SECTION 80C: “What are the tax-saving opportunities for individual
taxpayers?”
Section 80C of the Income Tax Act in India provides individual taxpayers various
opportunities to save on taxes by allowing deductions from their gross total
income. Here are some common investments and expenses that qualify for
deduction under Section 80C:
1. Employee Provident Fund (EPF):
> Contributions made by both the employee and employer towards the EPF
are eligible for deduction.
> Interest on an employee’s contribution to an EPF account above Rs 2.5 lakh
during the financial year is taxable in the hands of the employee.
> From FY 2020-21 onwards, the employer’s contribution to the EPF account
shall become taxable if the contribution to EPF exceeds Rs 7.5 lakh in a
financial year.
2. Public Provident Fund (PPF):
> Contributions made to a PPF account opened in the taxpayer's name, their
spouse, or their child are eligible for deduction.
> PPF allows a minimum investment of Rs 500 and a maximum of Rs 1.5 lakh
for each financial year. Investments can be made in a lump sum or a maximum
of 12 installments.
> Deposits into a PPF account have to be made at least once every year for 15
years.
> The current PPF interest rate is 7.1% p.a.
3. Life Insurance Premiums:
> Premiums paid towards life insurance policies issued by an insurer
approved by the Insurance Regulatory and Development Authority of India
(IRDAI) are eligible for deduction.
> Premiums paid during the financial year are eligible for deduction.
> Having a premium or aggregate of premium exceeding Rs 5 lakh in a year,
will be taxable. This means that any amount you pay above Rs. 5 lakh in
premiums won't be eligible for a tax deduction.
4. Equity Linked Savings Schemes (ELSS):
> Investments made in ELSS mutual funds are eligible for deduction.
> ELSS investments are eligible for deduction in the financial year in which
they are made.
> As per the Income tax rules, investments in the Equity Linked Savings
Scheme are eligible for tax deduction under Section 80C. You can claim a
deduction of up to Rs 1.5 lakh for investment in the Equity Linked Savings
Scheme.
> As it comes with a lock-in period of 3 years, you can not redeem it before 3
years. Hence, when you redeem your ELSS funds, you must pay long-term
capital gains tax at 10%. But, if the gain is within the limit of Rs 1 lakh, then
there is no tax.
5. Sukanya Samriddhi Account:
> Investments made in the Sukanya Samriddhi Yojana (SSY) scheme are
eligible for deductions under Section 80C, with a maximum cap of Rs 1.5 lakhs,
the interest accrued and the proceeds received upon maturity are exempted.
> Contributions made to a Sukanya Samriddhi Account opened for the benefit
of a girl child below 10 years are eligible for deduction and maturity duration is
21 years.
> Minimum value is Rs.250 and Maximum value is Rs.1.5 lakh per annum.
> Current yearly interest rate is 8.2% per annum.
6. National Savings Certificate (NSC):
> Investments made in NSC are eligible for deduction.
> NSC is a small savings scheme run by the post office. It has a lock-in period
of 5 years. The minimum amount that can be deposited in the scheme is Rs
1,000 and in multiples of Rs 100, there is no maximum limit.
>At a one-time investment, the scheme offers an interest rate of 7.7 %.
>Deposits in the scheme provide income tax benefits of up to Rs 1.50 lakh
under Section 80C of the Income Tax Act, 1961.
7. 5-Year Fixed Deposit (FD):
> Investments made in 5-year tax-saving fixed deposits offered by banks and
post offices are eligible for deduction.
> The minimum investment that can be made in a tax-saving fixed deposit is
Rs 100, whereas the maximum limit is Rs 1.5 lakh per financial year.
8. Senior Citizens Savings Scheme (SCSS):
> Investments made by senior citizens in SCSS are eligible for deduction.
> The current interest rate is 8.2% per annum.
> Minimum Investment: Rs 1,000.
& Maximum Investment: Recently increased to Rs 30,00,000.
>Tax Benefits: Available under Section 80C, up to Rs. 1.5 lakh
9. Tuition Fees:
> Tuition fees paid for the education of up to two children are eligible for
deduction.
> Deduction from taxable income under Section 80C is available to individual
taxpayers up to a maximum amount of Rs1.5 lakh for education expenses incurred for
one’s children.
> Each parent can claim the deduction for the tuition fees paid for up to two
children each, thereby covering a maximum of four children in a family.
10. Principal Repayment of Home Loan:
> Repayment of the principal amount of a home loan for the purchase or
construction of a residential house property is eligible for deduction.
> The maximum deduction for interest paid on self-occupied house property
is Rs 2 lakh.
>In case the construction exceeds the stipulated time, i.e. 5 years, you can
claim deductions on the interest of a home loan only up to Rs 30,000 for the
financial year.
11. Pension Funds:
> Contributions made to notified pension funds such as the National Pension
System (NPS) are eligible for deduction.
> Investment Amount: You get a complete deduction of up to Rs 1.5 lakh.
> It can be defined as an investment product that provides income after
retirement. Under Section 80CCC of the Income Tax Act, 1961, a taxpayer can
claim tax deductions against the monetary contributions made towards
specified pension funds that have been offered by an approved insurance
company.
These deductions are subject to the overall limit of ₹1.5 lakh per financial
year under Section 80C of the Income Tax Act, as applicable for the respective
financial years. Taxpayers should ensure they comply with the eligibility
criteria and keep documentation of their investments and expenses for tax
filing purposes.
By - Ravinder Kumar & Company
