deduction under 80C

  • Investment Schemes: : Unit Linked Insurance Plans (ULIPs), Equity Linked Mutual Fund (ELSS).
  • Insurance Schemes: Life Insurance
  • Retirement Savings Schemes: Public Provident Fund (PPF), National Pension Scheme(NPS), Employee Provident Fund.
  • Fixed Income Schemes: Senior citizen Saving Scheme (SCSS), National Saving Certificate (NSC), Sukanya Samriddhi Yojana. Home loan repayment, tuition fees payment.
  • Life Insurance: Any premium paid towards the life insurance policies up to the maximum limit of Rs.1,50,000 is eligible for tax deduction under section 80C of Income Tax Act. On the other hand, the returns on life insurance policies are applicable for tax exemption under section 10(10D) of the Income Tax Act.
  • ELSS Fund: Equity Linked Saving Scheme gets a Tax deduction under the section for a maximum investment of Rs.150,000. At least 65% of the ELSS funds are invested in the equity market. ELSS is one of the top tax saving instruments because not only do they offer a higher rate of returns, but they have the shortest lock-in time of 3 years amongst all tax-saving schemes. Also, the returns on the ELSS funds held for more than a year are considered Capital Gains as and are therefore 100% tax-free. Investing in a diverse ELSS portfolio through SIPs is the recommended option by financial and tax planners.
  • Public Provident Fund (PPF)- An individual can claim deductions for deposits made in PPF accounts in the name of self, spouse, and children even if major. HUFs can claim the deduction under the section for deposits made for any member of the family. The maximum deduction allowed is Rs.1, 00,000 under section 80C of the Income Tax Act.
  • Employee Provident Fund (EPF)- : The contribution made towards Employee Provident Fund (EPF)up to the maximum limit of Rs.1.5 lakh is eligible for tax deduction under section 80C of Income Tax Act.
  • National Savings Certificates (NSC): National Savings Certificate is a government-initiated saving instrument which comes with a tenure of 5 years. The interest earned in NSC is applicable for tax deduction under Section 80C of IT Act.
  • Sukanya Samriddhi Yojana: Sukanya Samriddhi Yojana is a government-initiated savings scheme for the girl child. The policy tenure of the scheme is 21 years. Under this scheme, the tax deduction is applicable up to the maximum limit of Rs.1,50,000 under Section 80C of the Income Tax Act.
  • Unit Linked Insurance Plan: Unit Linked Insurance Plan is insurance cum investment plan, which offers tax benefit under section 80C of IT Act on the premium paid towards the policy. The return earned towards ULIP plans is also eligible for tax exemption under 10(10D) of the IT Act.

Comparing the Popular Tax Saving Investments under section 80C:

Tax Saving Investment options Under Section 80C

Risk Profile

Interest (in %)

Guranteed Return

Lock-in Time (in years)

PPF

Risk free

8.1%

Yes

15

NSC

Risk free

8.1%

Yes

5

Tax Saving FDs

Risk free

7 %- 9 % approx

Yes

5

ELSS

Equity oriented

12% - 15 % approx

No

3

NPS

Equity oriented

8% - 10 % approx

No

Up Till retirement

ULIP

Equity oriented

8 %-10 % approx

No

5

Sukanya Samriddhi Yojna

Risk free

8.6%

Yes

21

SCSS

Risk free

8.6%

Yes

5

Payments Earning Tax Benefits under Section 80C

  • Premiums paid on Life Insurance during the FY for self, spouse, and children are eligible for deductions conditioned to the fact that paid premiums should not be over 10% of the assured sum. Life Insurance premiums paid any of the family members in case of a HUF are eligible for tax deductions under Section 80C. Children include non-dependent adult children, including a married daughter.
  • Tuition fees paid for a maximum of two kids studying in India is allowed for tax deductions under Section 80C. A maximum of Rs.150,000 can be given as fees for any educational institute or university, college, or school. The only condition is that the course has to be full time.
  • Repayment of the principal amount of the home loan is eligible for tax deductions. The loan can be for construction or purchase of the residential property. Deductions are allowed for registration fees, transfer expenses, and stamp duty.

Section 80C Deductions – FAQs

Q1. What is Section 80C of the Income Tax Act?

Ans:  80C includes various expenses and investments that are qualified for tax deductions. Under section 80C of the Income Tax Act, a taxpayer can claim Rs.1.5 lakh maximum tax deduction from the total income.

Q2. What all are covered deduction under 80C?

Ans: The deductions that are eligible for tax exemption under section 80C of the Income Tax Act are:

  • Home loan payment
  • Life insurance
  • Registration charges of house and stamp duty
  • Fixed deposit
  • Health Insurance
  • National Savings certificate
  • Provident fund
  • Infrastructure bonds
  • Education expenses
  • Post office time deposit
  • Sukanya samriddhi account
  • Senior citizen saving scheme
  • Pension fund 

Q3. Is employee PF included in Section 80C?

Ans: Yes, the employee provided fund is included under section 80C of the Income Tax Act.

Q4. What is Section 80ccc?

Ans: Section 80CCC is the subsection under section 80C of Income Tax Act which provides tax exemption to the individual for any amount deposited or paid in an annuity plan of the insurance company.

Q5. What is 80d?

Ans: The taxpayer can claim tax deduction under section 80D of the Income Tax Act if they have suffered expenses towards preventive health check-up, medical insurance, and other medical expenses. One can get up to a maximum tax deduction of Rs60,000 under section 80D of the Income Tax Act.

Q6. How much can be saved under 80c?

Ans: One can claim up to a maximum tax deduction of Rs.1,50,000 under section 80C of Income Tax Act 1961.

Q7. Does FD come deduction under 80C?

Ans: Yes, fixed deposit savings comes under section 80C of Income Tax Act 1961.

Q8. Does LIC come deduction under 80C?

Ans: Yes, LIC comes under section 80C of Income Tax Act 1961.

Q9. Does house rent come deduction under 80C?

Ans: Yes, house rent comes under section 80C of Income Tax Act 1961.

Q10. Does SIP come deduction under 80C? Who can claim deductions under Section 80C of the Income Tax Act, 1961?

Ans: SIP is the process through which one can invest in mutual fund, Only mutual fund tax saving scheme (ELSS) scheme offers tax deduction up to the maximum limit of Rs.1,50,000 under section 80C of Income Tax Act 1961.

Q11. What are the investments eligible for deduction under Section 80C?

Ans: Investments like NPS, FD, PPF, Insurance, ELSS, Post office deposits, etc. are eligible for tax deduction under section 80C of Income Tax Act 1961.

Q12. Does the limit of Rs. 1,50,000 means that a taxpayer can invest in more than one instrument and claim deductions of up to Rs. 1,50,000 for each investment?

Ans: No, the limit of Rs.1,50,000 is eligible for tax deduction keeping into account all the investments made the taxpayer under section 80C of Income Tax Act 1961.

Q13. Is the interest earned through investments in these instruments eligible for tax deductions under 80C?

Ans: No. In most of the cases, the earned interest income is taxable under various sections. The only exception is National Savings Certificates where reinvested interest (if any) becomes eligible for a tax deduction as per section 80c for the current financial year.

Q14. What are the tax benefits that can be claimed on life insurance?

Ans: One can claim tax benefit on the premium paid and maturity proceeds under section 80C of Income Tax Act 1961.

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