Section 80C

Section 80C of the income tax act came into effect from 1st April 2016 and is applicable on individuals and HUF’s only. Under section 80C of the income tax act, any individual or HUF is eligible for tax deduction up to Rs 1.5 Lakh per annum. You can also claim deduction under subsections of 80C – 80CC, 80CCD, 80CCF and 80CCG. You can claim these deductions at the time of filing income tax return. Individuals must file income tax return by 31st July every year.

Section 80 helps in reducing your tax liability by exempting your tax when you invest your money in certain investment schemes such as PPF, NSC etc. You can also take tax exemptions in certain expenditures.

Section 80C

Maximum Deduction under Section 80C

The maximum income tax deduction limit under Section 80C for tax saving is Rs 1.5 Lakh. There is no minimum limit.

Who cannot claim deduction under Section 80C?

This deduction cannot be claimed by –

  1. Partnership firms
  2. Companies
  3. Other corporate bodies.

Schemes under Section 80C

Schemes under which you can claim rebate under section 80C of the income tax act are as follows –

  1. Investment schemes include ELSS mutual funds, unit linked insurance policies (ULIPS)
  2. Insurance schemes which include term insurance, endowment insurance
  3. Fixed income schemes which include National saving certificate (NSC), Sukanya Samriddhi Yojana, Senior citizens saving scheme (SCSS)
  4. Recruitment saving schemes which include public provident fund (PPF), employees provident fund, National pension system (NPS)
  5. Miscellaneous include home loan repayment, Tuition fee payment

In order to give broader view about the investment schemes and the exemption limit specified under section 80C of the income tax act, see the table below –

Section 80C Instruments & Their Taxation Rules

S.no Instrument Tax rules
1 Public provident fund (PPF) Completely exempt under section 80C of the income tax act
2 Employee provident fund (EPF)/Voluntary provident fund(VPF) Completely exempt under section 80C of the income tax act unless withdrawn before completing 5 years of service
3 Life insurance premium payment Premium paid annually by the insurer is tax deductible
4 National pension scheme Amount deposited annually is tax deductible/pension payment taxable as per slab rate
5 Equity linked savings scheme Amount of principal invested is tax deductible. In case annual gain exceeds Rs 1 Lakh, returns are taxable
6 Sukanya Samriddhi Yojana Investments are tax deductible
7 Senior Citizens Savings Scheme Investments are tax deductible/returns taxed as per slab rate of senior citizens
8 National savings certificate Investment of Principal and reinvestment of interest are tax deductible/final year’s interest is taxable.
9 Tax saver fixed deposits (Bank/post office) Investments are tax deductible/interest earned is taxable at the time of payout
10 Unit linked insurance plan (UPLIP’s) Investments are tax deductible/in case maturity value exceeds 10 times the annual premium amount, returns are taxable.

Subsections of Section 80C

Section 80C contains certain sub-sections under which tax exemption can be claimed are as follows –

Section 80CCC

Tax deduction can be claimed under this section when the payment is made towards pension plans or annuity plans of insurance companies. The maximum deduction limit is Rs 1,50,000.

Section 80CCD

You can also claim deduction of Rs 1,50,000 in case any contribution is made by you towards the pension scheme of Central government. This deduction is only applicable on individuals and not HUF’s.

Section 80CCF

Section 80CCF of the income tax act defines investments made by the individuals towards long term government approved infrastructure bonds. Every eligible taxpayer can claim deduction up to Rs 20,000 under section 80CCF of the income tax act.

Section 80CCG

Section 80CCG defines investments made towards government approved equity saving scheme. The maximum deduction you can claim under this section is Rs 25,000.

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