What is 80C, and what deduction do you get under 80C? 80C is a section under income tax where expenditures and investments are exempted from income tax. The maximum deduction limit is 1.5 lakh annually from an individual and HUF taxable income. These benefits are unavailable to Corporate bodies, partnership firms, and other businesses. Let’s understand in detail what deduction you get under section 80C if you are an individual and HUF person.
Deduction investment under section 80C
1. Provident Fund (EPF)
- Investment can only be made by a salaried individual.
- A provident fund is a retirement investment that is subtracted from the monthly salary.
- An amount is contributed by both the employee and employer towards PF. The employer’s contribution is exempted from tax, while the employee’s contribution is deducted under section 80C.
- Employees can make voluntary contributions to the provident fund account. A voluntary provident fund is eligible for deduction under the 80C section.
2. Public Provident Fund (PPF)
- Investment can be done by anyone, be it salaried, self-employed, professional, businessman, etc.
- It is a long-term investment that provides assured returns.
- Interest is compounded annual basis, and the maturity period is 15 years.
- The minimum amount you contribute towards PPF is Rs 500 and the maximum you contribute is Rs 1.5 lakh. This amount is eligible for deduction under section 80C.
3. Life Insurance/Term Insurance
- The life insurance you purchased for yourself, your children, or your spouse is eligible for deduction under section 80C of the Income Tax Act.
- When you are paying multiple Life insurance premiums from different insurance providers, you can club the amount and claim a deduction of up to Rs 1.5 lakh.
4. Equity-linked savings scheme
Equity-linked savings schemes or ELSS are tax saver mutual funds that combine multiple benefits such as equity returns, tax saving, and comparatively small lock-in periods compared to PPF or other schemes.
- ELSS Funds, unlike regular mutual funds, come with a 3-year lock-in period & if withdrawn before the end of the lock-in period, one has to pay the tax saved on such mutual funds.
5. National saving certificate
- The national saving certificates are government-backed popular tax-saving instruments with 5 to 10 years of maturity.
- Interest in this long-term saving income is fixed & is semi-annually compounded.
- The current interest rate of NSC is somewhere around 7.7%(approx.)
- The minimum amount you invest in these NSCs is Rs 100, and the maximum amount has no limit. This NSC is eligible for deduction under section 80C.
- Hindu Undivided Families (HUFs), Trusts, and Private and Public Limited Companies (PLCs) are not permitted to invest in NSC.
6. Sukanya Samriddhi Scheme
- Sukanya Samriddhi Scheme: A person can invest in a scheme from when a girl is born until she turns 10 years old.
- The minimum amount you invest in the Sukanya Samriddhi Scheme is Rs 250, and the maximum limit is Rs 1.5 lakh. This Sukanya Samriddhi Scheme investment amount is eligible for deduction under section 80C.
- The interest is calculated on an annual basis and compounded on an annual basis. The amount of interest through this scheme is eligible for deduction under section 80C.
- Maturity under this scheme is attained after 21 years from the date of investment.
- Pre-mature withdrawal is restricted, though can be done in certain cases.
7. United Linked Insurance Plans
- United Linked Insurance Plans are popular nowadays because they save money and provide tax deductions under Section 80C of the Income Tax Act.
- These insurance plans provide coverage to the policyholder while also delivering significant returns in the long term.
- ULIPS provides you with a combination of a life insurance policy along with investment opportunities through a mutual fund in a single plan.
- One should read all the terms & conditions of insurance as well as investments part of the scheme & shall carefully select the available options in the scheme.
8. Repayment of Home Loan Principal Amount
- The EMI on the home loan towards repayment of the principal amount is eligible for deduction under section 80C.
- The repayment of a home loan consists of both the compounded interest and principal amounts.
- The interest amount of EMI can be claimed as deduction u/s 24, under the head “House Property” & the principal part of EMI can be claimed under section 80C in the Income Tax Act.
9. Registration Charges and Stamp Duty for a Property
When you purchase a house and property and pay the money for stamp duty and registration, you get the deduction under section 80C in the Income Tax Act.
10. Infrastructure Bonds
Infra bonds are known as Infrastructure Bonds. It is issued by an infrastructure company, not the government. If you invest money in this bond, you can claim a deduction under section 80C up to Rs 1.5 lakh
11. NABARD Rural Bonds
National Bank for Agriculture and Rural Development provides two kinds of bonds, Bhavishya Nirman Bonds and NABARD Rural Bonds. The amount is deductions under Section 80C, and the maximum amount you can get as deductions is Rs 1.5 lakh
12. Senior Citizen Savings Scheme
- The Senior Citizen Savings Scheme is senior citizens’ best long-term debt investment. The return senior citizens get is lucrative compared to other schemes, and the interest senior citizens get is quarterly.
- The individual whose age are above 60 years can invest in this scheme and deductions under Section 80C; the maximum amount they can get as deductions is Rs 1.5 lakh.
13. Five-year Post Office Time Deposit Scheme
Post office deposit schemes are similar to fixed deposits that banks provide. The duration of long-term debt schemes is one year to five years, but only the interest earned in the fifth year of the schemes is eligible for tax deductions under Section 80C.
Conclusion
Section 80C of the Income Tax Act provides investment options and expenditures eligible for tax deductions. These benefits individuals and Hindu Undivided Families can opt for. The deductions under 80C, you get Rs 1.5 lakh per annum.
The deduction is available on provident funds, public provident funds, life insurance premiums, and various schemes. These investments not only provide financial security and returns but also provide income tax benefits. If you need any help for filing income tax you can contact Kor Taxsolution for your help.
FAQs
Can I claim 80C deductions while filing my income tax returns?
You can claim 80C deductions while filing income tax returns before the assessment year ends.
Is a donation eligible for deduction under 80C?
When you are donating to specific funds and institutions, it is exempted under section 80C of the Income Tax act
Was the entire contribution of the EPF scheme eligible for deduction under 80C?
No, in EPF, only half the amount paid by the employee is eligible for the deduction.
Are both EPF and PPF investments eligible for deduction under 80C?
When you contribute towards an EPF and PPF, you can claim both investments under 80C.
Does the limit of Rs 1.5 lakh mean that I can invest in more than two instruments Rs. 1.5 lakh and claim benefits?
No. The limit of Rs 1.5 lakh means all your investments will be under 80C, and the maximum deduction you will get is Rs 1.5 lakh.
