• Sanskar Garg

Sec 80C of Income Tax Act, 1961: Understanding deductions under sec 80C

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Savings in certain types of investments may be deducted from gross total income under Section 80C. Only an individual or HUF is eligible to claim the deduction under section 80C. Section 80C allows for a maximum deduction of Rs. 1,50,000.

Examples: Assuming you earned a gross total income of 10,00,000/- as taxable income in PY 2015-16 (Assessment Year will be 2016-17 when you will estimate and pay the tax on this income). If you invest 100,000/- of this income in any or multiple activities listed under section 80C, your total taxable income will be reduced to 9,00,000/- for the PY.

  1. Life insurance premium policy: Premium paid on insurance on the life of the individual, spouse or any child (minor or major) and in the case of HUF, any member thereof. This will include a life policy and an endowment policy. Life insurance premium paid for parents (father / mother / both) or in-laws is not eligible for deduction under section 80C. If paying a premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) - even insurance bought from private players can be considered. Deduction will be allowed only for premiums upto a maximum of 10% (15% if insured is disabled) of the sum assured for policy issued on or after April 1, 2013 (10% in 2012-13 and 20% if insured before 1st April 2012).

  2. Premium paid in respect of a contract for deferred annuity: The premium for a deferred annuity on the life of the individual, his or her spouse, and any children is paid in order to effect and maintain the contract. (The contract does not, however, contain an option to receive payments in cash instead of annuities). Any amount deducted from a government employee's salary in order to secure a deferred annuity or provide for his wife and children [qualifying amount limited to 20% of salary].

  3. Contribution by an individual (not being repayment of loan) to SPF/PPF/RPF: Contributions to Superannuation Funds, recognised provident funds, and any provident fund to which the Provident Funds Act, 1925, applies. Section 80C allows for the deduction of contributions made to any Public Provident Fund created under the Public Provident Fund Scheme, 1968. This donation may be made in the name of the donor, his or her spouse, any of the donor's children, or, in the case of a HUF, any member of the family. The annual maximum for PPF deposits is Rs. 1,50,000.

  4. Any sum paid by an individual for NSC VIII and IX issue and deposit in Sukanya Samriddhi Scheme Account. The accrued interest thereon is deemed to be reinvested and is eligible for deduction.

  5. Contribution made by an individual or HUF to a Unit Linked Insurance Plan (ULIP) of UTI in the names of themselves, their spouses, or any children (any member in the case of a HUF) (Dhanaraksha).

  6. Membership in any pension fund or deposit scheme established by the National Housing Bank, such as the National Housing Bank (Tax Saving) Term Deposit Scheme of 2008.

  7. Any instalment or part payment towards the cost of purchase/construction of a residential property to a housing board or co-operative society (or repayment of housing loan taken from Government, bank, cooperative bank, LIC, National Housing Bank, assessee’s employer where such employer is public company/public sector company/ university/co-operative society)

  8. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children.

  9. Sum paid towards notified annuity plan of LIC or other insurer approved by IRDA.

  10. Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005).

  11. Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund).

  12. Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.

  13. Subscription to any units of any approved mutual fund referred to in section 10(23D), provided the amount of subscription to such units is subscribed only in 'eligible issue of capital' referred to above.

  14. Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme framed and notified.

  15. Subscription to notified bonds issued by the NABARD. 18. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions).

  16. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions).

  • Are section 80C and 80CCC same?

Section 80C provides deductions on various investments upto ₹ 1.5 lakhs per year from your taxable income. In comparison, Section 80CCC provides a deduction of upto ₹ 1.5 lakhs per annum for the contribution made by an individual towards specified pension funds. Section 80CCE thereby limits the total exemption limit upto ₹ 1.5 lakhs per annum.

  • Is there any deduction in respect of accrued interest of National Saving Certificates -

Amount invested in National Saving Certificates VIII Issue or IX Issue (NSC) is eligible for deduction under section 80C within the overall limit given above. This investment is for 5 years or 10 years and the amount invested along with interest is paid back to the investor at the time of maturity. However, interest is taxable annually on accrual basis. The accrued interest for any year (except for last year) is deemed as reinvestment and the same is entitled for deduction under section 80C. This provision is explained in problem 138-P2.

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