Section 80C Deduction

Section 80C deduction is available for taxpayers who have made certain payments like life insurance premiums, bank fixed deposits, payment of tuition fee, deposit under Sukanya Samriddhi Yojna, National Savings Certificate, ELSS, pension funds and more. Section 80C deduction is one of the most popular income tax deduction, as it covers a range of payments from tuition to bank deposits. Taxpayers can claim a maximum deduction of upto Rs.1.5 lakhs under Section 80C, 80CC and 80CCD.

Deposits Eligible for Deduction under Section 80C

Various types of deposits are eligible for deduction under Section 80C subject to certain conditions. Deposits under the following schemes are ideal for risk averse investors who would like to earn interest on their investment while also saving on taxes.

Bank Fixed Deposit

Amount deposited with a banks in terms of Bank Term Deposit Scheme, 2006 is admissible as deduction from gross total income. For a deposit in bank to be eligible for deduction, the deposit must be made for a minimum period of 5 years. Also, the deposit should not have be pledged to secure a loan or be encumbered.

National Housing Bank Term Deposit Scheme

Subscription to deposit scheme of National Housing Bank Subscription to National Housing Bank (Tax Saving) Term Deposit Scheme, 2008 of National Housing Bank is allowed as a deduction under Section 80C from gross total income.

Deposit with HUDCO

Subscription to deposit scheme of Housing and Urban Development Corporation Limited (HUDCO) known as Public Deposit Scheme of HUDCO is allowed as a deduction under Section 80C from gross total income.

Sukanya Samriddhi Yojna Scheme

Sukanya Samriddhi Yojna Scheme is a deposit scheme for girl child prosperity under Beti Bachao Beti padhao program of Prime Minister Narendra Modi. Sukanya Samriddhi Yojna Scheme promotes education and carefree marriage expenses for girl child. Deposit under Sukanya Samriddhi Yojna Amount deposited for a girl child of the individual or for a girl child for whom the individual is the legal guardian is allowed as a deduction under Section 80C.

Bonds issued by NABARD

Subscription to NABARD Rural Bonds issued by National Bank for Agriculture and Rural Development (NABARD) is allowed as a deduction under Section 80C of the Income Tax Act.

National Savings Certificates

Subscription to National Savings Certificates (VIII Issue) issued under the Government Savings Certificate Act, 1959 shall be admissible as deduction from gross total income under section 80C( 2)( ix).National Savings Certificates Scheme is specially designed for Government employees, Businessmen and other salaried classes who are Income Tax assesses. There is no maximum limit for investment. There is also no Tax deduction at source and the certificates can be pledged as collateral security to get loan from banks.

Deposits Eligible for Deduction under Section 80C

Investments Eligible for Deduction under Section 80C

Some types of investments in mutual funds and equity shares are eligible for deduction under Section 80C. Investments in following mutual funds and equity shares are ideal for investors who would like to earn above-average rate of return on their investment while also saving on taxes.

Equity Linked Savings Scheme (ELSS)

Investment under any Plan formulated by a Mutual Fund or Unit Trust of India under the 'Equity Linked Savings Scheme, 2005' is allowed as deduction while computing total income of the assessee. The amount can be invested in units in multiples of rupees five hundred. The amount invested would be locked in for a period of three years. However, in case of death of the subscriber, the nominee or legal heir can withdraw the investment after the completion of one year from the date of allotment.

Investment in Infrastructure Development

Investment in equity shares or debentures issued by a public company formed and registered in India or a public financial institution, the proceeds of which should be utilised wholly or exclusively for developing, operating or maintaining any infrastructure facility under an agreement with the Central Government, State Government or a local authority or any other statutory body is allowed as a deduction under Section 80C of the Income Tax Act.

Investment in Mutual Fund for infrastructure development

Instead of directly investing in the equity shares of debentures of a company, taxpayers can also subscribe to a mutual fund for infrastructure development for availing deduction under Section 80C. If the amount invested in the mutual fund must be exclusively used for developing, operating or maintaining any infrastructure facility under an agreement with the Central Government, State Government or a local authority or any other statutory body.

Insurance Premium Eligible for Deduction under Section 80C

Various types of insurance premiums are eligible for deduction under Section 80C. Taxpayers who wish to mitigate risk while saving taxes can opt for certain types of insurance plans to reduce risk and save taxes.

Premium on a life insurance policy

Premium on a life insurance policy paid self, spouse or child is eligible for deduction under Section 80C of the income tax act.

Contribution to Unit-Linked Insurance Plan

Contribution for participation in the Unit-linked Insurance Plan, 1971 of the Unit Trust of India or LIC is eligible for deduction under section 80C.

Insurance Premium Eligible for Deduction under Section 80C

Purchase of Construction of a Residential Property

Purchasing or constructing a house is a great way to save taxes. Payments like repayment of home loan, home loan interest and registration charges are tax deductible under Section 80C. For the deduction to be available the taxpayer must hold ownership of the residential property for a minimum of fiver years. If the taxpayer transfers the house property before the expiry of five years from the end of the financial year, then the deduction availed in the previous years would be held as income in the current year.

Home Loan Repayment

Home loan repayment can be deducted under Section 80C, if the income from the house property is assessable to tax under the head 'income from house property'.

Stamp Duty and Registration Charges

Samp duty, registration fee and other expenses for the purchase of a house property is deductible under Section 80C.

Payment of Installment to Housing Board

Payment of any installment or part payment of the amount due under any self financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis.

Payment of Installment to Cooperative Society

Payment of any installment or part payment of the amount due to any company or cooperative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him.

Payment of Tuition Fee for Children

Amount paid towards tuition fee for the purpose of full time education of any two children of the individual shall be admissible as deduction under section 80C( 2)( xvii). Deduction would be admissible of the amount paid to any university, college, school or other educational institution situated within India. However, payment towards any development fees or donation or payment of similar nature would not be admissible as deduction.

Contribution to Provident Fund or Superannuation

Amount contributed by a taxpayer as an employee to any Provident Fund or any Recognised Provident Fund or any approved Superannuation Fund is admissible as deduction under Section 80C from gross total income.

Contribution to Annuity Plan

Annuity is a powerful financial planning tool that which can be used by taxpayers to create a steady stream of income after certain years, while also saving on taxes.

Contribution to Annuity

Contribution to an annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify shall be admissible as deduction from gross total income under section 80C( 2)( xii).

Government Employees Contribution to Deferred Annuity

Amount deducted from salary payable by or on behalf of the Government to any individual in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum so deducted does not exceed one-fifth of the salary shall be admissible as deduction from gross total income under section 80C( 2)( iii).

Senior Citizen Savings Scheme

Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004 and deposit as five year time deposit in an account under the Post Office Time Deposit Rules is allowed as deduction from gross total income under Section 80C.

If any amount, including interest accrued is withdrawn by the taxpayer from deposit accounts before the expiry of the period of five years from the date of its deposit, the amount withdrawn will be deemed to be the income of the assessee in the previous year in which the amount is withdrawn except amount of interest which was included in the total income of the assessee in any earlier previous year. In case of death of the assessee only interest accrued, if any, which was not included in the total income of the taxpayer for any earlier previous year will be taxable. Any amount received by the nominee or legal heir of the assessee towards refund of deposit will not be taxable.

Contribution to Pension Funds

Contribution to any of the pension funds are deductible under Section 80C

UTI Retirement Benefit Pension Fund

UTI Retirement Benefit Pension Fund set up by UTI Mutual Fund for assessment year 2006-07 and subsequent assessment years.

Reliance Retirement Fund

Reliance Retirement Fund set up by Reliance Mutual Fund for assessment year 2015-16 and subsequent assessment years.

HDFC Retirement Savings Fund

HDFC Retirement Savings Fund set up by HDFC Mutual Fund for assessment year 2016-17 and subsequent assessment years.

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