Section 80C of the Income-Tax Act (ITA) provisions for certain investments by taxpayers to be eligible for up to ₹1.5 lakh deduction when taxable income is calculated for a given financial or assessment year. Combining it with other exemptions, deductions and rebate allows you to lower tax liability each year.
In the implemented from April this year, the provision has been outlined under Section 123.
What is the advantage of Section 80C deductions?
A key feature of investment tools that are allowed for deductions is that these offer dual advantage of tax saving while giving an interest income at the same time. Notably however, Section 80C deduction is only available under the old tax regime.
Further, an additional ₹50,000 can be claimed u/s 80CCD(1B) on contribution to specified pension funds.
Overall, these deductions for various instruments — Public Provident Fund (), Equity-Linked Saving Schemes (ELSS), some fixed deposits (FDs), life insurance premiums, encourages taxpayers in long-term saving and investing behaviour.
What investments are eligible for Section 80C deductions?
Some of the common financial instruments which provide tax exemption benefits under section 80C include the following:
5-year tax-saving fixed deposits: Taxpayers can choose to invest in . For a tenure of five years, these FDs with principal up to ₹1.5 lakhs can be claimed under Section 80C, further and interest up to ₹50,000 can be claimed as a deduction under section 80TTB.
Employees Provident Fund (EPF): Employee’s contribution to the is eligible for tax exemptions. The contribution by employer is not eligible for 80C exemption.
Equity Linked Saving Scheme (ELSS): This is an equity scheme that has a lock in period of three years. Through this investment, one can get an exposure to equity instruments.
Life Insurance Corporation (LIC): Upon buying any life insurance policy, you can claim 80C deduction on the paid towards the plan so long as the policy is meant for the taxpayer or the immediate family members such as spouse and children.
Loan principal repayment: Those who have taken home loan from a bank can use the principal amount as deduction under section 80C.
National Pension Scheme (NPS): Contributions made towards the retirement scheme are tax deductible under Section 80CCD, which is a part of Section 80C. But it important to note that the joint deduction under both these cannot be more than ₹1.5 lakh. Further, taxpayers can claim an additional ₹50,000 deduction over and above of ₹1.5 lakh under 80CCD (1B).
National Savings Certificate (NSC): Any investment made under the can be claimed under section 80C deductions up to a maximum limit of ₹1.5 lakh.
Public provident fund (PPF): Investment in also enables you to claim tax exemption up to a maximum of ₹1.5 lakh. Also, interest received on this investment scheme is tax -free.
Registration and stamp duty: If you have bought a house and thereby, make payment for and registration, this can also be claimed as deductions under Section 80C of the Income Tax Act.
Senior Citizen Savings Scheme (SCSS): The senior citizen savings is among the government backed small savings scheme for senior citizen taxpayers. It offers tax savings deductions under Section 80C.
Sukanya Samridhi Yojana (SSY): This is a saving scheme for the under the age of 10. Any investment made in this scheme is eligible for exemption under section 80C.
Tuition fees paid for up to two children: Taxpayers who pay for fees of their children can claim deduction under Section 80C for up to two children with limit of ₹1.5 lakh combined. Notably, this is available only on fees paid during the financial year.
Unit linked insurance plan (ULIP): The gives the twin benefit of insurance as well as investment. So, any investment made towards this enables you to claim exemption under section 80C.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.