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Under Section 80C :-
As
per the Income Tax Act and further amended Income Tax Department's time
to time Notification and amended Section Under Section 80C is given
below:-
The total limit under this section is Rs 1.5 lakh. Included under this heading are many small savings schemes like NSC, PPF and other pension plans. Payment of life insurance premiums and Sukanya Samriddhi Account are also eligible for deduction under Section 80C
Most of the Income Tax payee try to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section in toto so that one can make best use of the options available for exemption under
income tax Act. One important point to note here is that one can not
only save tax by undertaking the specified investments, but some
expenditure which you normally incur can also give you the tax
exemptions.
Besides these investments, the payments towards the principal amount of your home loan are
also eligible for an income deduction. Education expense of children is
increasing by the day. Under this section, there is provision that
makes payments towards the education fees for children eligible for an income deduction
Sec 80C of the Income Tax Act
is the section that deals with these tax breaks. It states that
qualifying investments, up to a maximum of Rs. 1.5 Lakh, are deductible
from your income. This means that your income gets reduced by this
investment amount (up to Rs. 1.5 Lakh), and you end up paying no tax on
it at all!
80 C Deduction at a glance as per Finance Budget 2015
Provident Fund (PF) & Voluntary Provident Fund (VPF)and (PF) is automatically deducted
from your salary. Both you and your employer contribute to it. While
employer’s contribution is exempt from tax, your contribution (i.e.,
employee’s contribution) is counted towards section 80C investments. You
also have the option to contribute additional amounts through voluntary
contributions (VPF). Current rate of interest is 8.5% per annum (p.a.)
and is tax-free.
Public Provident Fund (PPF): Maximum Limit raised up to Rs. 1.5 Lakh
Life Insurance Premiums: Any
amount that you pay towards life insurance premium for yourself, your
spouse or your children can also be included in Section 80C deduction.
Please note that life insurance premium paid by you for your parents
(father / mother / both) or your in-laws is not eligible for deduction
under 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 bought from private
players can be considered here.
Equity Linked Savings Scheme (ELSS): There
are some mutual fund (MF) schemes specially created for offering you
tax savings, and these are called Equity Linked Savings Scheme, or ELSS.
The investments that you make in ELSS are eligible for deduction under
Sec 80C.
Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components – Principal and Interest.The principal component of
the EMI qualifies for deduction under Sec 80C. Even the interest
component can save you significant income tax – but that would be under
Section 24 of the Income Tax Act. Please read “Income Tax (IT) Benefits
of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.
Stamp Duty and Registration Charges for a home: The
amount you pay as stamp duty when you buy a house, and the amount you
pay for the registration of the documents of the house can be claimed as
deduction under section 80C in the year of purchase of the house.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six years. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs 1601 after six years. The interest accrued every year is liable to tax (i.e., to be included in your taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C deduction.
Pension Funds – Section 80CCC: This
section – Sec 80CCC – stipulates that an investment in pension funds is
eligible for deduction from your income. Section 80CCC investment limit
is clubbed with the limit of Section 80C – it maeans that the total
deduction available for 80CCC and 80C is Rs. 1.5 Lakh.This also means
that yourinvestment in pension funds upto Rs. 1.5 Lakh can be claimed as
deduction u/s 80CCC. However, as mentioned earlier, the total deduction
u/s 80C and 80CCC can not exceed Rs. 1.5 Lakh.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
Senior Citizen Savings Scheme 2004 (SCSS): A
recent addition to section 80C list, Senior Citizen Savings Scheme
(SCSS) is the most lucrative scheme among all the small savings schemes
but is meant only for senior citizens. Current rate of interest is 9%
per annum payable quarterly. Please note that the interest is payable
quarterly instead of compounded quarterly. Thus, unclaimed interest on
these deposits won’t earn any further interest. Interest income is
chargeable to tax.
5-Yr post office time deposit (POTD) scheme: POTDs
are similar to bank fixed deposits. Although available for varying time
duration like one year, two year, three year and five year, only 5-Yr
post-office time deposit (POTD) – which currently offers 7.5 per cent
rate of interest –qualifies for tax saving under section 80C. Effective
rate works out to be 7.71% per annum (p.a.) as the rate of interest is
compounded quarterly but paid annually. The Interest is entirely
taxable.
Sukanya Samriddhi Account :- Newly introduce in the Budget 2015 for Minor Girl Child below 10 Years.
Children Education Fees :-
children’s education expense (for which you need receipts), that can be
claimed as deductions under Sec 80C max Rs. 1,00,000/- p.a.
