In this post, we will discuss a detailed look at section 80c Deduction. We will look at the following topics:
- What is Section 80C?
- Deduction on Investments u/s 80C of the Income Tax Act
- Sub sections of 80C deduction list (table and explanation)
- How to Calculate Deduction Limit Under Section 80C of Income Tax Act?
- FAQs on deduction under Section 80C
What is Section 80C?
As per the Income Tax Act, 1961, section 80C is the section that shows the multiple investments and expenses that are deducted and exempted from your Gross total income from the income tax. And an individual or Hindu undivided Family (HUF) are allowed to invest in stipulated tax-saving schemes that can claim a deduction up to Rs.1.5L.
Latest Update
- The National Saving Scheme (NSC) interest rate has been increased for the quarter of January to March 2023, from 6.8% to 7%.
- Senior Citizen Saving Scheme (SCSS) interest rate has been increased from 7.4% to 8% for the quarter of January to March 2023.
Deduction on Investments u/s 80C of the Income Tax Act
There are the following deductions on investment under section 80C of the Income Tax –
Investments |
Interest |
Risk |
Return |
Lock-in-period |
| (NPS) National Pension Scheme allows the individual to contribute up to Rs.1.5 Lakh. | 9% – 12% | High | No | Till the age of retirement (60) |
| (ULIP) Unit Life Insurance Plan and Life Insurance is linked to the market and is paid for the life insurance. | 8% -10% (Depends on market functions) | Moderate | No | 5 years |
| (NSC) National Saving Certificate – minimum investment of Rs.1000 for 5 years. | 6.8% | Low | Yes | 5 years |
| (SCSS) Senior Citizen Saving Scheme is available for voluntary retirement after age of 55 years | 7.4% | Low | Yes | 5 years |
| (FD) Fixed Deposit offered by post office and bank. | Maximum 8.4% | Low | Yes | 5 years |
| (PPF) Public Provident Fund allows an investor to claim the deposit amount as an exemption. And it is also applicable to voluntary contributions. | 7.10% | Low | Yes | 15 years |
| (ELSS) Equity Linked Saving Scheme | 12% – 15% (Depends on market functions) | High | Low | 3 years |
| (SSY) Sukanya Samaridhi Yojana meets the financial requirements for a girl’s education and marriage. But, a girl should not be older than 10 years. | 7.6% | Low | Yes | On completion of 23 years of the girl child |
| (EPF) Employee Provident Fund allows the tax exemption including interest. | 8.10% | Low | Yes | On Service completion |
| Stamp duty and Registration charges are considered two largest expenses for taking ownership of the property. And it is paid towards house procurements. Under this, exemption can be claimed this year on duties paid. | Same year | |||
HOME LOAN EMI is eligible for deduction under section 80C. But, there are certain conditions –
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| Children’s TUITION FEE is deductible under section 80C of income tax per two children’s education Maximum of Rs.1.5 lakh. |
Sub sections of 80C deduction list (Table and explanation)
Under the section 80C deduction, there are some sub-section that is:
Sub-section for tax saving |
Deductions |
Investments |
| Section 80C | 1.5 Lakh | There are certain investments under section 80C, such as – EPF, PPF,
|
| Section 80CCC | 1.5 Lakh | Contribution made towards notified Pension Fund under any Life Insurance Company. |
| Section 80CCD(1) | 1,5 Lakh | A Contribution made towards Atal Pension Yojana or National Pension Scheme. Applicable for the Central government and other individuals, both. |
| Section 80CCD(1B) | 50,000 | As an exemption, additional investment to NPS is up to Rs.50,000. |
| Section 80CCD(2) | – | Employer contribution from the salary of employees towards NPS based on their Basic + DA. |
| Section 80CCF | 20,000 | Contribution towards long-term government bonds. |
| Section 80CCG | 25,000 | An investment towards RGESS. |
How to Calculate Deduction Limit Under Section 80C of Income Tax Act?
Under section 80C deduction of the Income Tax Act, an individual can decrease their tax liability based on their investment under certain schemes. Although, your tax amount will be calculated and can save based on the tax slab rates and given percentage.
So, below you will see how to calculate a deduction under section 80C of the income tax.
Illustration 1
Ms Sanidhya has a total net income of Rs.20 Lakh, and she falls under the highest income tax slab rate of 30%. With that, she invested Rs 1,50,000 under section 80C. What will be the total taxable income of Ms Sanidhya?
Particulars |
Deduction under section 80C (Amount) |
Total amount |
| Net income
(-) 80C deduction Taxable income Up to Rs.2,50,000 Rs.2,50,000 to 5,00,000 – 5% (2,50,000*5%) Rs.5,00,000 to 10,00,000 – 20% (5,00,000*20% = 1,00,000) Rs.10,00,000 – 18,50,000 – 30% (8,50,000*30%=2,55,000) (+) Cess – 4% (3,67,500*4%=14,700) Total Tax |
20,00,000
1,50,000 Nil 12,500 1,00,000 2,55,000 14,700
3,82,200 |
18,50,000
Tax = 3,67,500 |
Illustration 2
In the case without investing under section 80C of the income tax. Then, What will be the total taxable income of Ms Sanidhya?
Particulars |
Without deduction under section 80C (Amount) |
Total amount |
| Net income
(-) 80C deduction Taxable income Up to Rs.2,50,000 Rs.2,50,000 to 5,00,000 – 5% (2,50,000*5%) Rs.5,00,000 to 10,00,000 – 20% (5,00,000*20% = 1,00,000) Rs.10,00,000 – 20,00,000 – 30% (10,00,000*30%=3,00,000) (+) Cess – 4% (4,12,500*4%=14,700) Total Tax |
20,00,000
0.00 Nil 12,500 1,00,000 3,00,000 16,500
4,29,000 |
20,00,000
Tax = 4,12,500 |
FAQs on deduction under Section 80C
What are the best tax-saving schemes in India under section 80C of Income Tax Act?
There are the following tax-saving schemes in India that allow deduction and exemption under section 80C of the income tax act. However, as an individual or HUF, you can claim a deduction of up to 1.5 Lakh from your Gross total income.
- National Saving Certificate
- Sukanya Samaridhi Yojana
- Equity Linked Saving Scheme
- Fixed Deposit
- Public Provident Fund
- Interest on Home loan repayment
- Senior Citizen Saving Scheme
- Home Loan Repayment
- Tution fee on children education
Who can claim for the Senior Citizen Saving Scheme under section 80C deduction
An individual employee who crossed the age of 55 years or reached 60 years or else those who have taken the Voluntary Retirement Scheme can opt for SCSS after the age of 55 years.
Is deduction applicable on the interest earned on all eligible investments?
No, all interest earned are not eligible under section 80C of the income tax act. So, you can go through the above given all instruments. But, in the case of the National Saving Certificate, if your interest is reinvested, then it will be eligible for deduction under section 80C.
Is the taxpayer allowed to claim 80C deduction during the filing of income tax return?
Yes, the deduction can be claimed during IT return filing.
Can I claim under section 80C deduction on the life insurance premium paid to the private aggregator?
Yes, you can claim under section 80C on life insurance premiums paid for any of both the companies’ private and public sectors, which are reorganised by the Insurance Regulatory and Development Authority of India.
This is the end of our discussion on section 80C deductions. Let’s know your other questions and opinions on this topic. Mention below the comment box. Also, you can go through our related posts.
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