What is Income Tax Investment under section 80C?

Section 80C is the most popular tax saving section under the Indian Income Tax Act. Any individual or HUF starting with tax planning first makes the full and optimum utilization of tax saving limit of Rs 1.5 lakhs available under this section.By investing the specified areas you can reduce your “Gross Taxable Income upto the limit specified. The tax saving option includes very popular and commonly invested options like

  • Life Insurance Premium Deduction
  • Tuition Fees Deduction
  • Deduction in Principal Repayment of House Loan
  • PPF Deduction
  • EPF Deduction
  • 5 Year Fixed Deposit
  • Deduction in NSC Investments
  • Sukanya Samriddhi Account
  • ELSS Deduction
  • Stamp Duty & Registration Charges Deduction etc
  • ULIP Deduction

Let us understand the individual limits and benefits of these popular tax saving investment options used widely in India.

Have you heard of Section 80C?

This magical section of Income tax Act will help you to save income & income tax.
If you are an individual or HUF, then using various ways suggested in Sec 80C, you can reduce “Gross Taxable Income” up to ? 1,50,000.

Tell me how can I save income & taxes?

We are presenting a list of ways using which you can save income & taxes. Simply go through them & if you face any confusion, get in touch with our eCAs.
All Set? Ready? Let’s GO!!

Life Insurance Premium Deduction

  • We can never predict future.
  • The best we can do is TO PLAN IT!
  • Hence, taking life insurance policy is the most appropriate thing to do if you want to plan your future.
  • Here, we are not going to tell what is life insurance policy? Which one is best? NO!
  • Instead, we’ll tell about the deduction of the insurance premium amount that you have paid. Sec 80C allows this to you.
  • You can claim this deduction for life insurance taken for yourself, your wife or children.
  • There are different percentages of deductions on the premium, depending upon when you took the insurance. Refer the below table for more clarity.

Life Insurance Premium Deduction

Tuition Fees Deduction

  • In this day & age, children’s education has become very expensive.
  • Be it School fees or expenses for picnics or new books etc. all add to parent’s worry every day.
  • But Sec 80C allows you a sigh of relief. You can claim the deduction of tuition fee paid for educating your children u/s 80C.
  • There are certain conditions which need to be kept in mind if you are looking to claim this benefit.
  1. Deduction is available for 2 children only.
  2. It needs to be paid for full-time education only.
  3. It should be paid to any university, college, school or other educational institution situated within India.

Deduction in Principal Repayment of House Loan

  • It is everyone’s dream to own a debt-free house which they can call their Home.
  • Well, Sec 80C helps & encourages you to realize that dream.
  • As per this section, if you have taken a home loan, then you can claim the deduction of principal amount repaid by you.
  • But the maximum amount of deduction will be ? 1,50,000 for the financial year.

PPF Deduction

  • The amount deposited by you in the Public Provident Fund is eligible for deduction in sec 80C.
  • It is a government backed scheme, so nothing can be safer than this. However, it is having the lock in period of 15 years.
  • What’s even more interesting is, you can deposit as low as ? 500 and go up to ? 1,50,000 in one financial year.
  • You have the option to make a deposit either in your name or spouse’s or children’s.

EPF Deduction

  • Employees contribution to Provident Fund : Under this scheme, employer and employee both contribute a certain amount of salary in this fund.
  • Employees contribution in EPF is deductible under section 80C upto a maximum limit of Rs. 1,50,000/-.
  • If balance in EPF is withdrawn after 5 years then the whole amount including interest is exempt.

5 Year Fixed Deposit

  • If you have a good amount of idle cash accumulated then making a Fixed Deposit will be beneficial for you.
  • Such FD is eligible for deduction under sec 80C up to ? 1,50,000.
  • But the minimum time period for such FD is 5 years. If you break FD before completion of lock-in period then deduction taken will be added back to your income.

Deduction in NSC Investments

  • Investments in National Savings Certificate are considered very secure.
  • You can start investing in NSC’s with a minimum amount of ? 100 and there is no maximum limit.
  • One interesting thing about NSC is that when interest is accrued, it is deemed to be re-invested in NSC. This saves you from any tax impact on interest as you can further claim the deduction of it u/s 80C.
  • NSC investments cannot be made by HUF.

Sukanya Samriddhi Account

  • Considering the “Save The Girl Child” initiative, this scheme was introduced a couple of years ago.
  • A minor girl’s natural/ legal guardian can open an account in bank/ post office in her name till the age of 10.
  • After that, the amount deposited by a parent/legal guardian in this account will be eligible for deduction u/s 80C.
  • The amount is required to be deposited for 15 years. After 21 years, this account will mature.
  • The minimum deposit is ? 1,000 annually, which can go up to ? 1,50,000.

ELSS Deduction

  • If you like to take some risks & invest in the stock market then ELSS can be a good option for you.
  • Investing in ELSS is eligible for 80C deduction. All you need is a DEMAT account and you are good to go.
  • You can start investing from ? 500 and there is no upper limit. But investing in this option invites a lock-in period of 3 years.

Stamp Duty & Registration Charges Deduction

  • While purchasing or constructing a new house, you must have paid stamp duty & registration charges.
  • These charges may look small as compared to the price of the house but they do make a dent to one’s pocket.
  • Sec 80C allows you to take the deduction in respect of these charges as well.
  • Apart from the above, there are some other ways through which you can claim the 80C deduction.
  • But those methods are not very much in practice because of the huge technicality involved in the procedures.
  • Still if you face any kind of issue while claiming above deductions, our eCAs are here to help you 24×7. Simply get in touch with them!
  • It is important to note that no matter what method you use to claim a deduction, TOTAL AMOUNT OF DEDUCTION U/S 80C CANNOT EXCEED ? 1,50,000.
  • In other words, you can invest in NSC, ELSS, PPF or any other manner as it suits you but the total sum allowed will not exceed ? 1.5 lacs.

ULIP Deduction

  • Unit Linked Insurance Plan : This is life insurance policy cum investment option.
  • ULIP provides risk cover along with investment option in large no. of qualified investments such as stocks, mutual funds or bonds.
  • In most of ULIPs, the minimum life cover offered is 10 times of annual premium with an option to select life cover amounts as much as 10 times or higher of annual premium.
  • Investment in ULIP is eligible for deduction under section 80C upto Rs. 1,50,000/-.

Our Thoughts

  • The government provides various ways, using which you can magnify your saving in income & taxes.
  • But at the end of the day, it depends upon you, your knowledge & tax management capabilities.
  • We hope our blog was able to maximize your savings & clear all your doubts related to 80C
  • For regular updates, keep following Tax2Win. Happy Filing ????

Our Thoughts

Frequently Asked Questions

Q- Can you claim deduction of 80c under 44ADA?

Yes, there is no restriction on 80C deduction.

Q- Does the Provident Fund come under section 80C of tax exemption?

Yes, Provident Fund is covered under 80C deduction.

Q- Do recurring deposits come under section 80C of tax deduction?

No, recurring deposit is not covered in 80C deduction and even interest on this is taxable.

Q- How do I save income tax under 80 C and how much maximum?

The threshold limit for investment is INR 1. Lakh for section 80C.

Q- Is Section 80C eligible if we are filing taxes under 44AD?

Yes, there is no restriction for 80C on 44AD.

Q- Is term insurance exempted under 80C or 80D?

Yes, term insurance is also covered in 80C as well as 80D.

Q- Does investing in NPS comes under section 80c?

Yes , NPS comes under 80C

Q- How can we save income tax beyond 1.5 lacs as I have already invested in PPF, LIC, NPS?

Yes, you can save tax on medical insurance or preventive health checkup under section 80D.You can also save taxes if you have taken any education loan for your children under section 80E.

Q- Can I claim deduction under section 80 C for home loan principal repayment of an under-construction house in India?

Deduction for principal repayment of house comes under the purview of section 80C.Howver, it can only be claimed if construction is completed.

Q- What is senior citizen saving scheme (SSC) and whether deduction of SSC can be claimed u/s 80C ?

This scheme is for senior citizens. Under this scheme, maturity period is 5 years while the rate of interest is 8.6% approx.
The lock in period of this scheme is 5 years.
Investment in SSC is eligible to claim deduction u/s 80C upto Rs. 1,50,000/-

Q- When can I withdraw money from Sukanya Samriddhi Yojana ?

After 21 years of opening the account, you can withdraw money. However, a partial withdrawal of up to 50% of the previous year’s balance is allowed after the account holder turns 18.

Q- When should I invest in SIP to claim deduction u/s 80C ?

You can invest any time during the relevant financial year.

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.