Income Tax Deduction Under Section 80C
A lot of times, people look at where their colleagues and friends have invested to save tax and just buy the same things without thinking if they are right for them. This isn’t the right approach. After all, you are putting your hard-earned money. You should know all the options available to you and then make an informed decision. Investments mentioned under section 80C are the most popular and preferred way to save taxes, chosen by the taxpayers’ deduction under section 80C and its allied sections allowing deduction up to a maximum of Rs. 1.5 lakh every year from the total income of the taxpayer and an additional deduction amounting to Rs. 50,000 can be claimed under section 80CCD(1b).
Who Can Avail The Deductions Under Section 80C
Let us look at what Section 80C of the Income Tax Act 1961 is According to the tax laws, you can claim a
deduction of Rs 1.5 lakh from your total income under section 80C. Basically, you can reduce up to Rs 1.5 lakh
from your total taxable income by saving and investing money in the products that are listed under Section 80C towards tax benefits. The deduction under Section 80C can be claimed only by Individuals (Resident or Non-Resident) and HUFs.Deduction under chapter VI – A is Not Allowed against LTCG, LTCG u / s 112A, STOG 111A & special tax income rates. Deduction Under Chapter VI – A Deduction under chapter VI – A is restricted to Gross Total income & deduction co be carry forward.
Options To Save Taxes Under Section 80C
under Section 80C and they are many such products. Actually, there are over a dozen avenues through which taxpayers could use to exhaust their tax savings under Section 80C. Each of these products is unique, though they all have a common objective which provides for tax savings on the monies that flows into them each financial year. Let us understand the basic features of each one of them.
1. Life Insurance Premium:
The LIC premium can be bought for Self, Spouse, or Children – In case of Individual & Any member of HUF – In case of HUF. the amount that can be claimed as a deduction on Life Insurance Premiums is as follows:
| TIME period | Deduction available |
| If policy issued before 01/04/2012 |
|
| If policy issued on or after 01/04/2012 |
|
| If the policy was issued on or after 01/04/2013 for a person with a disability ( u / s 80 person suffering from a specified disease ( u / s 80 DDB ) |
|
take a simple example :
Compute the eligible deduction under section 80C for A.Y.2022-23 in respect of the life insurance premium paid by Mr. Rahul mishra during the P.Y.2021-22, the details of which are given hereunder
| Date of issue of policy | Person insured | Actual capital sum assured | An insurance premium paid during 2021- 22 |
| 30/3/2012 | Self | 6,00,000 | 51,000 |
| 1/5/2017 | Spouse | 1,50,000 | 20,000 |
| 1/6/2019 | Handicapped son (section 80U disability) |
4,00,000 | 80,000 |
solution
| Date of issue of policy | Person insured | Actual capital sum assured | An insurance premium paid during 2021- 22 | Deduction u/s 80C for A.Y.2022- 23 |
Remark (restricted to % of sum assured) |
| 30/3/2012 | Self | 6,00,000 | 51,000 | 51,000 | 20% |
| 1/5/2017 | Spouse | 1,50,000 | 20,000 | 15,000 | 10% |
| 1/6/2019 | Handicapped son (section 80U disability) |
4,00,000 | 80,000 | 60,000 | 15% |
| TOTAL DEDUCTION | 1,26,000 | ||||
2. The amount deposited in Public Provident Fund ( PPF )/SPF/RPF
The Public Provident Fund (PPF) is one of the oldest tax savings instruments in the country which was introduced in 1968. It is a long-term retirement savings option, which functions like a savings-cum-tax savings medium. The PPF has a minimum tenure of 15 years, which can be extended in blocks of 5 years as per your wish. The amount deposited during a financial year in the account can be claimed under Section 80C deductions within the Rs 1.5 lakh limit. The current interest rate on PPF is 7.1%. There is another advantage with PPF; the interest rate is guaranteed and the gains are tax-free on redemption after maturity. Public Provident Fund or PPF is a savings cum tax savings investment scheme, the corpus of which can be used at the time of retirement. PPF Can be bought for Self, Spouse, or Children – In the case of individuals & Any member of HUF – In the case of HUF. The interest earned and the returns on this PPF scheme are not taxable and the PPF account can be opened either at a nationalized bank or post office.
3. Any sum paid or deposited in Sukanya Samridhi Account
Accordingly, Sukanya Samriddhi Scheme has been notified to provide that any sum paid or deposited during the previous year in the said
The scheme, by an individual in the name of:
- any girl child of the individual; or
- any girl child for whom such individual is the legal guardian
would be eligible for deduction under section 80C. The SSY account can be opened at the post office and designated banks for a girl child. The account can be opened for the girl child before she turns 10 years old
4. National Savings Certificates VIII
Savings Certificates under the Government Savings Certificates Act, 1959 notified by the Central Government in the Official Gazette (i.e. National Savings Certificate (VIII Issue) issued under the Government Savings Certificates Act, 1959)
5. Tuition fees
Payment of tuition fees to any university, college, school, or other educational institution within India for full-time education for a maximum of 2 children.Payment of tuition fees by an individual assessee at the time of admission or thereafter to any university, college, school, or other educational institutions within India for the purpose of full-time education of any two children of the individual. This benefit is only for the amount of tuition fees for full-time education and shall not include any payment towards development fees or donation or payment of similar nature and payment made for education to any institution situated outside India.
6. Repayment of housing loan
Repayment of housing loan including stamp duty, registration fee, and other expenses.Any payment made towards the cost of purchase or construction of a new residential house property. The income from such property:
- should be chargeable to tax under the head “Income from house property
- would have been chargeable to tax under the head “Income from house property” had it not been used for the assessee’s own residence
The approved types of payments are as follows:
- Any installment or part payment of the amount due under any self financing or other schemes of any development authority, Housing Board, or other authority engaged in the construction and sale of house property on an ownership basis; or
- Any installment or part payment of the amount due to any company or cooperative society of which the assessee is a shareholder or member towards the cost of house allotted to him; or
- Repayment of the amount borrowed by the assessee from:
- The Central Government or any State Government;
- The Life Insurance Corporation
- The National Housing Bank
- Any bank including a co-operative bank;
7. certain equity shares or debentures
Equity shares or debentures form part of any eligible issue of capital approved by the Board on an application made by a public company or as the subscription to any eligible issue of capital by any public financial institution in the prescribed form.A lock-in period of three years is provided in respect of such equity shares or debentures. In case of any sale or transfer of shares or debentures within three years of the date of acquisition, the aggregate amount of deductions allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.
8. units of mutual fund
any units of any mutual fund and approved by the Board on an application made by such mutual fund in the prescribed form It is necessary that such units should be subscribed only in the eligible issue of capital of any company
9. Investment in a five-year term deposit
Investment in a term deposit for a period of not less than five years with a scheduled bank; is in accordance with a scheme framed and notified by the Central Government in the Official Gazette. qualifies as an eligible investment for availing deduction under section 80C. The maximum limit for investment in a term deposit is RS 1,50,000.
10. notified bonds issued by NABARD
such bonds issued by NABARD (as the Central Government may notify in the Official Gazette) qualifies for deduction under section 80C.
11. Investment in five years Post Office time deposit
Investment in a five-year time deposit in an account under Post Office Time Deposit Rules, 1981 qualifies for deduction under section 80C.
12. Contribution to additional account under NPS
There are two types of NPS accounts i.e., Tier I and Tier II, to which an individual can contribute. Section 80CCD provides deduction in respect of contribution to individual pension account [Tier I account] under the NPS [referred to in section 20(2)(a) of the Pension Fund Regulatory and Development Authority Act, 2013 (PFRDA)] whereas deduction under section 80C is allowable in respect of contribution by Central Government employee to additional account [Tier II account] of NPS [referred to in section 20(3) of the PFRDA], which does not qualify for deduction under section 80CCD. Thus, the Tier II account is the additional account under NPS, contribution to which would qualify for deduction under section 80C only in the hands of a Central Government employee.
conclusion
Section 80C of the income tax allows individual taxpayers and HUF to claim a deduction of Rs 1.5 lakh from the total income by saving and investing money in the products that are listed under Section 80C towards tax benefits. And, the best way to leverage tax savings under Section 80C is to plan for it and align it smartly to your financial needs and goals. Doing so will help you save tax and also realize your financial goals.
