Deduction Under Section-80C

80C deduction are the most popular Income Tax Deductions. The 80C deduction limit for AY 2018-19, 2019-20 and 2020-21 is ? 1,50,000. The various options of investments and payments that qualify for deduction under this section are:

Investments in Tax Saving FDs

Tax-saving FDs are like regular fixed deposits but come with a lock-in period of 5 years and tax break under Section 80C on investments of up to Rs 1.5 lakh.

Eligibility : Can be opened by Resident Indian individuals.

Liquidity: Fixed Deposits have lock-in period of 5 years.

Rate of Interest : FD interest rate across different banks ranges from 5.5% to 7.75%

Investment Limit: Minimum investment limit is Rs 1000.

Tax Treatment : Interest earned in taxable.

Investments in PPF (Public Provident Fund)

PPF are long term investments backed by government of India. Deposits made in a PPF account are eligible for tax deductions under Section 80C.

Eligibility : Can be opened by Resident Indian individuals, salaried and non-salaried individuals. A HUF cannot open a PPF account.

Liquidity: PPF account have lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years.

Rate of Interest : Current interest rate is 8.0% p.a.

Investment Limit: Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively.

Tax Treatment : Interest earned is tax-free.

Investments in EPF (Employee Provident Fund)

EPF is a retirement benefit scheme that is available to all salaried employees. This amounts to 12% of basic salary + DA, that is deducted by an employer and deposited in the EPF or other recognised provident funds.

Eligibility : Can be opened by employee with basic salary greater than 15,000 /month

Liquidity: Can withdraw PF balance after 2 months of leaving job and does not take up employment within two months with an employer covered by PF Act

Rate of Interest : Interest rate on the EPF is 8.55%.

Investment Limit: Both employer and employee have to contribute a minimum 12% of Basic Pay + D.A.

Tax Treatment :Entire PF balance (including interest) is tax-free, if withdrawn after continuous service of 5 years

Investments in NPS (National Pension System)

The NPS is a pension scheme that has been started by the Indian Government to allow the unorganised sector and working professionals to have a pension after retirement. Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C

Eligibility : Can be opened by 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 ULIP (Unit linked Insurance Plans)

ULIPs 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

Investments in Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana :Scheme is one of the most popular schemes by the Government of India. The scheme is aimed at the betterment of girl child in the country

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 on Sukanya Samriddhi Yojana is 8.5%

Investment Limit: Investment is limited to maximum Rs.1,50,000 in a financial year

Tax Treatment : Investment and withdrawals & maturity amount are tax-free

 Senior Citizens Savings Scheme: 

Investments in Senior Citizens Saving Scheme, which as the name would suggest is suitable for senior citizens, qualify for deduction under Section 80C of the Income Tax Act. This scheme has tenure of 5 years. To participate in the Senior Citizens Saving Scheme, an individual has to be at least 60 years of age. Those who have taken VRS (voluntary retirement scheme) can opt for it after the age of 55.

 Stamp Duty and Registration Charges: 

 While buying a property, one of the largest expenses you will have to bear is the stamp duty and registration charges. To give taxpayers some relief, the government has included these expenses under Section 80C of the Income Tax Act, 1961. The deduction can only be claimed once the property construction is complete and you have legal possession of the house.

 Equity Linked Saving Scheme:

 Investments in equity linked savings scheme qualify for tax deduction under section 80C of the Income Tax Act Now, an essential point to be noted about equity linked savings scheme is that they have a mandatory lock-in period of three years from the date of investment. If you are considering investing in this scheme, make sure to invest for longer periods like five to seven years as they are equity schemes. Equity schemes are an ideal option for wealth creation over a long period.

Payments in Children’s tution 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. The fees have to be for a full-time course only.

Deferred Annuity Plan

You can claim deduction in respect of payment made by you under Deferred Annuity Plan. This annuity may be in your name, your spouse's name or in the name of any of your child. But to claim deduction under this annuity plan, there should be no provision of receiving cash in lieu of annuity.
And, if you're a government employee and any sum is deducted from your salary under deferred annuity plan, then deduction is restricted to only 1/5th of your salary.

Principal Repayment of Housing Loan

You can claim the deduction of principal repayment of your housing loan taken for purchase or construction of residential house property. Deduction can also be availed in respect of stamp duty charges, registration fee and other expenses paid for purchase of your house. This deduction is available for both individuals and HUF.

But keep in mind that if you sell/transfer such house property in respect of which such deduction was taken before expiry of 5 years from the end of financial year in which possession was taken, then the deduction availed in the earlier years will be taxable for you in that year.

Example: If you have taken home loan of Rs. 50,000 /- at the rate of interest is 10%, the bifurcation of installment is as follows:

Year	Financial Year	Installment	Interest	Principal paid
1	2015-16	Rs. 15,773.54	Rs. 5,000.00	Rs. 10,773.54
2	2016-17	Rs. 15,773.54	Rs. 3,922.65	Rs. 11,850.89
3	2017-18	Rs. 15,773.54	Rs. 2,737.56	Rs. 13,035.98
4	2018-19	Rs. 15,773.54	Rs. 1,433.96	Rs. 14,339.58

• Others

1.     Subscription to any deposit scheme/pension fund of National Housing Bank (NHB)

2.     Subscription to bonds issued by National Bank for Agriculture and Rural Development (NABARD)

3.     Subscription to notified deposit scheme of:

4.     Public Sector Housing Finance Company

5.     Housing Development Authority of cities, towns and villages

6.     Contribution towards annuity plans of LIC like Jeevan Dhara, Jeevan Akshay etc. or any other insurer as approved by Central Government.

7.     Subscription to equity shares or debentures of Public Company or any Public financial institution forming part of any eligible issue of capital approved by Board where proceeds are utilized for infrastructure company.

8.     Stamp duty, registration fee incurred for the purpose of transfer of such house property to the assessee.

For more details about this deduction Read More.

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Section-80CCF and Section 80CCG

Section 80CCF of the Income Tax Act is a special provision introduced for benefiting the investors of certain government-approved bonds schemes. The section was discontinued w.e.f AY 2013-2014. Section 80CCF was formulated in the year 2010 and came in force in 2011 under the income tax act.The deduction is avaliable to Indian resident,Individuals, HUFs and Minors also shall be take the benefit for this deduction. The minimum investment must be Rs 5,000. The is no higher cap limit, however the deduction limits to Rs 20000. The bonds must have a 5 year lock-in period. Sometimes companies offer buyback options wherein the investor can surrender the bonds after 5 years without up giving up his interest income. These bonds are listed on the stock exchange

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      These bonds are issued by infrastructure companies seeking approval of the government, and they offer a decent rate of interest plus additional tax benefits.Corporations like the Life Insurance Corporation, Integrated Infrastructure Finance Company, Industrial Financial Corporation of India, and non-banking financial institutions which are approved by the government as infrastructure companies.The benefits of Section 80CCF are over and above that of Section 80C.

Investors should remember that Section 80CCF applies only to certain investments.

Let us consider an example for better understanding

Mr Sunil, aged 30, works in a company, has earned a salary of Rs 7.5 lakhs this year. As per the income tax slabs, he is liable to pay tax on the amount exceeding Rs 2.5 lakhs, i.e. on Rs 4 lakhs. In order to reduce his tax liability, he invests Rs 100000 in schemes eligible for the deduction of section 80C. The limit of section 80C is Rs 1.5 lakh

Thus, now his taxable income at Rs 4 lakhs minus Rs 1 lakh = Rs 3 lakhs

Further, he also invests in government approved infrastructure bonds worth Rs 30,000.

Such bonds being eligible for deduction u/s 80CCF reduces his taxable income to Rs 3 lakhs minus Rs 20,000 = Rs 2.8 lakhs as the deduction u/s 80CCF is up to Rs 20,000.

Thus, we can see that Mr sunil has reduced his tax liability considerably.

Section 80CCG

Deduction under section 80CCG has been discontinued starting from 1st April 2017.

The Rajiv Gandhi Equity Savings Scheme was introduced in Budget 2012. This deduction was over and above the 80C deduction available to individuals

THEREFORE, the conditions under section 80 CCG for claiming deduction would be :–

  The gross total income of the assessee for the relevant assessment year should be less than or equal to ₹ 12 lakhs.

  The assessee should be a new retail investor as per the requirement specified under the notified scheme.

The investment should be in such listed equity shares or listed units of equity-oriented fund specified under the notified scheme.

The minimum lock in period in respect of such investment should be three years from the date of acquisition 

 Tax Benefit

The deduction was 50 % of amount invested in such equity shares or ₹ 25,000, whichever is lower. The maximum Investment permissible for claiming deduction under RGESS is Rs. 50,000. The benefit is in addition to deduction available u/s Sec 80C

Mr A, new retail investor, have made the following investment in equity share/units of equity oriented fund of Rajiv Gandhi Equity Savings Scheme for the Previous year 2012-13,2014-15 and 2015-16 as below :

Particulars	P.Y 2013-14	P.Y 2014-15	P.Y 2015-16
Investment in listed equity shares	₹ 15,000	₹ 42,000	₹ 30,000
Investment in units of equity oriented fund	₹ 45,000		₹ 12,000
Sale of all units of equity oriented fund purchased in P.Y 2013-14		₹60,000
Gross Total Income (comprising of salary income and bank interest)	₹11,50,000	₹11,75,000	₹12,25,000
Deduction under section 80 CCG	₹ 25,000	₹21,000	Nil
Remark	(Restricted to 50 % of ₹ 50,000)	(Restricted to 50 % of ₹42,000)	(Not eligible since GTI exceeding   ₹12,00,000
Amount liable to tax (on account of violation of condition)		₹ 22,500

Note :-  Since the deduction under section 80 CCG was not allowed during the P.Y 2015-16 on account of the Gross Total Income exceeding ₹ 12 lakhs, no amount relating to that year can be subject to tax in the P.Y.2012-15, being the year of violation of condition, even though the units were sold within 3 years. However a deduction of ₹ 22,500 (50 % of ₹45,000) was allowed under section 80 CCG in respect of investment of ₹15,000 in units of equity oriented fund in the P.Y,2013-14. Since such units have been sold in the P.Y. 2014 -15, the condition under section 80 CCG has been violated and ₹ 22,500 would be subject to tax in the P.Y.2014-15.