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Post By Mariya Panwala
Complete List of Deductions under Section 80(C)
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Deductions Under 80C, Tax Deductions
Tax season is here, and it is natural to think of ways to reduce your tax burden. No one wants to part ways with one’s hard-earned money. However, one needs to make sure that the ways one
The following list is divided into two categories – (a) investments and (b) certain payments against which you can claim tax deduction under Section 80(C).
Investments
#1 – Equity-linked Savings Scheme (ELSS) Funds
ELSS stands for Equity Linked Savings Scheme. This is like mutual funds and has equity and debt exposure. Putting your money in ELSS funds means that a majority of your portfolio is being invested in the stock market. You can claim a maximum of ₹1,50,000 [inclusive of other investments and payments made under 80(C)] tax deductions by way of investments in ELSS funds. These funds have a lock-in period of 3 years.
#2 – Public Provident Fund (PPF)
The contributions made towards your PPF account, where you can deposit a maximum of ₹1,50,000 in a year, are also eligible for tax deductions. You can claim up to ₹1,50,000 tax deductions (inclusive of other investments and payments) under Section 80(C).
#3 – Employee Provident Fund (EPF)
Any organization whose workforce exceeds 20 employees is liable to register with the EPFO, that is, the Employees Provident Fund Organization of India. Under this, salaried employees make their contribution to the EPF account (which is 12% of their basic salary). This works like a savings account that comes in handy in the event of uncertainties. A maximum of ₹1,50,000 tax deductions (inclusive of other investments and payments) is allowed against this fund under Section 80(C).
#4 – Tax-saving Fixed Deposits (FD)
Resident individuals and HUF can claim a maximum deduction of ₹1,50,000 [inclusive of other investments and payments made under 80(C)] in a year by way of tax-saving Fixed Deposits. However, FDs have a lock-in period of 5 years and thus premature withdrawals or loan against these funds cannot be applied for.
#5 – Unit-linked Insurance Plans (ULIP)
With all the talk and heavy marketing around mutual funds, it is easy to get carried away and begin investing in them. However, there is a superior wealth-making instrument in the market, namely Unit Linked Insurance Plans (ULIPs), which do much more and have fewer hidden costs.
ULIPs not only have several advantages over mutual funds, but they also eliminate all the disadvantages of mutual funds while giving you the same returns. Here's a look at some advantages of ULIPs:
- Lower fund-management charges than mutual funds
- No tax burden (gains made in ULIPs are completely tax-free)
- Same returns as mutual funds
- Hassle-free movement between debt and equity instruments
- Added life cover
The amount invested under ULIP plans is eligible for tax deductions under Section 80(C). You can avail a maximum of ₹1,50,000 tax deductions [inclusive of other investments and payments made under 80(C)].
Also Read: 5 Reasons Why ULIPs are Superior to Mutual Funds
#6 – Life Insurance Premiums
Premiums paid under a life insurance policy is eligible for tax deduction under Section 80(C). However, one must note that the deduction is allowed only if the premium paid is less than 10% of the sum assured. The total claimed deductions including deductions claimed under any other investments and payments covered under 80(C) cannot exceed the overall bracket of ₹1,50,000 for this.
#7 – National Savings Scheme (NSC)
NSCs are another Government-backed savings instruments. The contribution made towards NSCs is eligible for deductions under Section 80(C) up to a maximum amount of ₹1,50,000 (inclusive of other investments and payments).
#8 – Senior Citizens Savings Scheme (SCSS)
The contribution made towards Senior Citizens Savings Schemes is eligible for tax deduction under Section 80(C). You can claim a maximum deduction of ₹1,50,000, which is inclusive of other investments and payments made under Section 80(C). Note also that the interest earned from this contribution is taxable.
#9 – Sukanya Samriddhi Yojana
Contributions made towards Sukanya Samriddhi Yojana, which is designed to provide for the girl child’s education and marriage, qualify for tax deduction under Section 80(C). A maximum of ₹1,50,000 [inclusive of other investments and payments made under 80(C)] is allowed.
Other Payments Eligible for Deduction under Section 80(C)
#1 – Home Loan Repayment of the Principal Amount
The principal amount paid against a loan taken either to buy or construct a residential property is eligible for tax deduction under Section 80(C) of the Income Tax Act. The maximum amount that you can claim for deduction is ₹1,50,000. However, one must also note that the property bought against which such benefit has been received cannot be sold within at least five years of possession. In case a sale has been made, the earlier claimed deductions will be added back to the income of the year in which such sale has been made.
#2 – Kids’ Tuition Fees
Under Section 80(C), the payment of tuition fees for a maximum of 2 children is eligible for tax deduction up to ₹1,50,000 [inclusive of other investments and payments made under 80(C)]. One must, however, also note that such payment of fees has to be for a full-time course and the educational institute to which it is paid has to be situated in India only.
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