Tax saving u/s 80C

Tax saving u/s 80C

Deductions are the eligible expenses notified by the Income tax act which the assessee can claim against the income in order to reduce his total income and ultimately save his taxes. Investing in various schemes of notified by government will help you ultimately reduce the tax. Section 80C was introduced on 1st April 2006 which replaces the section 88 with more or less the same investment mix available in section 88. It is applicable to individuals and HUF. An assessee can get deduction under section 80C up to a maximum of Rs.1,50,000. Under 80C the following qualifying investments are available as deduction under 80C

1) Life insurance premium paid on insurance of individual:

Life insurance premium paid by the assessee is eligible for deduction under section 80C.

Conditions for claiming deduction:

  1. The assessees can claim the deduction for self, spouse and individual.
  2. The assessee cannot claim deduction for premium paid on the policy of his parents.
  3. In case the policy is issued before 01/04/2012 than the premium cannot exceed 20% of the policy value i.e. sum assured. For instance if the sum assured is Rs. 1,00,000 than the maximum eligible premium under this case will be Rs. 20,000 even if Mr. Rahul pay premium of more than Rs. 20,000 he cannot claim more than Rs. 20,000 under section 80C.
  4. In case the policy is issued on or after 01/04/2012 than the premium cannot exceed 10% of the policy value i.e. sum assured. For instance if the sum assured is Rs. 1,00,000 than the maximum eligible premium under this case will be Rs. 10,000 even if Mr. Rahul pay premium of more than Rs. 10,000 he cannot claim more than Rs. 10,000 under section 80C.
  5. In case the policy is issued on or after 01/04/2013 for person with disability or person suffering from specified disease than the premium cannot exceed 15% of the policy value i.e. sum assured. For instance if the sum assured is Rs. 1,00,000 than the maximum eligible premium under this case will be Rs. 15,000 even if Mr. Rahul pay premium of more than Rs. 15,000 he cannot claim more than Rs. 10,000 under section 80C.

2) Annuity plan of LIC:

In case assessee makes any subscription to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette specify then such contribution shall be eligible for deduction under 80C.

3) Investment in Unit Trust of India (UTI):

Investment in UTI (unit trust of India) can avail you deduction under 80C. Under UTI you is can invest in the following plans:

a. ULIP (unit link insurance plan)

b. Pension Plan

c. ELSS (Equity linked savings scheme)

4) Tax saver Mutual funds:

ELSS investment is an efficient way of saving taxes. Al l equity linked savings scheme are eligible for deduction under section 80C. ELSS comes with a shorter lock in period ( approximately 3 years). The ELSS instrument offers higher rate of return as compared to other 80C investments. The following are the benefits of investment in ELSS:

  1. Higher returns on investment
  2. Shorter Lock in period
  3. Protection in time of volatile market

5) Post office National Savings Time Deposit account:

This is similar to fixed deposits which are available for various time durations ranging from 1 year and up to 5 years. Interest on such deposit is payable annually but calculated quarterly. The assessee can deposit a Minimum of Rs. 1,000 and in multiple of 100. The current interest rate on National Savings Time Deposit account are as under:

Currently you are beneficial if you invest for 5 years plan as it offer Interest at the rate of 6.7% of interest. Also investment under 5 years Term deposit qualifies for the benefit of section 80C.

6) Public Provident Fund (PPF):

Public Provident Fund is long term investments backed by government of India. Deposits made in a PPF account are eligible for tax deductions under Section 80C. Presently the PPF is offering interest of 7.1% p.a. An individual can open account with INR 500/- and a deposit minimum of INR 500/- in a financial year and maximum INR 1,50,000/-.Interest on PPF is tax free. Maturity period is 15 years but the same can be extended within one year of maturity for further 5 years and so on. Withdrawal can be taken after the expiry of five years from the end of the year in which the account was opened.

7) Employer provident fund (EPF):

In case you are salaried person then your employee is deducting provident fund contribution from your salary. As employer contribution is exempt and your contribution is eligible for deduction under 80C.

8) National Savings Certificate:

NSC is a tax saving time instrument with a maturity period of five and Ten Years. Presently, the interest is paid @ 6.80% p.a. on 5 year NSC. Interest is Compounded Half Yearly. While the minimum investment amount is Rs 10,000, there is no maximum amount. Premature withdrawals are allowed only in case of special circumstances such as death of the holder. Investments in NSC are eligible for a deduction of up to Rs 150,000 p.a. under Section 80C. Furthermore, the accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C. However, the interest income is chargeable to tax in the year in which it accrues.

9) Tuition fees paid:

In case you are incurring expense on the tuition fees of your children study then such expenses can be claimed under section 80C. It is eligible for deduction only if expenses are for full time education in India incurred on school/college/Educational institution/university. The deduction can be claimed for maximum 2 children. You can claim deduction only if receipt regarding payment is available with you.

10) Tax saver time deposits:

Tax saver fixed deposit (FD) is a type of fixed deposit, which is an eligible investment under section 80C. Tax saver time deposit comes with a lock in period of 5 years. It offers interest from 6% to 7 %.Any investor can claim deduction of Tax saver deposit under section 80C.

11) Repayment of housing loan

In case the assessee is paying home loan EMI then the principal repayment from such EMI is eligible for deduction under section 80C.

12) Investment in Sukanya Samridhi Scheme:

Sukanya Samridhi Scheme is a government backed saving scheme targeted at the parents having girl child. The scheme encourages the parents to invest for the future of the girl child. It was launched 22nd January 2015. Presently, the scheme offers interest at the rate of 7.6% p.a.

13) Stamp duty and registration fees:

Stamp duty and registration fees paid at the time of buying house property and the registration fees paid at the time of purchase of property shall be eligible for deduction under section 80C. But shall not include any payment towards or by way of—

(A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

(B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

(C) any expenditure in respect of which deduction is allowable under the provisions of section 24

14) Contribution to Voluntary provident fund:

An employee can increase this contribution to provident fund if he is willing to get a less take-home salary. This additional contribution is called VPF and is also eligible for deduction under Section 80C. The rules for both EPF and VPF are the same.

15) Investment in NABARD bonds:

In case the assessee is worried about the volatile market then he can invest in the notified bonds issued by National Bank for Agriculture and Rural Development (NABARD). The NABARD bonds were first issued in March 2016. NABARD offers interest rate of 7.64% for 15 years bonds and 7.29% for a 10 years bonds.

16) Contribution to Pension scheme:

Contribution by an individual to any pension fund setup by any mutual fund referred in section 10(23D) is eligible for deduction under section 80C. as per section 10(23D) the following are the eligible person under section 10(23D):

  1. Mutual Fund registered under the Securities and Exchange Board of India Act, 1992
  2. Mutual Fund set up by a public sector bank or a public financial institution or authorised by the Reserve Bank of India and subject to such conditions as the Central Government may, by notification in the Official Gazette, specify in this behalf.

17) Deposit in Senior Citizen Savings Scheme:

Senior Citizens Savings Scheme (SCSS) is a government-backed savings instrument offered to Indian residents aged over 60 years. the deposit comes with a maturity period of 5 years from the date of investment in the scheme. Deposit in Senior Citizen Savings Scheme is eligible for deduction under 80C. At present Senior Citizen Savings Scheme offers interest at the rate of 7.4%.

18) Contribution to pension scheme by central government employee:

If employee of the central government contributes for National Pension Scheme then such amount is eligible for deduction under section 80C.

19) Subscription to equity shares or debentures eligible IPO

Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution. For the purposes of this clause,

(i) “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA i.e. An Indian company engaged in infrastructure facility or providing telecommunication services or which develops and operates industrial park or special economic zone notified by central government.or which is set up in any part of India for the generation or generation & distribution of power.

20) Subscription to deposit scheme:

In case individual subscribe to deposit scheme of a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes or any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both, shall be eligible for deduction under section 80C.

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