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Know how to reduce tax outgo, investment options, eligibility criteria,limits, lock-in-period
Section 80C is the most popular income tax deduction for tax saving. 80C deduction limit for current FY 2021-22 (AY 2022-23) is Rs.1,50,000. For claiming the tax benefit ITR filing is mandatory. In this guide we have explained all the investment options available under 80C alongwith their eligibility criteria.
Section 80C is an income tax deduction which helps you reduce the tax outgo. It covers specified investment and payment options which can reduce your taxable income upto Rs 1.5 lakhs. Although, the deduction is claimed at the time of filing your income tax return the investment is required to be made during the relevant financial year.
For example: For the FY 2022-23 i.e AY 2023-24 you need to invest in the specified options under section 80C between 1st April 2022 to 31st March 2023. The benefit for which will be claimed at the time of filing your income tax return in July 2023.
Individuals and HUF can save their taxes by investing in different tax saving options available under section 80C.
There are many investment options under section 80C with different eligibility criteria and benefits. Let’s understand them:
In case of a Resident Individual: |
Self Spouse or Any child of such individual |
In case of HUF: | Any member of HUF |
Amount of Investment : The minimum deposit limit is Rs. 500 and limit for maximum deposit is Rs 1,50,000 during a year.
Lock-in-Period : The PPF account matures after 15 years but part of the money can be withdrawn after 7 years.
Taxability : It’s EEE rated which means its tax exempt at the time of investment, returns and withdrawals.
Eligibility : Resident Individual parents having a girl child can invest in this scheme till the age of 10.
Amount of Investment : The minimum limit of deposit under this account is Rs 250 annually and the maximum limit is Rs 1,50,000.
Lock-in-Period : The amount is required to be deposited for 15 years. After 21 years, this account will mature.
Taxability : It’s EEE rated.
Amount of Investment : You can start investing from Rs 500 and there is no upper limit prescribed.
Lock-in-Period : 3 years.
Taxability : The investment is exempt under section 80C upto Rs 1.5 lakhs and the long term gains on withdrawals are exempt upto Rs 1 lakh. The dividends received (if any) will be exempt in the hands of the receiver.
Amount you can invest : The minimum deposit limit is Rs. 1000
Lock in Period : 5 Years. If you break the FD before completion of the lock-in period then deduction taken will be added back to your income.
Taxability : The amount invested is eligible for deduction under section 80C but the withdrawals and interest are taxable. Senior citizens can claim tax benefit of upto Rs 50,000 on the interest amount earned u/s 80TTB.
If you have a good amount of idle cash accumulated then making a Fixed Deposit will be beneficial for you.
Eligibility : Only individuals can buy a NSC, HUFs are not allowed to do so.
Amount you can invest : The minimum investment amount is Rs 100, there is no cap on the highest ceiling.
Lock in period : 5 Years
Tax benefit : The investment is tax deductible under section 80C and the interest earned is chargeable to tax under the head “Income from other sources”
One interesting thing about NSC is that when interest is accrued, it is deemed to be re-invested in NSC. This gives you an extra tax benefit on the reinvested interest amount.
Amount you can invest : There is no minimum investment limit but on higher side the investment amount shall not exceed Rs 15 lakhs or the amount received on retirement (whichever is higher)
Lock in Period : 5 Years
Tax Benefit : Investment is tax deductible u/s 80C. On interest income tax benefit upto Rs 50,000 can be taken u/s 80TTB. One of the best things about this scheme is that it can be foreclosed after 1 year.
Eligibility : You can make investments in the name of:
In case of an Individual: | Individual, Spouse or Any child of such individual |
In case of HUF: | Any member of HUF |
Amount you can invest : There is no such limit for making investment in the ULIP but the premium should not be more than 10% of the sum assured for taking the benefit of tax under section 80C.
Lock in Period : Minimum 5 years
Tax Benefit : On investment: Upto Rs 1.5 lakh
On Maturity : Exempt if premium paid is less than or equal to 10% of sum assured
Eligibility : Individual aged 18-60 years
Amount you can invest : There is no limit on the amount that can be invested but minimum deposit of Rs 6000/- cumulatively is required in a year.
Lock in Period : Till retirement
Tax Benefit : On investment Upto Rs 1.5 lakh
On Returns : Exempt Partially
In case of an Individual: |
Individual, Spouse or Any child of such individual |
In case of HUF: | Any member of HUF |
There are different percentages of deductions on the premium, depending upon when you took the insurance. Refer to the below table for more clarity.
This deduction is available for both individuals and HUF.
But keep in mind that if you sell/transfer such house property before expiry of 5 years from the end of the financial year in which possession was taken, then the deduction availed in the earlier years will become taxable.
Note:- TOTAL AMOUNT OF DEDUCTION U/S 80C CANNOT EXCEED Rs 1,50,000.
80C Investment Option | Lock In Period | Return | Risk | Taxability |
---|---|---|---|---|
PPF | 15 Years | 7.1% | Risk Free | Interest: Exempt Withdrawal : Exempt |
SSY | 21 Years | 8.4% | Risk Free | Interest: Exempt Withdrawal : Exempt |
ELSS | 3 Years | 12-15% (approx) | Risky | Dividend is exempt |
FD | 5 Years | 7-8% (approx) | Risk Free | Interest is taxable |
NSC | 5 Years | 7% | Risk Free | Interest is taxable |
SCSS | 5 Years | 8.6% | Risk Free | Interest is Taxable |
ULIP | 5 Years | 8-10% (approx) | Risky | Returns are taxfree subject to certain conditions taxable |
NPS | Till Retirement | 7-8% (approx) | Risk Free | Return : Partially exempt |
Yes, even in case your income has been reported under section 44ADA, still there is no restriction on claiming 80C deduction up to Rs. 150000.
Yes, Provident Fund is covered under section 80C deduction.
No, the recurring deposit is not covered in 80C deduction and even interest on this is taxable.
In case you have invested the money or done expenditure on the specified options u/s 80C, then you can claim the benefits of the same at the time of filing ITR. The threshold limit for investment is Rs 1.5 Lakhs for section 80C.
Yes, there is no restriction for claiming benefit under section 80C if income is disclosed under section 44AD of the income tax act.
The term Life insurance is covered in section 80C as well as the term medical insurance is covered under section 80D.
Yes, investment done in National pension scheme comes under the ambit of 80C
For saving taxes beyond the threshold of Rs 1.5lakhs, you can check other tax deductions like
Deduction for principal repayment of the house comes under the purview of section 80C.However, it can only be claimed if construction is already completed.
This scheme is for senior citizens for savings for their retirement. Investment in SSC is eligible for deduction u/s 80C upto Rs. 1,50,000/-
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.
You can invest any time during the relevant financial year.
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