Blog Post

Deduction 80C

Any individual or HUF can get a tax deduction maximum up to Rs. 1.5 lakh per financial year under Section 80C of the Income Tax Act, However, there is no minimum Limit

Here is a list of Best Tax Saving Investment and Payment option under Sec 80C of Income Tax Act, 1961

Investment Plans

Investments in EPF (Employee Provident Fund)

EPF is a retirement benefit scheme that is available to all salaried employees. A part of your salary is deducted monthly as your contribution towards EPF.

Eligibility Employee with basic salary more than Rs. 15,000 per month
Rate of Interest Interest rate on the EPF is 8.65% from Financial year 2018-19.
Investment Limit: Both employer and employee have to contribute a minimum 12% of Basic Pay and Dearness Allowance. if the contribution by your employer is more than 12 per cent of your salary, then the excess is taxable in your hands.
Tax Treatment Entire PF balance (including interest) is tax-free, if withdrawn after continuous service of 5 years.

However, the interest becomes taxable if EPF is withdrawn before completion of 5 years of service with an EPF registered company.

 

Investments in PPF (Public Provident Fund)

PPF is a scheme provided by the government and the investment in it is eligible for deduction under Section 80C. One can invest as low as Rs 500 and as high as Rs 1.5 lakh in a financial year.

Eligibility Any Resident Indian individuals, salaried and non-salaried individuals. However, HUF is not eligible to open a PPF account.
Liquidity PPF account have a tenure of 15 years, but can be further extended by 5 years.
Rate of Interest Current interest rate is 8.0% p.a. However, the rate is subject to revision every quarter.
Investment Limit Minimum investment is Rs. 500 and maximum investment limit is Rs 1.5 lakh.
Tax Treatment PPF Interest (compoundly) is exempt from tax. However you have to declare PPF returns in your income tax return each year.

 

Investments in Sukanya Samriddhi Yojana

Sukanya Samriddhi Scheme is one of the most popular schemes by the Government of India. In this scheme, you can open an account on behalf of your minor daughter till the age of 10.

This account can be opened for a maximum of two girls and in case of twins this facility will be extended to the third child as well.

The amount has to be deposited in this account for 15 years. The account will be mature after 21 years, which means that you don’t have to deposit anything between the 16th and 21st year.

Eligibility Parents/guardians can open an account in the name of a girl child till she attains the age of 10 years
Liquidity: Up to 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years
Rate of Interest Interest rate is 8.5%
Investment Limit The minimum annual deposit has been reduced to Rs 250 and maximum Rs.1,50,000 in a financial year.
Tax Treatment Investment and withdrawals & maturity amount are tax-free

 

Investments in NPS (National Pension System)

The NPS is a pension scheme that has been started by the Indian Government. Any contribution made by an individual to the National Pension System (NPS) is allowed as deduction under section 80CCD (1).

Note: The combined deduction under section 80C and 80CCD (1) cannot exceed Rs 1.5 lakh.

However, if one contributes an additional Rs 50,000 to NPS (over and above the combined limit of Rs 1.5 lakh) it can be claimed as deduction under section 80CCD(1B) i.e. total deduction that can be claimed for contributions to NPS is (Rs 1.5 lakh plus Rs 50,000) Rs. 2 lakh.

Eligibility Every Indian citizen between the age of 18 and 60
Liquidity Partial withdrawals are allowed after 15 years but under special conditions
Rate of Returns Returns rate on the NPS varies between 12% – 14%
Investment Limit No limit on maximum contribution
Tax Treatment Employer contributions are tax-free

 

Investments in Tax Saving FDs 

Any term deposit with a term of five years with a scheduled bank also eligible for deduction under section 80C on investments of up to Rs 1.5 lakh and the interest earned on it is taxable.

Eligibility Any Resident Indian individuals.
Rate of Interest FD interest rate varies from 5.5% to 7.75%
Investment Limit: Minimum investment limit is Rs 1,000.
Tax Treatment : Interest earned in taxable.

 

Investments in ELSS (Equity Linked Savings Scheme)

There are some mutual fund (MF) schemes specially created to offer you tax savings and these are called Equity Linked Savings Scheme (ELSS).

Eligibility Any Resident Indian individuals.
Liquidity ELSS funds have a lock-in period of 3 years.
Rate of Interest The return varies between 15% to 18%.
Investment Limit There is no limit on the amount that can be invested in any of these schemes i.e. As low as Rs. 500 per month (Allowed in SIPs also), but the tax benefit is available only for Rs 1.5 lakh.
Tax Treatment ELSS returns above Rs 1 lakh are subject to long term capital gains tax at a rate of 10%.

 

Investments in ULIP (Unit linked Insurance Plans)

ULIPs, An insurance product which covers life insurance and also provides the benefits of equity investments. Hence, these are a mix of insurance and investment.

A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. Investments of up to Rs 1.5 lakh in ULIPs are eligible for tax breaks under Section 80C

Eligibility An investor can buy ULIP for self or spouse or child
Liquidity Interest rate varies as it is market linked
Rate of Returns Return rate on the ULIP varies between 12% – 14%
Investment Limit No limit on maximum contribution
Tax Treatment Investment and withdrawals & maturity amount are tax-free

 

Payments eligible for tax saving deductions under Section 80C

Payments in LIC – Life Insurance Premium

  • Any amount paid towards life insurance premium for yourself, your spouse or your children is eligible for claiming deduction in Section 80C.
  • If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC), even insurance taken from private institutions (registered under Insurance Regulatory and Development Authority of India or IRDAI) are also eligible.
  • Apart from individuals if a Hindu Undivided Family (HUF) buys a life insurance for its member, then it can claim tax deduction on the premium paid.
  • The deduction is valid only if the premium is less than 10% of the sum assured.

 

Payments in Children’s tuition fees

  • The tuition fee paid for the education of two children is eligible for tax deduction under Section 80C of up to Rs 1.5 lakh.
  • The fee can be paid to any school, college, university or educational institute situated in India.
  • However, payment towards any development fees or donation or payment of similar nature would not be admissible as deduction.

Repayment of Home Loan Principle

  • Home loan repayment i.e. EMI can be deducted under Section 80C, if the income from the house property is assessable to tax under the head ‘income from house property
  • Home loan consists of two components – Principal and Interest. The principal qualifies for deduction under Section 80C.
  • Further, any payment made to development authorities like Delhi Development Authority (DDA) in order to purchase a house such as stamp duty, registration fees and transfer expenses also qualifies as deduction under section 80C.

How to get Benefit of Section 80C

For more information about section 80C, write a email to info@eadvisors.in or send a text message or whatsapp to +91 9910000833.

Leave a Comment

Your email address will not be published. Required fields are marked *

Phone: 9910000833
312, H3 Tower, Vardhman Plaza
Netaji Subhash Place, Delhi 110034
WhatsApp chat