Guide to Deductions Under Section 80C of the Income Tax Act

Section 80C of the Income Tax Act allows individuals and HUFs to claim deductions from their total income for certain specified investments and expenses. Under this section, taxpayers can reduce their taxable income by up to ₹1.5 Lakhs in a financial year.

  

Section 80C is further classified into different subsections, namely 80CCC, 80CCD (1), 80CCD (1b) and 80CCD (2). You can claim a deduction in a year while filing your income tax returns. Here's a look at the details about Section 80C of the Income Tax Act of India.

Section 80C of the Income Tax Act, 1961 has been divided into subsections based on different deductions. Refer to the table below to understand eligible tax-saving investments under the subsections of Section 80C:

There are various investment and savings schemes eligible for deductions under Section 80C. 

1. Tax Deductions under Section 80C on Savings Schemes

It includes deductions on various savings schemes. Here's a brief overview of the schemes that allow you to claim deductions under 80C:

Individuals can choose a combination of these savings schemes to maximise their tax benefits. Always check the latest tax regulations, as they may be subject to change.

2. Tax Deductions under Section 80C on Investment Schemes

Here's an 80C deduction list for eligible investment schemes and associated details:

There is also a set of eligibility criteria for claiming deductions under Section 80C. Here’s a look at them and other details.

1. Life Insurance Premiums

You can claim an 80C deduction on premiums paid for life insurance policies. You can enjoy these deductions for premiums paid on life insurance policies for yourself, your spouse, and your children. 

2. Public Provident Fund (PPF)

Both individuals and Hindu Undivided Families (HUFs) are eligible to claim deductions for contributions made to the PPF account. 

 

The interest earned on PPF is tax-free. It is calculated on the minimum balance in the account between the 5th and the end of the month, and it is credited annually.

3. Equity Linked Saving Scheme (ELSS)

Under ELSS, the investment is locked in for a period of 3 years. ELSS comes under the exemption category of Section 80C, and a maximum deduction of ₹1.5 Lakhs is allowed.

4. Senior Citizens Savings Scheme

Investments made towards the Senior Citizens Savings Scheme are eligible for tax deductions up to ₹1.5 Lakhs under this section. Individuals over 60 years of age can avail of this tax benefit by investing in SCSS, where the amount is locked in for 5 years.

5. NABARD Rural Bonds

Rural bonds offered by the National Bank for Agriculture and Rural Development (NABARD) also qualify for 80C tax exemptions. The maximum deduction amount is ₹1.5 Lakhs.

6. Unit Linked Insurance Plans (ULIPs)

Compared to conventional insurance policies, Unit Linked Insurance Plans have more to offer in the long term. Thanks to the Section 80C deductions, investors can avail a tax benefit of up to ₹1.5 Lakhs on the invested amount.

7. National Savings Certificate

National Savings Certificate or NSC is also an investment under 80C that allows you to claim an exemption. Interest earned on NSC is compounded semi-annually, and its maximum maturity period ranges from 5-10 years. 

 

You don't have to adhere to any limitation on your total sum invested towards NSC. However, like other investments, a deduction of up to ₹1.5 Lakhs is allowed under Section 80C.

8. Tax-Saving FD

Both banks and post offices offer tax-saving FDs. Here, the amount is locked in for 5 years. The maximum tax deduction allowed under Section 80C for a tax-saving FD is ₹1.5 Lakhs on the principal amount. The returns of such investments are liable for tax.

9. Employee Provident Fund (EPF)

The returns earned from an EPF, including the interest, are eligible for Section 80C deductions. However, it is only applicable to those employees who have continued their service for at least 5 years.

 

Voluntary contributions made towards EPF are also eligible for tax exemption under Section 80C.

10. Principal Repayment Towards Home Loan

Certain clauses must be fulfilled to claim these deductions. They are as follows:

• The tax exemption can only be claimed if the construction of the said property is completed

• Transfer of ownership within 5 years of possession will not be eligible for Section 80C exemption

• If the transfer is made 5 years after the property ownership, any amount claimed as a tax deduction must be taxed in the year of the transfer

11. Stamp Duty and Registration Charges

While owning a property, stamp duty and registration charges are considered two of the most significant expenses. 

 

The Government of India notifies the 80C limit for deductions on the stamp duty and registration charges paid towards house procurement. You can claim this deduction only in the year when these duties are paid.

12. Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana is a savings scheme specifically designed to meet the financial needs of girls' education and marriage. The parent/legal guardian of a girl child can open this account provided the girl is not more than 10 years of age. 

 

The parents of 2 or more girls (only twins) can also invest in this plan. According to Section 80C, both the maturity amount and the interest earned are tax-free.