Under the Income Tax Act, taxpayers are allowed to reduce their total tax liability by investing in certain sectors or making specific expenses. The government has attached a taxation benefit to encourage investment in these sectors. One such deduction is section 80C, which allows individuals and HUFs to claim deductions for investments and expenses mentioned under the Income Tax Act. Section 80C has two subsections – 80CCC and 80CCD. The maximum limit for deduction under section 80C, including the subsections, is INR 1,50,000, except for NPS tier I investment under section 80CCD(1B).
Investments Eligible for Section 80C Deduction
Here is the list of investment options eligible for claiming deduction under section 80C only if opted for the Old Tax Regime:
1. Contribution to ELSS:
Investment in Equity Linked Saving Scheme or a tax-saving mutual fund attracts a deduction under section 80C. Investment in ELSS funds comes with a lock-in period of 3 years and higher deliverable returns compared to FD, PPF, or NPS.
2. Contribution to Employees Provident Fund:
Employees having a basic salary of more than INR 15,000 per month can contribute to this fund. The contributions to the Employees Provident fund are eligible for deduction under section 80C. This contribution amounts to 12% of the salary. At present, the interest rate in EPF contribution is 8.15% p.a.
Previously this investment fell under the EEE category, but in Budget 2021 the taxability of interest was changed. If the Employee’s contribution in a year is more than INR 2,50,000 (non-government employees) and INR 5,00,000 (government employees), then interest on such additional contribution will be taxable. However, if the amounts are withdrawn before the completion of 5 years period then the same will be taxable.
3. Investment in Public Provident Fund:
It is backed by the Government and carries a fixed interest rate (7.1% p.a.). A resident Individual can invest a minimum of INR 500 and a maximum of INR 1,50,000 in a financial year. There is a lock-in period of 15 years which is further extendable by 5 years for investment in PPF. Withdrawals can be made partially after the completion of 7 years.
Any investment in the Public Provident Fund (PPF) is allowed as a deduction under this section. PPF deposits fall under the EEE (Exempt, Exempt, Exempt) tax category. Of which all three things including deposit, interest, and withdrawal amount are eligible for tax exemption.
4. Investment in Pension Fund by UTI:
Any amount invested by an individual in a pension fund set up by a mutual fund or UTI is allowed as a deduction under this section.
5. Investment in National Savings Certificate (NSC):
This scheme is run by Indian Post and carries an interest rate of 7.7%. Although there is no upper limit for investment in NSC, the maximum deduction available is INR 1.5 Lakhs. The lock-in period is of 5 years and interest earned from this investment is taxable as other sources.
6. Investment in Tax Saving Fixed Deposit:
Different banks and financial institutions offer term deposits which are created for tax saving under section 80C. The lock-in period of such tax-saving fixed deposits is 5 years. The amounts deposited can be claimed as a deduction for a relevant financial year. However, the interest earned on such deposits will be taxable as other sources.
7. Investment in Sukanya Samridhhi Savings Scheme:
Sukanya Samridhhi savings scheme was launched for the betterment of girl children in India. The parents or guardians can invest under this scheme in the name of their girl child till she attains the age of 10 years. Deposits in this scheme will earn interest at 8.2% per annum.
The investment amounts will be available as a deduction under this section. Moreover, the interest amounts will also be exempt.
8. Investment in Unit Linked Insurance Plan (ULIP):
ULIP is a mix of insurance and investment. The individual can invest under this plan for themselves, their spouse, or their children. Since the investment portion is dependent on market performance, there are no fixed returns. The amount of investment will be available as a deduction under this section up to INR 1.5 lakhs.
Further, the withdrawals and maturity amounts are not taxable. However, if the annual premium is more than INR 2,50,000 in any year during the policy period then the amounts received will be taxable to investors.
9. Senior Citizen Savings Scheme (SCSS):
Any individual who has aged more than 60 years or is over 55 years and has opted for retirement, can invest in a senior citizen savings scheme. Savings under the SCSS scheme will earn interest at 8.2% per annum. This deposit has a lock-in period of 5 years and is eligible for deduction under section 80C.
Payments Eligible for Section 80C Deduction
Life insurance Premium:
Taxpayers can claim a deduction under section 80C for life insurance premiums paid for themselves, their spouse, or children. The deduction for the premium amount is allowed up to 10% of the sum assured. In the case of policies issued before 1st April 2012, the deduction can be claimed up to 20% of the sum assured.
Home loan repayment:
The taxpayer can claim a deduction under section 80C for repaying the principal amount on a home loan taken for the construction or purchase of residential property. Additionally, deductions are also available for stamp duty, registration expenses, and transfer expenses.
Taxpayers must maintain ownership of the residential property for at least 5 years. If they sell the property before completing five years, they will need to treat the deduction claimed in previous years as income and pay taxes on that amount.
Children’s tuition fees:
Under section 80C, you can claim a deduction for tuition fees paid for up to two children. You can pay the fees to any school, college, university, or educational institution in India. The course must be full-time, and fees for private coaching or donations are not eligible for deduction.
Other deduction options available
- Subscription to the bonds issued by the NABARD (National Bank for Agriculture and Rural Development).
- Contribution to any deposit scheme or pension fund of NHB (National Housing Bank).
- Contribution to Approved Superannuation Fund.
- Contribution to the annuity plans of LIC like Jeevan Dhara, Jeevan Akshay, etc., or any other insurer as approved by the central government.
- Investments in any notified deposit scheme of:
> Public Sector Housing Finance Company
> Housing Development Authority of cities, towns, and villages.
Supporting Documents
No documents are to be submitted for filing an ITR. In the case of Salaried individuals along with the common documents such as Form 16, you will need to provide these documents to the employer.
- Life Insurance Premium receipts
- Deferred Annuity receipts
- NSC Accrued Interest receipts
- Provident Fund contribution receipts
- Receipt of Term Deposit for 5 years or more with a scheduled bank
- Receipt of Public Provident Fund contribution
- Receipt of Senior citizen saving scheme deposit
- Receipt of Contribution made to a superannuation fund
- Receipt of Tuition fees
- Receipt of Investment in Debentures / Shares of Companies as approved by CBDT, etc.
FAQs
As per the Income Tax Act, any Individual or HUF can claim a deduction under section 80C. This deduction is not available to partnership firms or corporate assessees.
You should submit proof of investments to your employer by the end of the Financial Year (FY). This allows your employer to factor in these investments when calculating your taxable income and the necessary tax deduction. If you forget to submit these proofs, you can still claim the investments when filing your income return, as long as they were made before the end of the relevant FY.
Yes, even if you report incomes under the presumptive scheme, you can still claim deductions under section 80C.
You can invest in different schemes or funds, but the total deductions cannot go beyond INR 1.5 lakhs.
Hey @sushil_verma
There are a wide range of deductions that you can claim. Apart from Section 80C tax deductions, you could claim deductions up to INR 25,000 (INR 50,000 for Senior Citizens) buying Mediclaim u/s 80D. You can claim a deduction of INR 50,000 on home loan interest under Section 80EE.
Hey @Dia_malhotra , there are many deductions that you can avail of. Your salary package may include different allowances like House Rent Allowance (HRA), conveyance, transport allowance, medical reimbursement, etc. Additionally, some of these allowances are exempt up to a certain limit under section 10 of the Income Tax Act.
For eg,
Tax on employment and entertainment allowance will also be allowed as a deduction from the salary income. Employment tax is deducted from your salary by your employer and then it is deposited to the state government.
The benefit Section 80EEB can be claimed by individuals only. An individual taxpayer can claim interest on loan of an electric vehicle of up to INR 1.5 lacs u/s 80EEB. However, if the electric vehicle is used for the purpose of business, the vehicle should be reported as an asset, loan should be reported as a liability and the interest on loan can be claimed as a business expense irrespective of the amount. (We have updated the article with the changes).
Thus, if you have a proprietorship business, you should claim interest amount as a business expense only if the vehicle is used for business purpose. However, if it is used for personal purpose, you can claim deduction of interest u/s 80EEB in your ITR since you would be reporting both personal and business income in the ITR (under your PAN).
As per the Income Tax Act, the deduction under Section 80EEB is applicable from 1st April 2020 i.e. FY 2020-21.
Hey @Sharath_thomas , we have updated the content according to the appropriate assessment year. Thanks for the feedback.
No issues. You’re welcome!
Hey @shindeonkar95
In case of capital gain income (LTCG/STCG), transfer expenses are allowed as deduction, except STT.
However, in case of business income (F&O, intraday), all expenses incurred for the business (including STT) are eligible to claim deduction in ITR.
Hope, it helps!
Hello,
Is it possible to claim deductions under S. 80CCF for Infra bonds bought in the secondary market and held to maturity?
There were a number of 10 year infra bonds issued in the 2010- 2013 period, which will start maturing soon. These are all listed on the exchanges (although hardly any liquidity or transactions in them). If I were to buy some of these bonds in the open markets and hold them in my demat to maturity (<3 years), is it possible to claim tax deductions (upto 20k per year) under 80CCF for buying?
I couldn’t find anything on this. Any help is appreciated.
Hello @Veejayy,
Yes you can claim deduction under 80CCF for investment made in specified infrastructure and other tax saving bonds bought in the secondary market and held to maturity.
Deduction under Section 80CCF can be availed only through investment in certain tax saving bonds, issued by banks or corporations after gaining permission from the government which shall be restricted upto 10,000 per year.
These bonds are generally long term bonds, having tenure of more than 5 years with a lock in period of 5 years in most of the cases. These bonds can be sold after the lock in period!
Also, interest earned on these bonds will be taxable.
Hope this helps!
Hi, I need to file my income tax for FY21, I am using Quicko platform for filing, I wanted to confirm if the ELSS investment amount for the FY21 is to be added in the section 80C, since I already the amount of Rs30,072 , should I add my ELSS amount to this existing amount and submit the total
Hey @Sheirsh_Saxena, yes, the investment amount needs to be added under 80C.