Section 80C
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Section 80 C meaning-
Section 80C meaning- Section 80C of the income tax act allows provisions for taxpayers to claim deductions up to Rs. 1.5 Lakhs on the gross income in a financial year. Taxpayers can reduce their taxable income through investments and other sources/channels. However, only Individuals and Hindu Undivided Families can avail of deductions under 80C. Corporates, Joint Stock companies, and other partnership firms do not qualify for the same.
What all comes under section 80c?
Indian tax exemption list (Investments under Sec 80C)- Equity Linked Savings Scheme, National Pension Scheme, Public Provident Fund, Tax Saving Fixed Deposits, National Savings Certificate, etc.
Indian tax exemption list (Expenses under Sec 80C)- payment of tuition fees, Stamp duty and registration charges, repayment of principal home loan amount, payments of LIC Life Insurance Premium, etc.
Indian tax exemption list (Expenses under Sec 80C)- payment of tuition fees, Stamp duty and registration charges, repayment of principal home loan amount, payments of LIC Life Insurance Premium, etc.
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Tax saving investments and expenses under 80C-
1. ELSS (Equity Linked Savings Scheme)- Equity- Linked Savings Scheme are a type of tax saving mutual funds that provide investors the benefit of relatively high returns packed with a tax-saving element. This investment scheme helps investors save up to Rs. 1.5 Lakhs under sec 80C of the Income Tax Act. This instrument invests in equities (as the name suggests), and these instruments have a lock-in period of three years. ELSS are a popular tax-saving option among investors with a high-risk appetite.
2. Public Provident Fund (PPF)- Public Provident Fund is a type of government bond suited for investors with a moderate or low-risk appetite. Public Provident Funds earn an interest of 7.9% per annum compounded annually and have a maximum deposit limit of Rs. 1.5 lakhs, hence the maximum amount of deduction you can claim on these instruments are Rs. 1.5 Lakhs under Sec 80C of the IT Act. Public Provident Fund accounts have a lock-in period of 15 years.
3. National Pension Scheme- National Pension Scheme is an initiative by the Central Government, regulated by the Pension Regulatory Fund Authority of India for employees working in the Public and Private sector. NPS helps individuals save money under Sec 80C of the income tax act, and NPS has a cap of 50-75% equity exposure for non-government and 50% equity exposure cap for government employees. The investment instrument can have significantly higher risk exposure and returns in comparison to instruments such as Public Provident Funds. Investors can withdraw only 60% of the NPS upon attaining the age of 60, with the rest being used to purchase an annuity post-retirement.
4. National Savings Certificates- National Savings Certificates are a type of investment instrument introduced by the Government of India. You can open a National savings certificate scheme with any post office, and this scheme helps investors claim deductions of up to Rs. 1.5 Lakhs under Sec 80C. Investors belonging to small to medium-income groups can invest in this scheme, and being a fixed income instrument, NSC offers a guaranteed interest rate of 7.9% compounded semi-annually. The scheme has a maturity period ranging between 5-10 years, and this scheme provides stable returns.
5. Tax Saving Fixed Deposits- Investors can invest in Tax Saving Fixed Deposit schemes through banks and post offices, which can help save tax under Sec 80C of the Income Tax Act. These instruments have a lock-in period of 5 years, and deposits can be made as a lump sum or in the form of monthly deposits. Fixed deposit interest rates can range between 5.5% - 7.5%.
6. Life Insurance Premium- You can claim deductions on up to 10% of the sum assured on Life Insurance premiums. You can not only claim deductions on your life insurance premiums but also on your spouse’s, dependants, children’s policies as well.
7. Unit Linked Insurance Plans (ULIPs)- Unit Linked Insurance Plans (ULIPs) are a type of insurance plan wherein the insured individuals can make the most out of the insurance element as well as an investment element. Premiums paid on ULIPs are eligible for a tax deduction of up to Rs. 1.5 Lakhs under section 80C of the Income Tax Act.
8. Infrastructure Bonds- Infrastructure Bonds are long-term fixed income instruments and investments of up to Rs. 20,000 in these instruments are eligible for tax deductions under Sec 80C of the income tax act. The limit of Rs.1.5 lakh are applicable for these long-term secured bonds as well, which have a maturity period of 10 to 15 years.
9. Senior Citizens Savings Scheme- Senior Citizen Savings Scheme is a type of government scheme offered to patrons over the age of 60. This scheme attracts an interest rate of 8.6%, and all eligible deposits are exempt from tax under Sec 80 C of the Income Tax Act (up to Rs. 1.5 Lakh). The scheme offers interest payouts over the course of five years, with an option to extend an additional three years.
10. NABARD Rural Bonds- National Bank for Agriculture and Rural Development (NABARD) bonds are tax-free bonds, with tenures ranging from 10, 15, and 20 years. These are some of the safest bonds an investor can invest in and these bonds are eligible for tax deductions of up to Rs. 1.5 Lakh under sec 80C.
11. Employee Provident Fund- This is a type of provident fund that all employees enjoy, consisting of 12% of their basic salary plus dearness allowance. These funds attract an interest of up to 8.5%, and the entire EPF balance (returns plus interest) are eligible for tax deductions under Sec 80C of the Income Tax Act.
12. Sukanya Samriddhi Yojana- This is a scheme introduced by the government of India to meet the financial needs of a girl child for the purpose of education and marriage. Deposits in the Sukanya Samriddhi Yojana scheme attract an interest rate of 8.5% and a maximum of Rs. 1.5 Lakhs (worth of interest) can be claimed as deductions under Sec 80C.
13. Principal repayment made towards home loan- You can only claim deductions on the principal component of the home loan EMI taken to buy or construct a residential property. Another clause this expense has is that deductions can be claimed only if the property is transferred/sold after five years of possession. This deduction is also applicable on stamp duty, registration fees, and transfer expenses.
14. Payments made towards the tuition fees of up to two children are eligible for Tax Deductions of up to Rs. 1.5 Lakhs under Sec 80C. This deduction can only be claimed on full-time course fees of schools, colleges, and universities situated in India.
2. Public Provident Fund (PPF)- Public Provident Fund is a type of government bond suited for investors with a moderate or low-risk appetite. Public Provident Funds earn an interest of 7.9% per annum compounded annually and have a maximum deposit limit of Rs. 1.5 lakhs, hence the maximum amount of deduction you can claim on these instruments are Rs. 1.5 Lakhs under Sec 80C of the IT Act. Public Provident Fund accounts have a lock-in period of 15 years.
3. National Pension Scheme- National Pension Scheme is an initiative by the Central Government, regulated by the Pension Regulatory Fund Authority of India for employees working in the Public and Private sector. NPS helps individuals save money under Sec 80C of the income tax act, and NPS has a cap of 50-75% equity exposure for non-government and 50% equity exposure cap for government employees. The investment instrument can have significantly higher risk exposure and returns in comparison to instruments such as Public Provident Funds. Investors can withdraw only 60% of the NPS upon attaining the age of 60, with the rest being used to purchase an annuity post-retirement.
4. National Savings Certificates- National Savings Certificates are a type of investment instrument introduced by the Government of India. You can open a National savings certificate scheme with any post office, and this scheme helps investors claim deductions of up to Rs. 1.5 Lakhs under Sec 80C. Investors belonging to small to medium-income groups can invest in this scheme, and being a fixed income instrument, NSC offers a guaranteed interest rate of 7.9% compounded semi-annually. The scheme has a maturity period ranging between 5-10 years, and this scheme provides stable returns.
5. Tax Saving Fixed Deposits- Investors can invest in Tax Saving Fixed Deposit schemes through banks and post offices, which can help save tax under Sec 80C of the Income Tax Act. These instruments have a lock-in period of 5 years, and deposits can be made as a lump sum or in the form of monthly deposits. Fixed deposit interest rates can range between 5.5% - 7.5%.
6. Life Insurance Premium- You can claim deductions on up to 10% of the sum assured on Life Insurance premiums. You can not only claim deductions on your life insurance premiums but also on your spouse’s, dependants, children’s policies as well.
7. Unit Linked Insurance Plans (ULIPs)- Unit Linked Insurance Plans (ULIPs) are a type of insurance plan wherein the insured individuals can make the most out of the insurance element as well as an investment element. Premiums paid on ULIPs are eligible for a tax deduction of up to Rs. 1.5 Lakhs under section 80C of the Income Tax Act.
8. Infrastructure Bonds- Infrastructure Bonds are long-term fixed income instruments and investments of up to Rs. 20,000 in these instruments are eligible for tax deductions under Sec 80C of the income tax act. The limit of Rs.1.5 lakh are applicable for these long-term secured bonds as well, which have a maturity period of 10 to 15 years.
9. Senior Citizens Savings Scheme- Senior Citizen Savings Scheme is a type of government scheme offered to patrons over the age of 60. This scheme attracts an interest rate of 8.6%, and all eligible deposits are exempt from tax under Sec 80 C of the Income Tax Act (up to Rs. 1.5 Lakh). The scheme offers interest payouts over the course of five years, with an option to extend an additional three years.
10. NABARD Rural Bonds- National Bank for Agriculture and Rural Development (NABARD) bonds are tax-free bonds, with tenures ranging from 10, 15, and 20 years. These are some of the safest bonds an investor can invest in and these bonds are eligible for tax deductions of up to Rs. 1.5 Lakh under sec 80C.
11. Employee Provident Fund- This is a type of provident fund that all employees enjoy, consisting of 12% of their basic salary plus dearness allowance. These funds attract an interest of up to 8.5%, and the entire EPF balance (returns plus interest) are eligible for tax deductions under Sec 80C of the Income Tax Act.
12. Sukanya Samriddhi Yojana- This is a scheme introduced by the government of India to meet the financial needs of a girl child for the purpose of education and marriage. Deposits in the Sukanya Samriddhi Yojana scheme attract an interest rate of 8.5% and a maximum of Rs. 1.5 Lakhs (worth of interest) can be claimed as deductions under Sec 80C.
13. Principal repayment made towards home loan- You can only claim deductions on the principal component of the home loan EMI taken to buy or construct a residential property. Another clause this expense has is that deductions can be claimed only if the property is transferred/sold after five years of possession. This deduction is also applicable on stamp duty, registration fees, and transfer expenses.
14. Payments made towards the tuition fees of up to two children are eligible for Tax Deductions of up to Rs. 1.5 Lakhs under Sec 80C. This deduction can only be claimed on full-time course fees of schools, colleges, and universities situated in India.
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