How to Avail Tax Deductions under Section 80C?

Written by : Knowledge Centre Team

2024-08-02

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Taxes can be complicated. That is exactly why your investment and saving strategy should account for how the returns will be taxed upon maturity/exit. Under the Income Tax Act, 1961, your various investments are eligible for tax deduction under 80C. In order to build a substantial corpus of funds as you proceed on your professional and consequently financial journey is possible only if you are very watchful of where your money goes. In this article, we show you how you can benefit from tax deduction under 80C of the Income Tax Act, 1961.

The Larger Picture

Under the Income Tax Act of 1961, Section 80C states deduction provisions on various investment options that can generate returns for the taxpayer and are also eligible to claim deductions while calculating the total taxable income of the taxpayer. Section 80C allows individuals and HUFs to claim tax deduction of up to Rs. 1,50,000 for certain tax-saving investments and payments.

Depending on the slab that you fall under, you can save a substantial amount of money by making use of provisions for tax deduction through investment in the instruments specified under Section 80C. Tax deductions are a sure-shot way for individuals to reduce their tax burden. When it comes to saving tax, most individuals prefer to claim tax deduction by the saving in investments instruments specified under Section 80C, among other options.

Investments eligible for deduction under Section 80C
Investment options	Minimum lock-in period
Equity Linked Saving Scheme	3 years
National Pension Scheme	Till Retirement (60 years)
Senior Citizens Savings Scheme	5 years
Public Provident Fund	15 years
National Savings Certificate	5 years
Unit-Linked Insurance Plan	5 years
Fixed deposit	5 years
Sukanya Samriddhi Yojana	8 years

So how is it done? Before getting there, let us look at how some of the components of expenditure and investments are treated under Section 80C.

Life Insurance

If you are paying life insurance premiums that cover you, your spouse or your kids, then those payments will be eligible for tax deduction under section 80C. However, there is one condition: if the policy was issued after Mar 31, 2012, then the amount paid towards premiums should be less than 10% of the amount received on maturity. For policies issued before this date, the payments made toward premiums are eligible for tax deduction if their value is less than 20% of the amount received on maturity.

On property: home loan principal repayment, stamp duty and registration charges

If you are repaying the principal amount on your home loan for a property that is not under construction, then that amount of money will be eligible for deduction under section 80C. However, if the property is transferred within five years from the date of possession, then the taxpayer will not be eligible for these benefits.

In fact, if the property is transferred within five years, then the benefits claimed on the amount in previous years becomes taxable in the year of transfer. Another point to note: the amount paid towards stamp duty and registration of the property at the time of purchase will also be eligible for tax deduction under section 80C of the Income Tax Act.

Public Provident Fund, ELSS and Bank Deposits

Contributions of upto Rs. 1.5 lacs made towards Public Provident Fund are eligible for income tax deductions under Section 80C. However, you should know that these funds have a lock-in period of 15 years, so that you can figure that into your saving strategy. Same goes for Equity Linked Savings Scheme - however, their mandatory lock-in period is 3 years. In case of Bank FDs, the principal amount is eligible for tax deductions under section 80C while the interest is not. This condition holds only for FDs which mature after 5 years.

For Senior Citizens

Investments made under the Senior Citizen Savings Scheme are also eligible for tax deduction under section 80C. While this scheme is applicable for citizens over 60 years of age, those who have opted for Voluntary Retirement Scheme can opt for it at 55. Lock-in period under these schemes is 5 years.

Sub-Sections under Section 80C of the Income Tax Act

Section 80C is applicable for individual taxpayers and Hindu Undivided Families (HUFs). Under the Income Tax Act of India, this section is further divided into a few sub-sections –

Sub-sections	Tax Deduction	Eligible Investments
Section 80CCC	Rs. 1,50,000	Payment made towards Pension Plans and Mutual Funds
Section 80CCD(1)	Rs. 1,50,000	Payment made towards certain Government schemes such as National Pension Scheme, Atal Pension Yojana, among others
Section 80CCD(1B)	Rs. 50,000	Investments of up to Rs.50,000 in National Pension System (NPS) is considered for exemption under this section.
Section 80CCF	Rs. 20,000	Investments made toward long-term government-approved infrastructure bonds.
Section 80CCG	Rs. 25,000	Investments made under a government-approved equity savings scheme.

How to claim these deductions?

The ITR-1 contains a detailed break-up column where deductions applicable under various sections of the Income Tax Act can be listed. These deductions are claimed in Part C of the third tab of ‘Computation of Income and Tax’. If you are filing ITR-1 online, then some of these details get auto populated from the details provided in Form 24Q, which is filled by your employer. Taxes can complicate your saving and investment strategy. If you are looking for investment options that can help you save tax, the Invest 4G Plan from Canara HSBC Life Insurance can help you save taxes on your investment. It is insurance and investment oriented policy that provides you a risk cover along with solid returns on your investment. Apply for it today and start saving taxes on your investments.

Frequently Asked Questions:

What is the maximum tax deduction limit under 80C?
Under section 80C of the Income Tax Act, you can claim a maximum deduction of up to ₹ 1.5 Lakh from your total income.
Can I invest in more than one instrument to claim Rs.1.5 Lakh deduction for each investment?
No, as per Section 80C taxpayers can avail a maximum tax deduction of Rs.1,50,000, which shall include all the investments made in tax-saving instruments.
Can I claim a deduction on the premiums paid towards a Life Insurance from a private insurer?
Yes, life insurance policies bought from any IRDAI recognized insurer, be it public and private, is eligible for deduction under Section 80C.
Are donations eligible for tax deduction under Section 80C?
No, donations made to specific institutions are not eligible for tax deduction under this section of the Income Tax Act instead they are eligible under Section 80G.
Can I claim deductions under Section 80C while filing my Income Tax Return?
Yes, you can claim deduction under Section 80C while filing your income Tax return.

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