Learn all about the education under Section 80C. Know the list of various tax saving schemes under Section 80C of the Income Tax Act, 1961. Check out the list of Income Tax Deduction as per Section 80C.
Section 80C of Income Tax Act 1961
The Income Tax Act furnishes various income tax deductions that can be claimed at the time of IT return filing. The total taxable income after reducing the deductions that have been claimed would be taxed as per the Income tax slab rates. Section 80C of the Income tax Act 1961 provides the list of Investments or expenses which are allowed as Deduction from assessee’s taxable Salary. In this article, you can get the details regarding Tax Deduction under Section 80C of the Income Tax Act and who is eligible for the deduction, Eligible Investments, what is the Limit for deduction, who can invest for whom and the period for investment.
List of Deductions under Section 80C
Income tax deduction is the deduction u/s 80C of Income Tax Act, which is allowed for making investments in certain specified instruments. There are many instruments in which investments can be made. Check the list of deductions under Section 80C from the following section.
- PPF Account.
- Tax Saving Mutual Fund.
- Fixed Deposit.
- National Savings Certificate.
- Repayment of Principal on Housing Loan.
- Premium on Life Insurance Policy.
- Equity Oriented Mutual Funds.
- Contribution to Employee Provident Fund.
Public Provident Fund
PPF-Public Provident Fund is available for both salaried individuals and self-employed. PPF is one of the best long term saving options which is safe and gives the assured returns. Maturity period for PPF is 15 years, and current interest rate for Public Provident Fund is 8.8% tax-free. Contributions to Public Provident Fund accounts of the spouse and children are also eligible for Tax deduction u/s 80C. The maximum amount that can be deposited is Rs. 1,50,000/-. The contribution is exempted under Section 80C of Income Tax Act, and Interest earned is tax exempted, and withdrawal is also tax exempted.
ELSS- Equity Linked Saving Schemes
ELSS is a mutual fund scheme which is approved for tax savings. ELSS funds have the lock-in period of 3 years and underlying investment in Equity. If taxpayer invests for the long term, then ELSS has the potential to give handsome returns. The investments that assessee makes in ELSS are eligible for deduction under Section 80C. Investors can invest up to Rs. 1,50,000/- in an ELSS fund and deduct the investment from their taxable income as per Section 80C of Income Tax Act, thereby effectively reducing their tax liability.
Life Insurance Premiums
An amount that taxpayer pay towards life insurance for Self, Spouse and children are eligible for Deduction under Section 80C. Assessee can take insurance policy from, Life Insurance Corporation of India or any private insurer. From 1st April 2013, the Only premium equal to 10% of sum assured will be allowed. So make sure, you have sum assured of 10 times the annual premium. If the premium is more than 10% of sum assured, you can only claim up to 10% of Sum assured.
Employee Provident Fund
For Salaried Individuals, Provident Fund is default investment which qualifies for deduction under section 80C. Employers take this investment into account while deducting TDS. The taxpayer can check the monthly Provident Fund deduction in your payslip and check what balance amount you need to invest in other 80C securities. Current interest is 8.8%. Interest Tax-free.
Must Read: Employee Provident Fund | EPFO
National Pension Scheme-NPS
Under Section 80CCD, any contribution made National Pension Scheme Tier I scheme is allowed as deduction. But, the assessee can claim a maximum deduction of Rs. 1,50,000/- lakh under Section 80C, Section 80CCC and Section 80CCD combined. An additional exclusive tax benefit of Rs.50,000/- u/s 80CCD (1B) per assessment year (applicable from FY 2015-16/AY 2016-17) for NPS investments.
Any amount paid as tuition fee for the education of the first 2 children is eligible for deduction u/s 80C. The deduction can be claimed for full-time courses including pre-nursery and playschool.
Repayment of Principal on Housing Loan
The EMI- Equated Monthly Installment that assessee pays every month to repay his home loan consists of two components – Principal and Interest. The principal component of the EMI-Equated Monthly Installment qualifies for deduction under Section 80C. Even the interest component can save you significant income tax – but that would be under Section 24 of the Income Tax Act.
Stamp Duty and Registration Charges for a home
The amount you pay as stamp duty when you buy a house and the amount taxpayer pay for the registration of the documents of the house can be claimed as the deduction under section 80C in the year of purchase of the house.
Must Read: Deductions under Stamp Duty
Infrastructure Bonds are also popularly called Infra Bonds. Infrastructure companies issue these bond and not the government. The amount that you invest in these bonds can also be included in Section 80C deductions.
Pension Funds – Section 80CCC
The Section 80CCC – stipulates that an investment in pension funds is eligible for deduction from your income. Sec 80CCC investment limit is clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and 80C is Rs. 1.50 Lakh. This also means that your investment in pension funds upto Rs. 1.50 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1.50 Lakh.
Sukanya Samriddhi Account
Sukanya Samriddhi Account Scheme (SSY) is a small deposit scheme for the girl child, as part of ‘Beti Bachao Beti Padhao’ campaign, which would currently fetch the yearly interest rate of 9.1 percent and provide income tax deduction Under Section 80C of the Income Tax Act, 1961. Interest on such SSY account is taxable as Income from Other Sources.
5 years post office time deposit (POTD) scheme
The 5 Year post office time deposit (POTD) qualifies for tax saving under section 80C. Interest – 8.5 % (Taxable).
5 Year bank fixed deposits (FDs)
Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled to section 80C deduction. The exclusive five years Fixed Deposit by banks which are eligible for deduction under Section 80C. The taxpayer needs to ask bank that he/she need “Tax Saver FD,” the bank will then put a stamp on your FD regarding five-year lock-in. Interest Rates are 8.5 -9.5% (Taxable).
Unit linked Insurance Plan – ULIP
ULIP- Unit-linked Insurance Plans are a combination of life insurance with benefits of equity investments. ULIP plans have attracted the attention of investors and tax-savers not only because they aid assessee to save tax but they also perform well to give decent returns in the long-term.
Deductions Under Section 80C for NRI
As a Non-Resident, the taxpayer can also claim deduction under section 80C by investing in all of the products above except the following cases.
- New investment in NSC
- 5-year post office Fixed Deposit.
- New Public Provident Fund (PPF) account opening contribution to existing PPF is eligible.
Must Read: Income Tax Slab for Non-Resident
How to claim Section 80C Deduction
If the taxpayers are a salaried employee, then the employee should normally declare their investments to the employer and submit proofs. Then the Employer will give the deduction to the employee when calculating TDS.
In case the employee could not submit proofs to the employer, he can still claim the deduction under section 80C while filing his Income Tax returns- Income Tax Efiling.