Section 80C of Income Tax Act

Under Section 80C of the Income Tax, an individual can avail for deductions up to Rs 1,50,000 per annum on the total annual income. This deduction can be availed by individual employees (both men and women) as well as Hindu Undivided Family (HUF).

An assessee cannot avail deduction under Section 80C over and above the maximum limit of Rs 1,50,000 per annum.

Investment Options Under Section 80C

1. Public Provident Fund (PPF)
2. National Savings Certificate (NSC)
3. Employee Provident Fund (EPF)
4. Voluntary Provident Fund (VPF)
5. Five Year Tax Saving Fixed Deposit Schemes
6. National Pension Scheme (NPS)
7. Sukanya Samriddi Yojana/Scheme
8. Deposits with Housing and Urban Development Corporation Limited (HUDCO)
9. Unit Linked Insurance Plans (ULIP)
10. Life Insurance Premium paid (for self or spouse or children) to Life Insurance Corporation of India (LIC)
11. Repayment of Home Loan (only principal amount)
12. Children’s tuition fees (for two children)
13. Investment in Bonds
14. Investments in Mutual Fund/UTI Mutual Fund
15. Stamp Duty/Registration Fee/Other expenses related to purchase/construction of residential house
16. Senior Citizens Savings Scheme (SCSS)
17. Five – Year Post Office Time Deposit Schemes
18. NABARD Rural Bonds
19. Equity Linked Savings Scheme

Public Provident Fund

The amount of investment made in a public provident fund is eligible for deduction on an annual basis. The scheme is fully guaranteed by the Central Government and the balance amount is not subject to attachment under any order or decree of a court. The minimum amount of deposit stands at Rs 500 per annum and there is no maximum limit on the deposit amount. The account can also be opened in the name of minor children and parents can act as guardians. Investors can avail loan on PPF between third financial year to sixth financial year by pledging the account as collateral security. This account can either be opened in any of the banks or post offices across India.

National Savings Certificate

The national savings certificate is a form of government savings bonds which is mainly used for small savings and also for income tax saving purpose. It is issued by Indian Postal Service (India Post). These certificates are available in the denomination of a minimum of Rs 100 and in multiples of Rs 100. There is no maximum limit on the amount of deposit in NSC. The interest amount is compounded on an annual basis but it will be payable at the time of maturity.

Employee Provident Fund

The employee provident fund is a savings scheme meant for employees in India and is formed under the Employees’ Provident Fund and Miscellaneous Act of 1952. It is administered and managed by the Central Board of Trustees which mainly comprises of representatives of the government, employers and employees. The scheme aims at promoting savings habit which can be used post-retirement of employees. The savings in this scheme is eligible to gain interest which is usually revised regularly by the Employees’ Provident Fund Organization (EPFO).

Voluntary Provident Fund

The voluntary provident fund is a voluntary fund contribution from the employee towards his/her provident fund account which forms a part of savings which can be used post-retirement. Any contribution which is above the 12% of contribution by an employee towards the employee provident fund constitutes voluntary provident fund. The maximum contribution for VPF is up to 100% of the basis salary and dearness allowance. The government of India decides on the interest rate at the beginning of each financial year.

Five Year Tax Saving Fixed Deposit Schemes

This is a form of fixed deposit which is specially designed for tax savings purpose meant for five years. The minimum amount of deposit usually differs from one bank to another but there is no maximum limit. The lock-in period of this scheme is five years. Any kind of premature withdrawal and loan by pledging the deposit cannot be availed. Depositors can avail this FD’s at private as well as public sector banks. It can be held either singly or jointly. In case of joint account, only the first holder is available to secure tax benefits. The maximum amount that can be claimed for deduction is up to Rs 1,50,000 in a financial year.

National Pension Scheme

Under this scheme, the subscriber can contribute regularly in a pension account during the tenure of work life. Post-retirement, individuals can secure a regular income from this scheme. The interest rate will be determined by the pension fund manager whom the depositor chooses and it usually varies from one manager to another.

Sukanya Samriddi Yojana/Scheme

It is a savings deposit scheme meant exclusively for girl child launched under “Beti Bachao Beti Padhao” campaign. It can be opened any time after the birth of a girl baby till she turns 10 years. The account can be opened in any bank or post office across India. The minimum amount of deposit is Rs 1000 per annum and the maximum limit is Rs 1,50,000 per annum. Deposits have to be made till the completion of 15 years starting from the date of opening of the account. The account matures on completion of 21 years starting from the date of opening or whenever the girl on whose name the account is opened marries (whichever is earlier).

Deposits with Housing and Urban Development Corporation Limited

Investors who subscribe to deposit schemes issued by the Housing and Urban Development Corporation Limited as public deposit scheme is allowed for deduction. The minimum lock-in period is 5 years and the maximum amount allowed for deduction is up to Rs 1,50,000. Depositors can avail loan against deposit only against the following schemes – HUDCO Regular Plus – Periodic Income Scheme and HUDCO Multiplier Plus – Cumulative Income Scheme.

Unit Linked Insurance Plans

It is a market-linked insurance product which aggregates the best of insurance and investment. It is usually linked to the capital market and offers flexibility to the investor to either invest in equity or debt fund as per the risk inclination. The dual benefits of this scheme backed by the flexibility make it one of the most attractive forms of investment.

Life Insurance Premium paid (for self or spouse or children) to Life Insurance Corporation of India

The premium in insurance refers to the amount of money than either an individual or a business firm must pay for an insurance policy. The premium amount paid by an individual towards the life insurance policy either for himself or spouse or children is eligible for deduction under Section 80C of the Income Tax Act of 1961. Premium amount can either be paid either monthly or quarterly or half-yearly or on a yearly basis.

Repayment of Home Loan

Individuals who have taken home loan can claim for deduction on repayment of the principal amount of the home loan. The maximum amount of deduction under this category stands at Rs 1,50,000 per annum. The amount of deduction also depends on the ownership share which an individual has on the property. The home loan should be in the name of the assessee. Deduction under this category can also be claimed by the co-borrower and can only be claimed from the financial year during which the construction of the house was completed.

Children’s Tuition Fees

Individuals who pay their children’s tuition fee will be eligible to get deduction under Section 80C of the Income Tax Act. This deduction is available to only two children per annum and in case of more than two children, the assessee can claim for deduction only for two kids. Maximum deduction available for the tuition fee of children stands at Rs 1,50,000 per annum. Donation paid to the school at the time of admission is not an allowance expense under this category.

Investment in Bonds

Investment in infrastructure bonds can be claimed for deduction under Section 80C of the Income Tax Act of 1961. Investments to the tune of Rs 20,000 in infrastructure bonds are eligible for income tax deduction.

Investments in Mutual Fund/UTI Mutual Fund/Equity Linked Savings Scheme

Investment in mutual funds is also eligible for tax deduction under Section 80C of the Income Tax Act. The minimum lock-in period under this scheme will be three years starting from the date of investment. The maximum limit of deduction under this category stands at Rs 1,50,000 per annum. This is one of the ideal options for creating wealth on investing for a long period of time.

Stamp Duty/Registration Fee/Other expenses related to purchase/construction of residential house

During the purchase of property, one has to incur heavy expenses and it included stamp duty and registration charges. With an intention to give some relief to the taxpayers, the government of India provides a deduction on stamp duty, registration fee and other expenses incurred by the buyer at the time of purchase of property under Section 80C of the Income Tax Act. This deduction can be claimed after the construction of the property is complete and one has legal possession of the house.

Senior Citizens Savings Scheme (SCSS)

The senior citizens in the country can save in the Senior Citizens Savings Scheme and can qualify for deduction under Section 80C of the Income Tax Act of 1961. The tenure of the scheme is 5 years. One should be equal to or more than 60 years to be eligible for investing in this scheme.

Five – Year Post Office Time Deposit Schemes

Investment in five-year post office time deposit qualifies for securing benefits under Section 80C of the Income Tax Act of 1961. One can claim for deduction up to Rs 1,50,000 per annum on investing in this scheme over a period of five years. The scheme also provides a decent interest rate on deposited amount.

NABARD Rural Bonds

The bonds issued by the National Bank for Rural and Agricultural Development also qualifies an individual to gain tax deductions under Section 80C of the Income Tax Act.

Equity Linked Savings Scheme

This is a unique scheme which comes in with dual benefits as it covers life insurance as well as provides benefits of equity investments. Apart from this it also provides tax-savings and will help one to grow money over a long period of time.