Section 80C of the Income Tax Act

Section 80C of the Income Tax Act is one of India’s most popular tax-saving provisions, widely used by taxpayers. It encourages investment in various financial instruments while helping reduce your income tax liability.

Understanding what qualifies for deductions under Section 80C and the maximum deduction limit can help you make well-informed financial decisions.

Here is a simple guide to tax benefits under 80C, covering all you need to know about eligible deductions and how to maximise your tax benefits.

What is Section 80C of the Income Tax Act?

Section 80C of the Income Tax Act provides tax deductions on your taxable income. This deduction is based on the amount you have invested in eligible savings or investment products or spent on specified purposes.

The total maximum deduction allowed under Section 80 C of the Income Tax Act, considering all eligible savings and investment options, is ₹1.5 lakhs.

The following expenditures and savings and investments qualify for a tax deduction under 80C Section:

 Section Under 80C: Old Tax Regime vs New Tax Regime

The tax benefit under 80C is available only in the old tax regime. The new tax regime provides concessional tax rates but does not allow for most tax deductions and exemptions under the 80C Section.

Who Can Claim D​eductions Under Section 80C of the Income Tax Act?​

The deduction under Section 80C of the Income Tax Act is applicable to Individuals and Hindu Undivided Families (HUFs). You can claim deductions under Section 80C at the time of filing your Income Tax Returns (ITR).

Companies and partnership firms cannot benefit from Section 80C of the Income Tax Act.

List of Deductions Under Section 80C Section of the Income Tax Act

Savings and Investments that Qualify for Tax Deductions Under 80C Section of Income Tax Act

Equity-Linked Savings Scheme

The Equity-Linked Savings Scheme is a type of mutual fund scheme that helps you invest in equity-linked financial instruments for market-linked returns.

 Public Provident Fund

The Public Provident Fund is a Government-backed scheme that offers a long-term savings benefit. The interest is compounded annually and the maturity benefits are provided after 15 years.

Employees Provident Fund

The Employees Provident Fund is a Government-backed scheme for retirement benefits offered to salaried employees. Both the employer and the employee contribute 12% of the employee’s salary to this fund.

Life Insurance

Life insurance provides a death benefit to your loved family members in the event of your unexpected demise. It also offers savings and investment benefits.

Unit-Linked Insurance Plan (ULIPs)

Unit-linked Insurance Plans are life insurance plans that offer both life coverage and the option to invest in financial securities. You can choose between equity, debt or hybrid funds based on your risk tolerance level.

Sukanya Samriddhi Yojana (SSY)

Sukanya Samriddhi Yojana is a Government-backed savings scheme for the benefit of a girl child. It can be opened by a parent or guardian for two girl children less than 10 years of age.

You should deposit money in the SSY account for 15 years. After 15 years, the interests continue to accrue until the girl child turns 21 years old.

National Savings Certificate (NSC)

The National Savings Certificate is a Post Office savings scheme. You can invest in the NSC scheme in multiples of ₹100.

Further, the interest earned is reinvested for the first four years by default.

Senior Citizen Savings Scheme (SCSS)

The Senior Citizen Savings Scheme is a tax-saving scheme for senior citizens. It offers a regular income based on the lump sum amount you have deposited for the SCSS. It can be opened individually or jointly with your spouse.

Tax-Saving Fixed Deposit

A fixed deposit is a safe tax-saving option offered by banks and certain Non-Banking Financial Institutions (NBFCs). You can deposit a lump sum amount in a fixed deposit for a period up to 10 years and earn the interest amount periodically.

• Post Office Time Deposit

Post Office Time Deposit is another safe tax-saving option. You can choose between 1 and 5 years for the maturity benefit. The interest amount is payable annually but calculated quarterly.

Post Office Monthly Income Scheme

Post Office Monthly Income Scheme is a post office scheme that provides a monthly payout benefit. It is a common investment option for retired individuals.

Expenses That Qualify for Tax Deductions Under 80C Section of Income Tax Act

Tuition Fees Paid f​or Children

The tuition fees paid for your children towards school education, graduation or post-graduation qualify for an 80C deduction in Income Tax. The benefit is applicable for a maximum of up to two children.

Home Loan Principa​l Repayment

The amount you have paid for your home loan principal repayment is eligible for a tax benefit under 80C. The construction has to be complete and the property should not be transferred within 5 years of possession to qualify for the 80C section benefit. ​

Stamp Duty and Regis​​tra​​tion Charges

The amount you have spent on stamp duty and registration for the purchase of a new residential property qualifies for 80C deduction in the Income Tax Act. You should be the owner of the property, and the construction has to be completed for this benefit.

Subsections of Section 80C of the Income Tax Act 1961

How Much Can I Claim Under Section 80C of the Income Tax Act?

The maximum deduction you can claim under Section 80C, 80CCC and 80CCD(1) is ₹1.5 lakhs. The benefit under Section 80CCD(1b) is over and above the limit of ₹1.5 lakhs.

The maximum deduction under Section 80C of the Income Tax Act 1961 is as follows:

How to Calculate the Deduction Under Section 80C of the Income Tax Act?

Here is an example to help you understand the calculation. Ms Neena works in a private company. The details of her salary, savings and investments are detailed below.

If she had opted for the old tax regime, her taxable income would be as follows:

When Should I Invest to Claim Deductions Under Section 80C of the Income Tax Act?

While investing at any time during the financial year (1st April to 31st March)  allows you to qualify for the tax deduction under Section 80C, it is best to do it at the start of the year. This allows you to fully benefit from both the tax deduction and any applicable interest accrued.

By investing at the start of the year allows you also to make wise investment decisions to maximise the tax benefit under 80C.

How to Maximise Tax Savings Under 80C Section of the Income Tax Act?

• Diversify your Portfolio - Save and invest in different types of financial instruments to save a lot on your income tax liability while also balancing on risk and returns. For example, with a Reliance health insurance plan, you can claim tax deductions under 80D.
• Start Early - When you start investing early, you get the opportunity to diversify your portfolio and do better financial planning. Also, you can maximise your accrued interests.
• Choose Long-Term Investment Products - By choosing long-term financial instruments, you can leverage compounded growth and greater tax benefits.
• Compare the Different Savings and Investment Plans - Before choosing a savings plan or investment product, understand its features, benefits and maximum tax deduction and exemption limits to maximise your financial returns.
• Utilise Employer Benefits for NPS - The employer’s contribution for NPS does not fall under the total maximum limit of Section 80C, Section 80CCC and Section 80CCD(1). It can be claimed separately for salaried employees and both Government and private taxpayers.

Frequently Asked Questions About Section 80C of the Income Tax Act

1. How to claim deductions under Section 80C?

   You can claim deductions under 80C for the various eligible expenses, savings and investments at the time of filing your Income Tax Returns (ITR).

2. Can I claim 80C deductions in Income Tax for a life insurance plan from a private life insurance company?

   Yes, the life insurance premium paid for any authorised life insurance policy offered by a private insurer is eligible for deduction under the 80C Section.

3. What is covered under the 80C Section?

   Section 80C covers tax deductions applicable to various savings and investment plans, such as Equity-Linked Savings Schemes (ELSS), Life Insurance plans, Public Provident Funds, the National Pension Scheme, National Savings Certificates, etc., and expenses such as registration and stamp duty charges paid, tuition fees paid and home loan principal repayment.

4. Are donations eligible for 80C income tax exemption?

   Under Section 80C of the Income Tax Act, certain savings, investments and expenses qualify for a tax deduction. Therefore, donations are not eligible for the tax deduction benefit.

5. Does FD come under the 80C Section?

   Yes, a tax-saving fixed deposit qualifies for deductions in Income Tax up to the 80C limit of ₹1.5 lakhs. However, the lock-in period is 5 years. .

6. What is the difference between Section 80C and Section 80CCC of Income Tax?

   Section 80C deduction applies to various savings and investment plans and certain specified expenses. On the other hand, Section 80CCC deduction applies specifically to annuity or pension plans provided by life insurance providers.

7. Can I claim both 80C and 80CCC of Income Tax?

   Yes, you can claim deductions under both 80C and 80CCC for the eligible savings and investment plans. However, the total amount should not exceed ₹1.5 lakhs.

8. Is it necessary to upload proof of investments made to claim deductions under Section 80C while filing ITR?

   No, you are not required to submit proof of investments made to claim deductions under the 80C Section when filing your ITR. However, it is important to keep the documents safe in case they are needed for future reference or verification.

9. In which year can I claim the deduction under the 80C Section for stamp duty charges paid for my residential property?

   You can claim the deduction under Section 80C for stamp duty charges in the financial year in which the payment was made. For instance, If you paid the stamp duty charges on 28th April 2024, you can claim the applicable deduction in FY 2024-25.

10. Does my entire contribution made towards EPF schemes qualify for the tax deduction under Section 80C?

    Your entire contribution to the EPF scheme qualifies for a tax deduction of up to ₹1.5 lakhs under Section 80C.

11. Can I invest in more than one savings or investment plan and claim deductions of up to ₹1.5 lakhs for each plan?

    No, the tax benefit under Section 80C is fixed up to ₹1.5 lakhs across all eligible savings and investment plans. You can choose multiple policies for the investment, but the maximum deduction remains ₹1.5 lakhs in total.

12. Does a loan taken for the repair or renovation of my house qualify for a deduction under Section 80C?

    No, a loan taken for the repair or renovation of your house does not qualify for 80C deductions in Income Tax. It is only applicable to a repayment done for the principal amount in a home loan for the purchase or construction of a residential property.

13. Does the premium paid for term insurance qualify for a deduction under Section 80C?

    Yes, the premium paid for any type of life insurance plan, including term insurance, qualifies for the tax deduction under Section 80C of the Income Tax Act.

14. Can a company or private firm benefit from tax savings under Section 80C?

    No, the tax deduction under Section 80C of the Income Tax Act is applicable only to Individuals and HUFs.

15. If I have made an investment on 30th April 2024, for which financial year can I claim the deduction under Section 80C?

    If you have made an investment on 30th April 2024, you can claim the eligible deduction under Section 80C for the FY 2024-2025.

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Disclaimers:

*T&C Apply. For more details on risk factors, terms conditions, brochure, and exclusions, please read the policy wording and CIS carefully before concluding a sale.

Tax Benefits: Tax benefits are subject to conditions under Section 80D of the Act and amendments thereof. The tax laws are subject to amendments/changes from time to time. Please consult your tax advisor for details.