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Section 80c: Income Tax Deduction Rules You Must Know

Uncategorized Tax 25-11-2022 | 5 mins read

Section 80c of the Income Tax Act has a great advantage. It allows you to claim tax rebates on investments. You can claim a tax deduction of up to ₹150,000. This is especially applicable to individuals. Companies, LLPs, or partnership firms are not eligible for this.

It is sometimes not easy to calculate individual tax. This guide will help you do that. Let us check the sub-sections of 80c.

Tax Deductions You Can Avail Under 80c Sub-Sections

SubsectionTax DeductionsThings to Know
Section 80CCCIt is used for annuity pension plans. Tax deductions are possible in this section. It includes the purchase, renewal or continuation of policy.The section is applicable for pension or periodical annuity. Individual taxpayers are eligible for this section.
Section 80CCDIt is used for central government pension schemes. The Atal Pension Yojana is one of the schemes in this section.
The monthly amount is received from the National Pension System. Accounts surrendered are taxable in this scheme. The deduction amount should be lower than 10% of the salary. This is meant only for individual taxpayers.
Section 80CCFIndividuals & HUFs can claim deductions in this section. Deductions are applicable in a few aspects. Tax savings and infrastructure bond investments are some of them.The maximum deduction is ₹20,000. The investments have a pretty decent interest rate. The tax benefits are good too.
Section 80CCGThis is a great choice for people interested in the market. It is for individual investors in the equity market.It applies to first-time buyers only. The gross total income must not exceed ₹12,000,00 per year. The maximum deduction is ₹25,000. There is a limit on investments, which is ₹50,000. There is a 50% deduction available in this section. The lock-in period is 3 years.

Investments & Expenses Eligible for Under 80c Deduction

Unit Linked Insurance Plans (ULIP)

ULIPs combine life insurance coverage and investments. A part of the premium goes towards life insurance. The rest is invested in equities or debt instruments. The lock-in period is 5 years.

Tax-Free options include investment payments up to ₹150,000 per annum. You can also get withdrawals and maturity amounts tax-free. Proceeds are taxable if the annual premium exceeds ₹250,000. ULIP allows you to switch among different investment portfolios. These include equity, debt, and balanced portfolios. These insurance plans are useful for many things. You can save for retirement. You can plan your children’s education. ULIPs are also useful for creating wealth.

Life Insurance Premiums

The minimum holding period for these premiums is 2 years. Premiums of self, spouse, or dependent children can be used for tax deductions. Policies for parents or parents-in-law are not eligible for deductions. The maximum investment in a financial year is ₹150,000.

Public Provident Fund (PPF)

This is one of the most popular options. Contributions made towards PPF are tax deductible under 80c. Resident Indian nationals are eligible for this fund. There is a longer lock-in period for PPF, which is 15 years. Investment payments, maturity amounts, and interest are tax-free. The funds can be used for long-term savings. You may plan for a child’s wedding. You can secure your retirement with this scheme. PPF is also helpful in wealth generation.

Tax Savings Fixed Deposit

Banks and Indian post offices allow you to open Tax Saving Fixed Deposits. They have higher interest rates than regular deposits. The deposits are tax deductible. The lock-in period is 5 years. The interest earned in this deposit is taxable. You can invest a maximum of ₹150,000 in a financial year for tax-free plans.

Employees Provident Fund (EPF)

EPF is a vital scheme. The retirement scheme is available for all salaried employees. You are eligible after five years of service. The employer or the individual opens the account. The employer and employee must contribute 12% of the basic Salary + D.A if the salary is above ₹15,000. Employer’s contribution is not suitable for tax deduction under 80c. It is tax-free. EPF allows you to save a portion of your wages. Employee’s contribution for up to ₹150,000 in a financial year is eligible for deductions.

Equity Linked Savings Scheme (ELSS)

You can invest in ELSS Mutual Funds. This will help you claim the section 80c deduction. The lock-in period is 3 years. A maximum investment of ₹150,000 in a financial year is tax-free.

National Savings Certificate (NSC)

NSC is one of the most popular tax-saving schemes. The central government offers it to Indians. The tax is deductible under Sub-Section 80CCD. You can choose the lock-in period. It is 5 years or 10 years. A maximum deposit of ₹150,000 in a financial year is tax-free. An additional contribution of ₹50,000 is deductible under Section 80CCD (1B).

Senior Citizens Savings Scheme

An individual above 60 can opt for SCSS. If you choose the Voluntarily Retirement Scheme (VRS), you can invest in SCSS after age 55. The lock-in period is 5 years. You can extend the lock-in period by another three years. A maximum deposit of ₹150,000 in a financial year is tax-free.

Sukanya Samriddhi Yojana

This is a significant savings scheme. It is meant for girls’ education and wedding needs. The parents of the girl child can open this account. This has to be done before the girl child turns ten. You can open accounts for two girls. If there are twin girls in the second birth, you can claim an 80c deduction for all three girls. There are tax exemptions in this scheme. Interest earned and proceeds received upon maturity/withdrawal are some of them. This is a good scheme for parents as it offers peace of mind. It helps plan for the child’s future. It is a great gift idea too.

Infrastructure Bonds

These are government bonds. They are offered by companies that develop infrastructure. You can help in the country’s growth with these bonds. These bonds are tax-exempt. ₹150,000 is the maximum tax-free investment in a financial year.

Home Loan Principal Repayment

The Indian government wants everyone to have homes. You may build your home with a home loan. These loan payments are eligible for tax deduction under section 80c. You must construct a house within five years from the time of the loan. You can claim a deduction for the year when construction ends.

The principal repayment amount paid towards the home loan is deductible under 80c. You cannot claim tax deductions for the interest. A maximum investment of ₹150,000 in a financial year is tax-free.

Getting the Maximum Benefits via Income Tax Section 80c Deduction

You can claim a total deduction of ₹150,000 as an individual, HUF or NRI. This is because of section 80c of the Income Tax Act. You can do this on a single transaction. You can also diversify investments.

Final Thoughts on 80c Deduction

You don’t need all these exemptions to file taxes. The maximum benefit stays the same. It is ₹150,000 for a financial year. You can decide what is best for you. Think about risk-taking ability. Plan your financial goals. Then choose which scheme works. Explore more about tax-saving schemes on Piramal Finance. This online platform is what you need to learn everything about relevant developments in the world of finance. Check out the website for informational blogs on financial matters and to know more about personal loans, credit cards, and financial management.

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