Section 80C of the Income Tax Act allows you to deduct up to Rs 1.5 lakh when you invest in savings schemes. Read this blog to learn more about deductions under Section 80C of the Income Tax Act.
Latest News on Section 80C of Income Tax Act
Proposed changes to the tax regime and the 80C deduction limit.
The upcoming budget (FY 2024-25) is expected to include potential changes to the tax regime and the 80C deduction limit. The benefit of Section 80C is currently unavailable under the default (new) tax regime. This benefit is likely to be extended to the default tax regime, encouraging more taxpayers to choose it.
The government may also increase the 80C deduction limit under the previous tax regime from Rs 1.5 lakh to Rs 2 lakh. The 80°C limit was last changed in 2014. During the Modi 1.0 government, Finance Minister Arun Jaitley increased the limit from Rs 1 lakh to Rs 1.5 lakh.
Deduction under Section 80C of Income Tax
The Indian government introduced several deductions to encourage investments and savings among taxpayers in India, allowing taxpayers to benefit from tax breaks on taxable income. Deduction under Section 80C is an income tax act that allows eligible individuals to reduce their tax liability. Section 80C of the Income Tax Act allows a property buyer to apply for several redemptions, including exemptions from stamp duty and registration fees.
What is Section 80C of the Income Tax Act in India?
Section 80C of the income tax went into effect on April 1, 2006. It is one of India’s most advantageous sections of the Income Tax Act, allowing deductions for various investment strategies. Taxpayers who plan their investments wisely and invest in PPF, NSC, and other schemes can deduct up to Rs 1.5 lakh from their taxable income each year. Section 80C is only available to individual taxpayers and Hindu Undivided Families. Corporate bodies, partnership firms, and other businesses are not eligible for the tax deduction under Section 80C.
Eligibility of Section 80C
Individuals and Hindu Undivided Families (HUFs) both qualify for Section 80C deductions. This section of the Income Tax Act in India is applicable to both Indian residents and non-resident Indians.
Deductions for investments under Section 80C
Section 80C of the Income Tax Act of India provides several tax-saving investment options. Check out the following investment options that will help you plan your investment wisely and save tax under Section 80C:
| Investment Options | Lock-In Period (Minimum) | Rate of Interest (ROI) | Risk Rate |
| Sukanya Samriddhi Yojana | 21 years | 7.6% | Low |
| National Pension System (NPS) | Till the age of 60yrs | 8% to 10% | High |
| Senior Citizen Savings Scheme (SCSS) | 5 years | 7.40% | Low |
| National Savings Certificate | 5 years | 6.8% | Low |
| Equity Linked Savings Scheme (ELSS) | 3 years | Ranging between 12% and 15% | High |
| Fixed Deposit | 5 years | Upto 8.40% | Low |
| Public Provident Fund | 15 years | 7.1% | Low |
| Unit Linked Insurance Plan | 5 years | Ranging between 8% to 10% | Moderate |
Provident Fund
The Provident Fund (PF) will automatically deduct the amount from your monthly salary. In this investment scheme, both employees and employers contribute to the PF. The PF contribution made by the employee is eligible for deduction under Section 80C of the Income Tax Act.
Another benefit of the Provident Fund scheme is that employees can make voluntary contributions to their PF Account, also known as the Voluntary Provident Fund (VPF). The VPF amount is also eligible for tax deductions under Section 80C.
Public Provident Fund
The Public Provident Fund is another investment scheme that is eligible for a deduction under Section 80C of the Income Tax Act. This investment option is the most popular because it provides guaranteed returns. The Public Provident Fund has a maturity period of 15 years and is compounded annually. The minimum amount you can contribute to the PPF scheme is Rs 500, and it can go up to Rs 1.5 lakh.
Life Insurance Premium Payment
Section 80C of the Income Tax Act allows you to deduct the premium you pay for life insurance you purchased for your parents, spouse, or children.
You can also combine your life insurance policies to claim Section 80C deductions of up to Rs 1.5 lakh per year.
Equity Linked Savings Scheme (ELSS)
There are a few mutual fund investment schemes that are specifically designed to save taxes. One of the most popular schemes is the Equity Linked Savings Scheme (ELSS). This scheme allows individuals to claim up to Rs.1.5 lakh in tax deductions under Section 80C of the Income Tax Act.
National Savings Certificate
Another popular tax-saving scheme is the National Savings Certificate (NSC). A National Saving Certificate has a maturity period of five to ten years. The minimum amount you can invest in this certificate is Rs.100, with no maximum limit. So, any amount you invest in this scheme qualifies for a National Savings Certificate.
Sukanya Samriddhi Scheme
The Sukanya Samriddhi Scheme is primarily intended for female children, and you can open an account as soon as your daughter is born. This scheme allows individuals to invest a minimum of Rs 1,000 and a maximum of Rs 1.5 lakh. Any interest earned in this scheme is also eligible for tax deductions under Section 80C of the Income Tax Act.
Stamp Duty and Registration Charges for Property
When you purchase a property, you must pay stamp duty and registration fees, which are tax deductible under Section 80C.
NABARD Rural Bonds Investment Plan
The acronym NABARD stands for the National Bank for Agriculture and Rural Development. This investment scheme provides two types of bonds: Bhavishya Nirman Bonds and NABARD Rural Bonds. Only NABARD Rural Bonds are eligible for tax deductions under Section 80C of the Income Tax Act. The maximum deduction allowed is Rs 1.5 lakh.
Senior Citizen Savings Scheme (SCSS)
The Senior Citizen Saving Scheme, introduced by the government, is an investment scheme designed specifically for Indian senior citizens. The returns on this investment scheme are relatively high when compared to other schemes, and the Senior Citizen Savings scheme pays interest quarterly. Those over the age of 60 can invest in this scheme and receive tax benefits of up to Rs 1.5 lakh.
5-Year Postal Time Deposit Investment Plan
The post office deposit scheme is one of the most popular and long-standing investment schemes. This investment scheme is similar to the fixed deposit schemes offered by banks. The duration of the post office deposit scheme ranges from one to five years, and the interest earned on a five-year post office time deposit investment plan is tax deductible under Section 80C of the Income Tax Act of India.
Subsections of Section 80C of the Income Tax Act
After reviewing the investment plans eligible for deductions under Section 80 of the Income Tax Act, it is time to look at the numerous sub-categories and investments that are eligible for deductions:
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| Sub-Section | Deduction | Limit of Deduction |
| Section 80CCC | Amounts deposited in LIC or any other insurer’s annuity plan for a pension from a fund mentioned in Section 10 (23AAB) are eligible for deduction. | – |
| Section 80TTA (1) | An interest income from the savings account | Up to Rs.10,000 |
| Section 80 TTB | Exemption from interest received from banks or post offices, among other things. Only senior citizens are eligible. | Up to Rs.50,000 |
| Section 80CCD (1) | An employee’s contribution to the National Pension Scheme (NPS) account (up to Rs. 1 lakh) | – |
| Section 80CCD (2) | Employer Contribution to the National Pension Scheme Account | Up to 10% of the salary |
| Section 80CCD (1B) | Additional contribution to the National Pension Scheme account. | Rs 50,000 |
| Section 80E | Interest on education loan | Interest paid for 8 years |
| Section 80EE | Interest on home loan (applicable to first-time homeowners) | Rs 50,000 |
| Section 80CCG | Rajiv Gandhi Equity Scheme | Rs.25,000 or 50% of the amount invested in equity shares, whichever is lower. |
| Section 80D | Medical Insurance | Rs.25,000 for self, children, and spouse; Rs.50,000 for parents over the age of 60. |
| Section 80DD | Medical treatment for handicapped dependents | If the disability is more than 40% but less than 80%, you can claim up to Rs.75,000. If it exceeds 80%, Rs.1.25 lakh may be claimed. |
| Section 80U | Self-suffering from disability | Rs.75,000 in cases of mental/physical disability (including blindness), and Rs.1.25 lakh for people with severe disabilities. |
| Section 80G | Contributions to organizations for social causes | Donations of up to Rs.2,000 made using any payment mode except cash |
| Section 80GGB | Contribution to political parties by companies | The amount contributed |
| Section 80GGC | Contribution to political parties by individuals | The amount contributed |
What’s the difference between Sections 80C and 80EE?
Section 80C of the Income Tax Act is one of the most popular among taxpayers because it deals with a variety of tax-exempt investments. Section 80C of the Income Tax Act allows a taxpayer to deduct up to Rs.1.5 lakh annually from their total taxable income.
Section 80EE of the Income Tax Act allows taxpayers to receive income tax benefits on the interest portion of residential real estate loans obtained from any financial institution. This section allows a maximum deduction of Rs 50,000.
When is the best time to invest so that you can claim deductions under Section 80C of the Income Tax Act?
Industry experts recommend beginning tax-saving investments at the start of the fiscal year to avoid a loss of interest for the entire year. So, start your tax-saving investments on time to avoid any tax losses. Not only will you make an informed decision by starting your tax-saving investment on time, but you will also earn interest for the entire fiscal year.
Summary: Section 80C of the Income Tax Act.
If you are planning or are currently repaying a loan for a home or your children’s tuition fees, or if you invest in mutual funds/UTI that are eligible for deduction under Section 80C, it is critical that you understand the various types of deductions under Section 80C of the Income Tax Act, as well as all of the other details involved. Section 80C allows you to claim deductions under the Income Tax Act, but you must understand how to save tax.
