Section 80 C Deductions under Income Tax

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 Lakh, are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1 Lakh), and you end up paying no tax on it at all! 

This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1 Lakh, you save tax of Rs. 30,000. Isn’t this great?

Qualifying Investments

• Provident Fund (PF): The payments that you make to your PF are counted towards Sec 80C investments. For most of you who are salaried, this amount gets automatically deducted from your salary every month. Thus, it’s not just compulsory savings for your future, but also immediate tax savings! 
  
  
• Voluntary Provident Fund (VPF): If you increase your PF contribution over and above the statutory limit (as deducted compulsorily by your employer), even this amount qualifies for deduction under section 80C. 
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• Public Provident Fund (PPF): If you have a PPF account, and invest in it, that amount can be included in Sec 80C deduction. The minimum and maximum allowed investments in PPF are Rs. 500 and Rs. 70,000 per year respectively.
  
  
• 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 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 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.
  • 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. 
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  • National Savings Certificate (NSC): The amount that you invest in National Savings Certificate (NSC) can be included in Sec 80C deductions.
  • Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions. 
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  • 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 Lakh. 
  •   This also means that your investment in pension funds upto 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. 
    
    
  • Bank Fixed Deposits: This is a newly introduced investment class under Section 80C. Bank fixed deposits (also called term deposits) having a maturity of 5 years or more can be included in your Sec 80C investment.
    
    
  • Senior Citizen Savings Scheme (SCSS): SCSS is a deposit scheme specially meant for elderly citizens.
    
    
  • 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.
    
    
    
  • Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.