One of the most significant and highly utilized provisions of Income Tax Act of India are sections of 80C. They permit individuals, including Hindus undivided families, with deduction to the extent of ₹1.5 lakhs on a financial year for computation of taxable income and thus reduce its tax liability. This provision arouses savings and investments because this act brings tax benefits for specified investment avenues and expenses.
Key Features of Section 80C
Eligibility:
Benefits under section 80C are available only to individuals and HUFs.
Other persons like corporate bodies, partnership firms and other commercial organizations cannot benefit from such deductions.
Section 80C
This provision of Section 80C of the Income Tax Act 1961 allows exemptions on income tax for Individuals and Hindu Undivided Families (HUFs) based on investments and accumulation of certain expenses. For an individual taxpayer and Hindu Undivided Families (HUFs), benefits are available in the amount of Rs. 1.5 lakh. The benefits under Section 80C, 80CCC, 80CCD(1), and 80CCD(2) are not available to a corporate body, partnership firm, or any other business entity
Limitations on Deductions Under Section 80C, 80CCC, 80CCD(1), and 80CCD(2)
The deductions on income tax under Section 80C and its various sub-sections are as follows:
Tax Benefits available under Section 80C
The following are the investments eligible for deduction under Section 80C of the Income Tax Act of India.
List of Tax Benefits under Section 80C
Life Insurance Premiums
An individual can claim the premium for their life insurance to get benefits under Section 80C. When an individual has more than one life insurance from different providers, they can group together all the premiums paid upon these policies in order to claim their tax benefits.
Public Provident Fund
A Public Provident Fund is one of the most favored long-term investment options. Contributions made toward a PPF can be filed under Section 80C.
Provident Fund
Provident Fund (EPF) is the retirement fund initiated by the government. Here, the employees and employers contribute equally to this money. The employee can claim his contribution from here under Section 80C.
Equity Linked Savings Scheme
ELSS are mutual funds which have been drafted with tax-saving objectives in mind. ELSS enables individuals in claiming tax exemptions of up to Rs 1.5 lakh per year under Section 80C of the Income Tax Act.
Sukanya Samriddhi Scheme
An individual can open Sukanya Samriddhi on behalf of his girl child between the birth and age of ten years. The earned interest is eligible for tax exemption under the Income Tax Act.
Repayment of Home Loan Principal
Repayment of home loan principals of an individual also enables him to obtain tax exemptions under the Income Tax Act.
Stamp Duty and Registration Charges
People can obtain registration fees and stamp duties while purchasing property. They can recover the amount under the Income Tax Act.
NABARD Rural Bonds
NABARD provides Rural Bonds. These bonds are filed to avail tax benefits under the Income Tax Act in India.
Infrastructure Bonds
If one invests in these bonds, they can qualify for tax breaks of up to Rs.1.5L under the Income Tax Act.
Senior Citizen Saving Scheme
Investment in this scheme can be done only when the individual crosses 60 years of age. These investments are low-risk, and by investing in them, a person may be able to claim exemptions for tax purposes up to Rs.1.5 lakh under the Income Tax Act.
Unit linked Insurance Plus (ULIPs)
ULIPs provide tax benefits up to Rs. 1.5 lakh per year under the Income Tax Act. ULIPs provide high returns in the long run.
National Savings Certificate
NSC is one of the most popular tax-saving instruments with a maximum maturity period of 5 to 10 years with semi-annual compounding of interest.
Tax Saving Fixed Deposit
Banks and Post Offices provide tax-saving FDs that provide tax benefits according to the Income Tax Act. They have a lock-in period of at least five years.
Frequently Asked Questions
Q.1 What is Section 80C under the Income Tax Act?
Section 80C is a section under the Income Tax Act that provides the relief to individuals for the specific investments and expenses up to Rs. 1.5 lakh each year.
Q.2 Can a person deduct the tuition fees of a child who is studying overseas under Section 80C?
The children’s tuition fee cannot be deducted if they are studying overseas under Section 80C of the Income Tax Act of India.
Q.3 Is the interest accrued on an investment under Section 80C taxable?
Interest accrued on some of the investments under Section 80C, such as PPF and NSC, is tax free. But one should verify it themselves though.
Q.4 What is the lock-in period of investments under Section 80C?
The lock-in period varies from investment to investment like ELSSs have a lock-in period of Section 80C.
Q.5 Can both parents claim deduction for tuition fees of their child under Section 80C?
Yes, both can claim the deduction for paying tuition fees subject to all eligibility criteria and that the total amount not exceeding ₹1.5 lakh in a financial year.
Q.6 Is repayment of interest in a home loan deductible under Section 80C?
Yes, the interest portion of home loan repayment comes under Section 24(b), while the principal amount is deductible under Section 80C up to ₹1.5 lakh per year.
Q.7 Is investment in post office schemes deductible under Section 80C?
Yes, the investments under certain post office schemes like National Savings Certificates, NSC, and 5-Year Post Office Time Deposit are allowed to be deducted under Section 80C.
Q.8 Is it possible to claim the life insurance premium paid for my parents under Section 80C?
No, only life insurance premium is allowable which is taken for self, spouse, or children.
