A detailed look at 80C deduction
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A detailed look at 80C deduction

 In this post, we will discuss a detailed look at section 80c Deduction. We will look at the following topics:

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. 

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 RiskReturnLock-in-period
(NPS) National Pension Scheme allows the individual to contribute up to Rs.1.5 Lakh.9% – 12%HighNoTill 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)ModerateNo5 years
(NSC) National Saving Certificate – minimum investment of Rs.1000 for 5 years.6.8%LowYes5 years
(SCSS) Senior Citizen Saving Scheme is available for voluntary retirement after age of 55 years7.4%LowYes5 years
(FD) Fixed Deposit offered by post office and bank.Maximum 8.4%LowYes5 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%LowYes15 years
(ELSS) Equity Linked Saving Scheme12% – 15% (Depends on market functions)HighLow3 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%LowYesOn completion of 23 years of the girl child
(EPF) Employee Provident Fund allows the tax exemption including interest.8.10%LowYesOn 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 –

  • It is applicable on the self-occupied property or home, where you have the option to claim up to Rs.2 lakh as a deduction on interest on the home loan.
  • Transfer of property within 5 years of possessions, then will be excluded from the income tax exemption.
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 (Table and explanation)

Under the section 80C deduction, there are some sub-section that is:

Sub-section for tax saving

Deductions 

Investments 

Section 80C1.5 LakhThere are certain investments under section 80C, such as – EPF, PPF,

  • Payment made for ULIP, ELSS,
  • Payment made for principal amount NSC, SSY, SCSS, home loan, and others.
Section 80CCC1.5 LakhContribution made towards notified Pension Fund under any Life Insurance Company.
Section 80CCD(1)1,5 LakhA Contribution made towards Atal Pension Yojana or National Pension Scheme. Applicable for the Central government and other individuals, both.
Section 80CCD(1B)50,000As 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 80CCF20,000Contribution towards long-term government bonds.
Section 80CCG25,000An 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? 

ParticularsDeduction 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? 

ParticularsWithout 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 Section 80C deduction

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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