Income Tax Deduction Under Section 80C

By | September 17, 2017
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Section 80C is one of the major Tax Saving tools, which all of us can utilize. We will see the items which can be included under the head of deduction under section 80C, in this article.

Brief History of Section 80 C

Section 80 C came into effect from 1st April 2006, after replacing the old Sec 88. The maximum limit of Deduction, in a Financial Year, under section 80C is 150000. The previous maximum limit of this section was 100000, up-to the financial year 2014-2015. After this, it was raised to 150000.

Section 80C mainly includes different investment options for tax saving purpose. It is one of the peak choices for many people. It is common belief that only the investments can put forth for deductions under this section, but some expenses like a home loan or tuition fee can also be considered for deductions under this section.

Deductions Considered Under Section 80C

1)    Tax Deductions on Life Insurance Premium

For the premium paid on a life insurance policy for self, spouse as well as kids and if the policy issue date was before 31st March 2012, then 20 % of the sum assured will come under the deduction head.

If the policy issue date was after 1st April 2012, then only 10 % of the sum assured will come under the deduction head.

It does not matter, whether the kids are major, minor, unmarried, married, dependent or independent. One cannot claim deduction under this section for the Life Insurance Premium paid for covering parents or in-laws. One can claim the insurance for premiums paid to any insurance company. Private sector insurance policies are also a part of the tax benefit category.

2)    Tax Deductions on Public Provident Funds

The amount invested in PPF for self, spouse or child will come under the tax deduction category. Here also, it does not matter that the child is major, minor, married, unmarried, independent or dependent. One cannot claim deductions under section 80C for the PPF account of parents, siblings or the in-laws.

3)    Tax Saving Mutual Funds (ELSS) or Equity Linked Saving Schemes

The mutual funds, we are talking about here are equity oriented mutual funds. A 3-year lock in is offered by such mutual funds. After 3 years, one can withdraw the amount if one desires so. This will also hold good for SIP.

One should here consider that the ELSS mutual funds are equity related and thus one should not think that it will always be beneficial to withdraw after 3 years. As equity investments are long term investments, the Market can give negative returns in case of short term mindset.

4)    Sukanya Samriddhi Scheme

The amount invested under the Sukanya Samriddhi Scheme will come under the deduction head under this scheme. This particular scheme is the Girl Child Scheme introduced by the government. One should understand here, that this is a debt product and thus one cannot fulfil his financial goals using this product. This is to fulfil the kid’s purpose of a long term education as well as marriage goals.

5)    NSC or National Saving Certificate

This saving scheme is from the Post Office. There is a minimum limit of 100 Rs and there is no maximum limit. The duration of this product is 5 Years. It is considered as the most popular product among the tax savers.

6)    Tax Deduction under Senior Citizen Savings Scheme

This is the product for Senior Citizens. One has to invest a sum and he will start getting the interest rate quarterly. The minimum amount which can be invested is 1000 Rs and one can go to a maximum of 15 Lakhs for a single individual. The maturity period for this product is 5 Years. The individuals above the age of 60 are eligible for this.

7)    Tax Deductions under 5 Years Bank and Post FDs

These products are Fixed Deposit with a lock-in period of 5 years. The amount invested under these FDs is eligible to be included as Tax deduction under section 80C. There are different variants of FDs available in the market, but only 5 years FDs are eligible for the Tax Savings objective.

8)    Tax Deductions on Home Loan Principal

It should be considered here that the total part of the principal repayment is eligible for tax deduction under this scheme.

9)    Tax Deductions on NABARD Bonds

The amount invested in the NABARD bonds for rural and agricultural development will be eligible for Tax Deduction under Section 80C

10)  Tax Deduction on Tuition Fee

The amount paid as the Tuition fee for the kids with a maximum of 2 kids per individual qualify for the deduction under section 80C.

The tax saving is one of the most beneficial activities which should be adopted by individuals to save their tax liabilities. However, it should be mentioned here that the tax saving investments should be aligned with your financial goals. One can choose the product which suits to the risk appetite as well as the financial goals tenure of the individual.

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