Section 80C : Income Tax Deduction List For Taxpayers

Table of Content:

1. Section 80C: Overview
2. ​Section 80C of Income Tax Act : Subsections
3. Section 80C Deductions
4. Public Provident Fund (PPF)
5. Employees’ Provident Fund (EPF)
6. National Pension Scheme (NPS)
7. Equity Linked Savings Scheme (ELSS)
8. Life Insurance Premium
9. Tax Saving Fixed Deposits (FDs)
10. National Savings Certificate (NSC)
11. Senior Citizens Saving Certificate (SCSS)
12. Principal Repayment Of Home Loan
13. Sukanya Samriddhi Yojana

With an aim to encourage savings and investments amongst Indian taxpayers, The Income-Tax Department of India offers various deductions from taxable income under chapter VI A of the Income Tax Act, 1961. Section 80C is the most commonly-used provision for tax saving under this Income Tax Act. 

While every income-generating citizen of the country is obliged to pay taxes, the deductions under 80C can reduce the tax liabilities. Let’s explore this tax-saving provision in detail and what it entails.

Section 80C: Overview

Section 80C of Income Tax Act is a clause and provision that allows exemptions in the form of investments and expenditures from the taxable income. It allows a maximum of Rs. 1.5 lakh deduction every financial year from an investor’s taxable income. 

This clause is only applicable to Hindu Undivided Families or individual taxpayers. Most deductions under 80C are also applicable for NRIs. Businesses, partnership firms, and corporate bodies are not qualified to get tax exemptions under Section 80C.  

Section 80C of Income Tax Act : Subsections

Here is the list of the subsections of Section 80C that states all the eligible investments for tax exemptions:

Also Read: Tax Benefits Of Renting Out Your Property

Section 80C Deductions

Here is the list of options you can use to avail tax benefits under Section 80C of Income Tax Act:

• Public Provident Fund (PPF)

• Employees’ Provident Fund (EPF)

• National Pension Scheme (NPS)

• Equity Linked Savings Scheme (ELSS)

• Unit Linked Insurance Plan (ULIP)

• Life Insurance Premium

• Tax Saving Fixed Deposits (FDs)

• National Savings Certificate (NSC)

• Senior Citizens Saving Certificate (SCSS)

• Principal repayment of home loan

• Sukanya Samriddhi Yojana

A few of these 80C investment options have a minimum lock-in period. They are:

Let’s find out details about these 80C investment options listed above!

Public Provident Fund (PPF)

It is one of the most popular instruments for investment from the 80C deduction list that gives assured returns. Its interest is compounded every year. The minimum contribution you can make towards PPF is INR 500, and the maximum contribution for PPF is INR 1.5 lakhs. The interest received on PPF is tax-free. Any voluntary contribution you make as an employee towards the PPF is also eligible for tax deduction under Section 80C. 

Employees’ Provident Fund (EPF)

It is referred to as Provident Fund (PF) or Voluntary Provident Fund (VPF). It is subtracted from your monthly salary automatically. Both the employer and the employee contribute towards the PF. The contribution made by the employer is tax-free, and the contribution made by the employee is eligible for tax deduction under Section 80C of Income Tax Act. 

National Pension Scheme (NPS)

Any contributions made towards NPS are eligible for deduction under Section 80C of Income Tax Act. But the catch here is that combined deduction under Section 80C and Section 80CCD should not exceed INR 1.5 lakhs. You can claim up to INR 50,000 under Section 80CCD. You will get an additional benefit of INR 50,000 if you have a Tier 1 NPS account. 

Equity Linked Savings Scheme (ELSS)

It is another type of investment scheme that lets you save income tax on the amount you put into the fund. It has higher returns as your money is invested in equity funds. ELSS falls under Section 80C’s exemption category with its maximum limit of up to INR 1.5 lakhs.

Life Insurance Premium

The premiums you pay towards life insurance policies are also eligible for tax deduction under Section 80C Income Tax Act. These exemptions are available for policies held by you, your spouse, and children. However, the premium you pay for your parents or parents-in-law is not eligible for a tax deduction. 

Tax Saving Fixed Deposits (FDs)

Post offices and banks in India offer Tax-saving FDs. The returns on these instruments are liable for taxation. In the case of post office deposit schemes, only the interest earned on a five-year deposit scheme is eligible for a tax deduction. These FDs offer a maximum INR 1.5 lakhs tax exemption on the principal amount. 

National Savings Certificate (NSC)

It is another popular tax-saving instrument if you are a tax-avert individual. The interest earned on NSC is compounded semi-annually. The interest accrued for the first four years from NSC is eligible for tax deduction under Section 80C Income Tax Act. The minimum amount you can contribute towards NSC is INR 100. The amount you invest is subject to a limit of INR 1.5 lakhs in a financial year.

Senior Citizens Saving Certificate (SCSS)

SCSS is the best investment scheme for senior citizens at least 60 years of age. Citizens who opt for a Voluntary Retirement Scheme (VRS) can opt for SCSS after 55 years. The returns in this scheme are lucrative and the interest is paid quarterly. A senior citizen can claim tax benefits up to INR 1.5 lakhs Section 80C of Income Tax Act. 

Principal Repayment Of Home Loan

The repayment you make towards the principal component of the home loan is eligible for a tax deduction. You can avail exemptions if:

• The property’s construction is completed.

• The transfer of property does not occur within five years of its possession. 

Any amount you claim as a tax deduction will be taxable in the transfer year if the transfer of property occurs within five years.

Suggested Read: HRA Tax Benefits With Rent Receipts

Sukanya Samriddhi Yojana

This scheme is for meeting a girl’s educational and marital financial requirements. The girl cannot be older than ten years to be eligible for this scheme while opening the account. Parents of two or more girls (only in the case of twins) can also invest in this scheme. The interest in this scheme is calculated and compounded annually. Interest earned from this scheme is also eligible for tax exemption. The minimum amount you can invest in this scheme is INR 1000.  

Conclusion

We hope the article helps you understand deductions under Section 80C of Income Tax Act. Save this blog and use it later when you file your tax returns and avail the tax benefits you can!

Suggested Read: Pro Tips On Saving Tax With Sale Of Land