Under the Income Tax Act, taxpayers are allowed to reduce their total tax liability by investing in certain sectors or making specific expenses. The government has attached a taxation benefit to encourage investment in these sectors. One such deduction is section 80C, which allows individuals and HUFs to claim deductions for investments and expenses mentioned under the Income Tax Act. Section 80C has two subsections – 80CCC and 80CCD. The maximum limit for deduction under section 80C, including the subsections, is INR 1,50,000, except for NPS tier I investment under section 80CCD(1B).
Here is the list of investment options eligible for claiming deduction under section 80C only if opted for the Old Tax Regime:
Investment in Equity Linked Saving Scheme or a tax-saving mutual fund attracts a deduction under section 80C. Investment in ELSS funds comes with a lock-in period of 3 years and higher deliverable returns compared to FD, PPF, or NPS.
Employees having a basic salary of more than INR 15,000 per month can contribute to this fund. The contributions to the Employees Provident fund are eligible for deduction under section 80C. This contribution amounts to 12% of the salary. At present, the interest rate in EPF contribution is 8.15% p.a.
Previously this investment fell under the EEE category, but in Budget 2021 the taxability of interest was changed. If the Employee’s contribution in a year is more than INR 2,50,000 (non-government employees) and INR 5,00,000 (government employees), then interest on such additional contribution will be taxable. However, if the amounts are withdrawn before the completion of 5 years period then the same will be taxable.
It is backed by the Government and carries a fixed interest rate (7.1% p.a.). A resident Individual can invest a minimum of INR 500 and a maximum of INR 1,50,000 in a financial year. There is a lock-in period of 15 years which is further extendable by 5 years for investment in PPF. Withdrawals can be made partially after the completion of 7 years.
Any investment in the Public Provident Fund (PPF) is allowed as a deduction under this section. PPF deposits fall under the EEE (Exempt, Exempt, Exempt) tax category. Of which all three things including deposit, interest, and withdrawal amount are eligible for tax exemption.
Any amount invested by an individual in a pension fund set up by a mutual fund or UTI is allowed as a deduction under this section.
This scheme is run by Indian Post and carries an interest rate of 7.7%. Although there is no upper limit for investment in NSC, the maximum deduction available is INR 1.5 Lakhs. The lock-in period is of 5 years and interest earned from this investment is taxable as other sources.
Different banks and financial institutions offer term deposits which are created for tax saving under section 80C. The lock-in period of such tax-saving fixed deposits is 5 years. The amounts deposited can be claimed as a deduction for a relevant financial year. However, the interest earned on such deposits will be taxable as other sources.
Sukanya Samridhhi savings scheme was launched for the betterment of girl children in India. The parents or guardians can invest under this scheme in the name of their girl child till she attains the age of 10 years. Deposits in this scheme will earn interest at 8.2% per annum.
The investment amounts will be available as a deduction under this section. Moreover, the interest amounts will also be exempt.
ULIP is a mix of insurance and investment. The individual can invest under this plan for themselves, their spouse, or their children. Since the investment portion is dependent on market performance, there are no fixed returns. The amount of investment will be available as a deduction under this section up to INR 1.5 lakhs.
Further, the withdrawals and maturity amounts are not taxable. However, if the annual premium is more than INR 2,50,000 in any year during the policy period then the amounts received will be taxable to investors.
Any individual who has aged more than 60 years or is over 55 years and has opted for retirement, can invest in a senior citizen savings scheme. Savings under the SCSS scheme will earn interest at 8.2% per annum. This deposit has a lock-in period of 5 years and is eligible for deduction under section 80C.
Deduction under section 80C of Income Tax Act can not be claimed against short term capital gains u/s 111A , long term capital gains and income chargeable to tax at special rates.
Deduction under section 80C of Income Tax Act can not be claimed against short term capital gains u/s 111A , long term capital gains and income chargeable to tax at special rates.
Taxpayers can claim a deduction under section 80C for life insurance premiums paid for themselves, their spouse, or children. The deduction for the premium amount is allowed up to 10% of the sum assured. In the case of policies issued before 1st April 2012, the deduction can be claimed up to 20% of the sum assured.
The taxpayer can claim a deduction under section 80C for repaying the principal amount on a home loan taken for the construction or purchase of residential property. Additionally, deductions are also available for stamp duty, registration expenses, and transfer expenses.
Taxpayers must maintain ownership of the residential property for at least 5 years. If they sell the property before completing five years, they will need to treat the deduction claimed in previous years as income and pay taxes on that amount.
Under section 80C, you can claim a deduction for tuition fees paid for up to two children. You can pay the fees to any school, college, university, or educational institution in India. The course must be full-time, and fees for private coaching or donations are not eligible for deduction.
CA Assisted Income Tax Return filing for individuals having salary, one house property & income from other sources.
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CA Assisted Income Tax Return filing for individuals having salary, one house property & income from other sources.
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No documents are to be submitted for filing an ITR. In the case of Salaried individuals along with the common documents such as Form 16, you will need to provide these documents to the employer.
As per the Income Tax Act, any Individual or HUF can claim a deduction under section 80C. This deduction is not available to partnership firms or corporate assessees.
Can I claim the 80C deductions at the time of filing the return in case I have not submitted proof to my employer?
You should submit proof of investments to your employer by the end of the Financial Year (FY). This allows your employer to factor in these investments when calculating your taxable income and the necessary tax deduction. If you forget to submit these proofs, you can still claim the investments when filing your income return, as long as they were made before the end of the relevant FY.
If I am filing my return using presumptive shecme then can I claim deduction u/s 80C?Yes, even if you report incomes under the presumptive scheme, you can still claim deductions under section 80C.
Is there a restriction on the maximum number of investments I can undertake under section 80C?You can invest in different schemes or funds, but the total deductions cannot go beyond INR 1.5 lakhs.
