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Section 80C Deductions

Section 80C of the Income Tax Act, 1961 allows taxpayers to save tax by investing in tax-deductible investment instruments.

The Income Tax Department of India provides different deductions from the taxable income under Chapter VI A deductions. The prime purpose of the income tax behind this move is to encourage investments and savings among the taxpayers. Among all, 80C is one of the most popular Sections that helps the taxpayers minimize their tax liability.

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What is Section 80C?

Section 80C of the Income Tax Act, 1961 of India is one of the most fapopularmous sections amongst the taxpayers in the country. It is a clause that highlights different expenses and investments that are exempt from tax. Section 80C can also be referred to as the section that allows reduction of the taxable income through tax saving investments or incurring eligible expenses. As per the Section 80C of the Income Tax Act, 1961, individuals and HUFs (Hindu Undivided Families) are allowed a maximum deduction of Rs. 1.5 Lakh on a yearly basis from the total income of the taxpayer. Benefit under Section 80C is not available for companies, partnership firms and LLPs.

Investments Eligible for Deductions Under Section 80C

Here is a list of investment options that are qualify for tax deductions under Section 80C of the Income Tax Act, 1961:

  • Life Insurance

An individual can claim premiums paid towards a life insurance policy covering self, children or spouse as per Section 80C. One can also invest in tax saving life insurance policy options such as ULIPs that come with a lock-in period of 5 years.

  • Public Provident Fund (PPF)

An individual can make an investment in PPF with Rs. 1.5 Lakh per year and 15 years of lock-in period and claim it under Section 80C of the Income Tax Act. What’s more is that returns after maturity are exempt from taxes.

  • Fixed Deposit

Fixed Deposit made in a bank is eligible for tax deduction under Section 80C. The interest earned in the 5-year fixed deposit is taxable and doesn’t qualify for tax-saving benefits.

  • Equity-Linked Savings Scheme (ELSS)

Equity-Linked Savings Scheme (ELSS) is known for granting tax-saving benefits with long-term returns. It is a diversified equity mutual fund featuring a 3-year lock-in period.

  • Employees’ Provident Fund (EPF)

Employees’ Provident Fund (EPF) is an account that helps one accumulate a part of their salary on a monthly basis that is eligible for tax benefits. It must be noted that interest earned on the EPF corpus must be kept in check as the interest only up to a certain level is tax-free.

  • National Savings Certificate (NSC)

National Savings Certificate (NSC) is a tax-saving scheme that an individual can claim under the income tax Section 80C. NSC comes with a 5-year lock-in period. The interest earned is taxable. However, as the interest gets collected in the account, and is deemed as reinvested, it qualifies for a new claim under Section 80C.

  • Senior Citizens Savings Scheme (SCSS)

Senior Citizens Savings Scheme (SCSS) is an excellent choice for senior citizens. It is also eligible for the income tax benefits under Section 80C with a tenure of five years. One must be at least 60 years of age to become eligible for investing in this scheme. People opting for voluntary retirement can take it after the age of 55 years

  • Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a savings scheme for a girl child. It is eligible for tax benefits. This particular scheme is available for two girl children. However, it can be extended to a third child if there is a case of twins. The amount must be deposited for a total of 15 years that matures after the 21 years mark.

  • National Pension Scheme (NPS)

The National Pension Scheme (NPS) is a pension program for employees that lack a pension system created for retirement. This scheme was started by the Government of India and is a great scheme for tax savings benefits under Section 80C.

Payments Eligible for Deduction Under Section 80C

The payments are:

  • Life Insurance

Individuals with a life insurance or term insurance policy must be ready to avail tax benefits under Section 80C of Income Tax Act, 1961 for the payments made towards the policy premium. Note that the insurance can be in the individual’s name, their spouse’s name or their child’s name. The total amount that one can claim for exemption should be 10% of the sum assured.

  • Repayment of House Loan

In case an individual is repaying the principal component of a home loan, the amount will qualify for deduction under Section 80C. Learn that this tax exemption is also inclusive of payments made towards stamp duty and registration.

  • Payments Towards Children’s Fees

An individual who pays fees for the admission of their child in schools, colleges or universities in India for full-time courses can claim tax benefits under Section 80C. Note that the tax exemption under Section 80C can be claimed for up to two children for the specific financial year.

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FAQ About Section 80C Deductions

  • What is section 80C?

    Section 80C is a section under the Income Tax Act, 1961. Under this section, individuals and HUFs can claim tax deduction up to Rs. 1.5 Lakh from their taxable income.

  • Who can claim tax exemption under Section 80C?

    Individual taxpayers and HUFs or Hindu Undivided Families can claim tax exemption under Section 80C of the Income Tax Act, 1961. 

  • Can I invest in different investment schemes and claim for up to Rs. 1.5 Lakh for each?

    No! You will only be allowed to claim Rs. 1.5 Lakh for that particular financial year no matter how many investments you make. 

  • Can I claim tax benefits on life insurance?

    Yes! Tax exemption on life insurance can be claimed. 

  • What are the tax benefits that one can claim under life insurance?

    An individual is free to claim tax benefits against the premium paid towards their life insurance policy under Section 80C of the Income Tax Act, 1961. Tax exemption is also present on maturity benefit and death benefit, which the nominee gets in the event of the death of the policyholder. 

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