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Section 80C – Income Tax Deduction under Section 80C

Updated on: 05 Jul, 2024 03:59 PM

Section 80C of the Income Tax Act is the most popular income tax deduction for tax saving. 80C deduction limit for the current FY 2023-24 (AY 2024-25) is Rs.1,50,000. However, ITR filing is mandatory in order to claim the deduction under section 80C.

Deduction under section 80C of the income tax act are applicable only for individual taxpayers and Hindu Undivided Families. Corporate bodies, partnership firms, and other businesses are not eligible to avail of tax exemptions under Section 80C.

In this guide, we have explained all the investment options available under 80C deduction, along with their eligibility criteria.

What is Section 80C of the Income Tax Act?

Section 80C of the Income Tax Act is an income tax deduction that helps you reduce your taxable income and thus helps in reducing the tax outgo. It covers specified investment and payment options that can reduce your taxable income by an amount of up to Rs 1.5 lakhs. Although the deduction is claimed when filing your income tax return, the investment must be made during the relevant financial year.

For example, For FY 2023-24, i.e., AY 2024-25, you need to invest in the specified options under section 80C of the Income Tax Act between 1st April 2023 and 31st March 2024. The benefit can be claimed at the time of filing your income tax return.


Eligibility of Section 80C of Income Tax Act

Individuals and HUF can save their taxes by investing in different tax-saving options available under section 80C deduction list. This section also applies to both Indian residents and non-resident Indians. Companies, partnerships, and other corporate bodies are not eligible for 80C deduction.


How Much Can be Claimed Under Section 80C?

You can claim a maximum deduction of up to Rs. 1.5 lakh from your total income under Section 80C.

This maximum section 80C deduction limit of Rs.1.5 lakh per annum is the aggregate of the deductions claimed under Sections 80C and 80CCE. In other words, whether an individual invests the entire Rs.1.5 lakh in just section 80C or splits this amount among sections 80C, 80CCC, and 80CCE, the maximum deduction allowed cannot exceed Rs.1.5 lakh.

Section 80CCC provides a deduction of upto Rs.1.5 lakhs for the contribution made towards specified pension funds.

The aggregate amount of deduction allowed under sections 80C, 80CCC, and 80CCE shall not exceed Rs.1.5 lakhs.

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Section 80C Deduction List - What is covered under Section 80C?

Public Provident Fund (PPF):

It’s the safest investment option under section 80C.

Eligibility: You can make investments in the name of:

In the case of a Resident Individual: Self
Spouse or
Any child of such individual
In the case of HUF: Any member of HUF

Amount of Investment: The minimum deposit limit is Rs. 500, and the 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 six years.

Taxability: It’s EEE-rated, which means it's tax-exempt at the time of investment, returns, and withdrawals.

Sukanya Samriddhi Yojana(SSY) Account:

Prime Minister Narendra Modi launched this scheme in line with the Beti Bachao, Beti Padhao campaign on 22 January 2015.

Eligibility: Resident Individual parents with a girl child can invest in this scheme until age 10.

Amount of Investment: The minimum deposit limit 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.

Mutual Funds (Equity Linked Saving Scheme):

If you like to take some risks & invest in the stock market, then ELSS can be a good option for you. For deduction under section 80C, you can invest in units of UTI or mutual funds specified u/s 10(23D) of Income Tax India, 1961.

Amount of Investment: You can start investing from Rs 500 without an upper limit.

Lock-in-Period: 3 years.

Taxability: The investment is exempt under section 80C of the Income Tax Act 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 chargeable to tax under the head “Income from other sources”.

5-Year Tax Saving FDR:

Almost everyone invests in FDR, but did you know you can claim a deduction for it, too? Yes, the income tax deduction is available on a 5-year FD done with banks or post offices.

Amount you can invest: The minimum deposit limit is Rs. 1000

Lock in Period: 5 Years. If you break the FD before the completion of the lock-in period, then the 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 benefits of up to Rs 50,000 on the interest amount earned u/s 80TTB.

If you have a good amount of idle cash accumulated, making a Fixed Deposit will benefit you.

National Saving Certificate (NSC):

Investments in a National Savings Certificate (NSC) are considered very secure.

Eligibility: Only individuals can buy an NSC; HUFs are not allowed to do so.

Amount you can invest: The minimum investment amount is Rs 100, and 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.

Senior Citizen Saving Scheme:

SCSS (Senior Citizen Saving Scheme) is one of the most lucrative investment options for investing the lump sum money received at retirement by resident senior citizens in India.

Amount you can invest: There is a 1000 minimum investment limit, but on the higher side, the investment amount shall not exceed Rs 30 lakhs or the amount received on retirement (whichever is higher)

Lock in Period: 5 Years

Tax Benefit: Investment is tax-deductible u/s 80C. Interest income tax benefits up to Rs 50,000 can be taken u/s 80TTB. One of the best things about this scheme is that it can be foreclosed after one year.

Unit Linked Insurance Plan (ULIP):

This is a life insurance policy cum investment option. ULIP provides risk cover and investment options in large no. of qualified investments such as stocks, mutual funds, or bonds. In most ULIPs, the minimum life cover offered is ten times the annual premium, with an option to select a higher life cover.

Eligibility: You can make investments in the name of:

In the case of an Individual: Individual,
Spouse or
Any child of such an individual
In the case of HUF: Any member of HUF

Amount you can invest: There is no such limit for making investments 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: As per The Finance Act, 2021, certain ULIP plans will no longer have exemptions in case:

  • The policies are issued on or after February 1, 2021, and
  • If you have paid an insurance premium of Rs 2.5 lakh or more for any of the previous years, then the amount received (including the bonus) at the time of maturity will be taxable.
  • In case an individual has purchased multiple ULIP plans and the aggregate amount paid is more than Rs 2.5 lakh, then it comes under the ambit of taxation.

National Pension Scheme (NPS):

The investment in NPS has manifold tax benefits. Section 80C and 80CCD(1) cumulatively provide a tax benefit of Rs 1.5 lakh for the NPS contributions.

Eligibility: Individuals aged 18-60 years

Amount you can invest: There is no limit on the amount that can be invested, but a 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

Life Insurance Premium (LIP):

Under section 80C, the deduction is allowed in respect of life insurance premiums. The premium must be for the Life insurance policy taken 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

There are different percentages of deductions on the premium, depending on when you took the insurance. Refer to the table below for more clarity.

Life Insurance Premium Deduction

Children's Tuition Fees:

You can claim a deduction for the payment of tuition fees of your children to any university, college, school, or any other educational institution in India for education. However, the deduction would not be allowed for payment toward development fees, donations, or payments of a similar nature. Certain conditions must be kept in mind if you want to claim this benefit.

  1. The deduction is available for two 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 in India.

Principal Repayment of Housing Loan:

You can claim a deduction of principal repayment of your housing loan taken to purchase or construct residential house property.

This deduction is available for both individuals and HUF.

But keep in mind that if you sell/transfer such house property before the 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.

Deferred Annuity Plan

You can claim a deduction for your payment under the Deferred Annuity Plan. This annuity may be in your name, your spouse's name, or the name of any of your children. But to claim a deduction under this annuity plan, there should be no provision for receiving cash in lieu of an annuity. And, if you're a government employee and any sum is deducted from your salary under a deferred annuity plan, then the deduction is restricted to only 1/5th of your salary.

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 compared to the price of the house, but they do make a dent in one’s pocket. Sec 80C allows you to take the deduction regarding these charges as well.


Other 80C Deduction Options

  • Contribution towards Approved Superannuation Fund.
  • Subscription to any deposit scheme/pension fund of the National Housing Bank (NHB)
  • Subscription to bonds issued by the National Bank for Agriculture and Rural Development (NABARD)
  • Deposit in an account under the Senior Citizen Savings Scheme.
  • Subscription to notified deposit scheme of
  • Public Sector Housing Finance Company
  • Housing Development Authority of cities, towns, and villages
  • Contribution towards annuity plans of LIC like Jeevan Dhara, Jeevan Akshay, etc. or any other insurer as approved by the Central Government.
  • Subscription to equity shares or debentures of a Public Company or any Public financial institution forming part of an eligible issue of capital approved by the Board where proceeds are utilized for infrastructure company.

Note:- TOTAL AMOUNT OF DEDUCTION U/S 80C CANNOT EXCEED Rs 1,50,000.


Tax Saving Investment Options under section 80C

80C Investment Option Lock In Period Return Risk Taxability
PPF 15 Years 7.1% Risk Free Interest: Exempt Withdrawal: Exempt
SSY 21 Years 8.2% 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 7.7% Risk Free Interest is taxable
SCSS 5 Years 8.2% 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
Note:
  • The interest /return rates are subject to periodical changes. In the case of post office saving schemes like PPF, SSY, SCSS, NSC, FD, etc, the interest rates are announced quarterly.
  • The tax benefit on investment amount in all of the above cases is based upon the amount invested or Rs 1.5lakh (whichever is lower) for all options.

How to Calculate Section 80C Deduction?

Calculating the Section 80C deduction involves summing up the eligible investments and expenses made during the financial year.

Let's consider a scenario where an individual's gross taxable income is Rs 9,00,000 per annum. The individual benefits from the standard deduction of Rs 50,000 per year and invests Rs 1.5 lakh in an ELSS fund under Section 80C.

Without Section 80C Deduction:
Gross Taxable Income = Rs 9,00,000
Standard Deduction = Rs 50,000
Taxable Income = Rs 9,00,000 - Rs 50,000 = Rs 8,50,000
Tax Liability Calculation without Section 80C Deduction:
As per Income Tax Slab for individuals below 60 years:

  • Up to Rs 2,50,000: No tax
  • Rs 2,50,001 to Rs 5,00,000: 5% on income exceeding Rs 2,50,000
  • Rs 5,00,001 to Rs 8,50,000: 20% on income exceeding Rs 5,00,000

Taxable Income falls in the 20% tax slab.
Tax = 12500 + 20% of (8,50,000-5,00,000) = 12500+ 70000 = 82500
Total Tax Liability without Section 80C Deduction = Rs 82500
With Section 80C Deduction:
Gross Taxable Income = Rs 9,00,000
Standard Deduction = Rs 50,000
Section 80C Deduction = Rs 1,50,000
Taxable Income = Rs 9,00,000 - Rs 50,000 - Rs 1,50,000 = Rs 7,00,000
Tax Liability Calculation with Section 80C Deduction:
As per Income Tax Slab for individuals below 60 years:

  • Up to Rs 2,50,000: No tax
  • Rs 2,50,001 to Rs 5,00,000: 5% on income exceeding Rs 2,50,000
  • Rs 5,00,001 to Rs 7,00,000 : 20% on income exceeding Rs 5,00,000

Taxable Income falls in the 20% tax slab.
Tax = 12,500 + 20% of (7,00,000 - 5,00,000) = 52,500
Total Tax Liability with Section 80C Deduction = Rs52,500
Savings due to Section 80C Deduction = Rs 82,500 - 52,500 =30,000 -

In this scenario, by utilizing the Section 80C deduction of Rs 1.5 lakh, the individual reduces their tax liability from Rs 82,500 to Rs 52,500, resulting in tax savings of Rs 30,000

You can also easily calculate the tax savings under Section 80C with the Tax2win calculator. Click here to calculate.


Income Tax Deduction Limits Under Section 80C, 80CCC, 80CCD(1), and 80CCD(2)

Sections Description Deduction Limit
80C Various investments such as PPF, ELSS, NSC, etc. Up to ₹1,50,000
80CCC Contributions to certain pension funds Within the 80C limit
80CCD(1) Employee contributions to NPS/Atal Pension Yojana up to 10% of salary + dearness allowance Up to ₹1,50,000
80CCD(2) Employer contributions to NPS/Atal Pension Yojana Up to 10% of basic + dearness allowance
80CCD(1B) Self contributions to NPS and Atal Pension Yojana above the Section 80CCD(1) limit Up to ₹ 50,000, including for Section 80C, 80CCC

The ITR filing for FY 2023-24 has started. If you want to learn more tax saving tips and tricks and maximize your tax savings, let our experts handle tax filing for you and help you file ITR accurately. Connect with Tax Experts


Section 80C Income Tax Act FAQs

Q- What is Section 80C?

Section 80C is one of the most popular section that provides taxpayers deductions on various investments up to 1.5 lakh per year from their taxable income thus allows to reduce the tax burden.


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

Yes, even in case your income has been reported under section 44ADA, there is still no restriction on claiming an 80C deduction up to Rs. 150000.


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

Yes, Provident Fund is covered under the section 80C deduction.


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

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


Q- How do I save income tax under section 80C, and what is the maximum amount?

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.


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

Yes, there is no restriction for claiming benefits under section 80C if income is disclosed under section 44AD of the income tax act.


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

The term Life insurance is covered in section 80C, and the term medical insurance is covered under section 80D.


Q- Does investing in NPS come under section 80C?

Yes, investment done in National pension scheme comes under the ambit of 80C


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

For saving taxes beyond the threshold of Rs 1.5lakhs, you can check other tax deductions like

  • Mediclaim or preventive health checkup under section 80D or
  • Interest repayment on education loans under section 80E.

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

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.


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

This scheme is for senior citizens to save for their retirement. Investment in SSC is eligible for deduction u/s 80C up to 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 a deduction u/s 80C?

You can invest any time during the relevant financial year.


CA Abhishek Soni
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.

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