The Section 80C of Income Tax Act is the most popular act in India. It is the most popular to the all salaried Individuals. So today let us understand the Section 80C of Income tax act in very detail. So that it can be helpful to you for your Financial planning and Tax Deduction at the end of the financial year.
Qualified Investments for Section 80C Tax Deduction Rs. 1.5 Lakh excluding the 50 thousand U/s 80CCD(1B), As New NPS Scheme 2016.
There are several financial products available in the market which is approved for the Section 80C. Here is a List
1) Provident Fund (PF) & Voluntary Provident Fund -
Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer’s contribution.
While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free .
2) Public Provident Fund (PPF) -
The PPF is the most favorite instrument of Indians. You can Invest Maximum of Rs.1.5 Lakh. This Rs.1.5 Lakh invested in PPF is Tax deductible. because PPF comes under Section 80C.
3) National Savings Certificate (NSC) -
NSC is also eligible for Section 80C tax deduction. These are the 6 year lock-in period instruments which give you 8% annual return.
4) Equity Linked Saving Schemes (ELSS) -
Now, these are my favorite. ELSS also known as Equity linked Savings schemes are basically the Equity mutual funds having a 3-year lock in period. You can invest in it and enjoy the benefits of investing in equity as well as the tax deduction under 80C. There are many ELSS available in the market from every fund house.
5) Life Insurance Premiums -
Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction.
If you are paying the premium for more than one insurance policy, all the premiums can be included.
6) Home Loan Principal Repayment -
Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C.
7) Stamp Duty and Registration Charges for 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 a deduction under section 80C.
However, this can be done only in the year in the year of purchase of the house.
8) Five Year Bank Fixed Deposits -
Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are also entitled to section 80C deduction.
9) Child’s Education Expenses -
Well, yes your children’s education expenses are also tax deductible under 80C.
Almost every kind of Insurance Product is Tax Deductible under 80C such as Health Insurance, Accidental Insurance, ULIPs, Child Insurance and Future Plans, Pension Plans, Retirement Plans and every other thing related to the Insurance.
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 means that the total deduction available for 80CCC and 80C is Rs. 1.5 Lakh.
This also means that your investment in pension funds up to Rs. 1 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 Lakh.
12) Section 80CCD(IB)- You can get maximum Rs. 50,000/- benefits by this section as new National Pension Scheme 2016 ,additional deduction U/s 80C1.5 Lakh.
13) Post Office Time Deposit Account -
This is the fixed / term deposits offered by the Department of Posts (Government of India) through the post offices in India.
If the time deposit is opened for a duration of 5 years or more, the amount invested is qualified for deduction under section 80C.
