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What Is Section 80C?
Section 80C is a provision for tax deduction under the Income Tax Act 1961. It is one of the most used tax provisions that help individuals and HUFs reduce their taxable income based on some of their expenses and savings or investments made in certain financial instruments.
Various tax-saving provisions and financial products introduced by the Government encourage people to invest in various financial products and help secure their future while saving on taxes.
Timely investment early in life and choosing a long-term investment will help ensure maximum financial benefits. Here is a detail about the 80C deduction, types, and list of deductions.
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Table of Content
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Types Of Deductions Under Section 80C -
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What Is Covered Under Section 80C? -
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Tata AIA Plans to Save Tax -
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Subsections of Section 80C -
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Important Point to Consider - Old Tax Regime vs New Tax Regime
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Limit for Deductions Under Section 80C -
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How To Calculate Tax Deductions Under Section 80C? -
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Eligibility Criteria for Deductions Under Section 80C -
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How To Maximize Tax Deduction Benefits Under Section 80C? -
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Frequently Asked Questions
Types Of Deductions Under Section 80C
Section 80C of the Income Tax Act is based on two types of financial transactions: expenses, savings, and investments. Expenses are based on spending activities, and savings and investments are related to purchasing financial products that help save funds for the future or invest funds for capital appreciation.
- Expenses - Expenditures incurred towards paying school tuition fees for children, repayment of the home loan principal and the stamp duty and registration cost incurred towards purchasing or constructing a new residential property.
- Savings and Investments - Savings and investments made in the following financial products will qualify for a tax deduction under Section 80C Income Tax Act 1961.
- Life Insurance
- Public Provident Fund (PPF)
- Employees Provident Fund (EPF)
- Equity Linked Savings Scheme (ELSS)
- Bank Fixed Deposit
- Unit Linked Insurance Plan (ULIPs)
- Sukanya Samriddhi Yojana
- Senior Citizens Savings Scheme
- National Savings Certificate (NSC)
- Post Office Time Deposit
These expenses, savings, and 80C investments will qualify for the tax deduction based on the stated individual terms and conditions that define their eligibility. Also, there is a maximum limit to which the respective individuals and HUFs can claim the tax deduction.
Therefore, understanding the different products and saving and investing funds based on the provisions is important to enhance the financial benefits.
What Is Covered Under Section 80C?
Section 80C of the Income Tax Act provides tax deduction benefits to individuals and HUFs for some of their expenses, savings, and investments made in a financial year. Here is a detail about what is covered under the 80C deduction.
1. Savings and Investments
The following are the different financial products that provide savings and investment benefits while saving on tax. The 80C deduction list is as follows:
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Life Insurance
The premium paid for life insurance for self, spouse and dependent children provided by an insurer approved by the Insurance Regulatory and Development Authority of India will qualify for a deduction under Section 80C, subject to certain terms and conditions.
When you buy a term insurance plan or a guaranteed* returns savings plan, you can save tax# up to Rs 46,800*
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Public Provident Fund (PPF)
The Public Provident Fund is a long-term investment option wherein the investor must regularly invest a certain amount into the PPF account. The accumulated fund and the interest earned are provided as the maturity benefit.
The minimum and maximum amount for the investment is ₹500 and ₹1.5Lakhs per annum. The policy tenure is 15 years. It is a safe government-backed scheme that is not market-linked. The annual investment into the PPF account will qualify for the tax deduction under Section 80C of the Income Tax Act.
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Employees Provident Fund (EPF)
The EPF is a retirement scheme introduced by the Government wherein an employee and the employer of an organization will contribute 12% of the basic salary and dearness allowance separately towards the EPF for the benefit of the employee.
The Employee Provident Fund Organization (EPFO) will settle the accumulated fund and the interest earned after retirement. The employee's contribution of 12% of basic salary and dearness allowance deducted by the employer will qualify for the deduction under 80C.
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Equity Linked Savings Scheme (ELSS)
The ELSS is a mutual fund scheme that helps individuals to invest in financial securities for market-linked returns. The investment made in such ELSS with a lock-in period of 3 years will qualify for the deduction under Section 80C.
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Bank Fixed Deposit
Banks offer fixed deposit options for individuals seeking safe saving methods. Savings made in such fixed deposits with a 5-year lock-in period will qualify for a tax deduction under Section 80C of the Income Tax Act.
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Unit Linked Insurance Plan (ULIP plan)
The premium paid for a ULIP plan will qualify for a tax deduction under Section 80C of up to 10% of the sum assured if purchased after 1st April 2012 and up to 20% of the sum assured if purchased before 1st April 2012. However, it is subject to the maximum limit for deduction under Section 80C - ₹1.5 Lakh.
In addition, if the investor opts for a top-up on the ULIP investment, the additional premium will also qualify for the tax benefit subject to the terms and conditions.
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Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana is a savings scheme for the girl children in a family. The parent or the guardian can open this account for girl children who are less than 10 years of age. The minimum amount that can be invested in this scheme is Rs 1000 and maximum is limited to Rs. 1.5 Lakh in a financial year.
The benefit can be for up to two children in a family. The fund invested in the SSY qualifies for a tax deduction under Section 80C of the Income Tax Act.
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Senior Citizens Savings Scheme (SCSS)
The SCSS is a savings scheme for senior citizens to secure funds for their retirement. The policy tenure for the scheme is 5 years. Investments made in the SCSS will qualify for the tax deduction under 80C of the Income Tax Act. Individuals above 60 years can invest in this scheme and claim tax deduction up to Rs 1.5 Lakh.
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National Savings Certificate (NSC)
The investments made in the NSC will qualify for the tax deduction under Section 80C up to a maximum of Rs 1.5 Lakh every financial year. In addition, if the interest earned is reinvested, it qualifies for the tax deduction under Section 80C in the year it is reinvested. The minimum amount that can be invested is Rs 100 and there is no maximum limit. The maturity period is five years and 10 years, respectively.
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Post Office Time Deposit
The amount invested in the 5-year Post Office Time Deposit account qualifies for a tax deduction under Section 80C of the Income Tax Act 1961. The duration can range from 1 year to 5 years and only the interest earned qualifies for tax deduction under section 80C.
2. Expenses:
The following expenses qualify for a tax deduction under Section 80C.
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Home Loan Principal Repayment
The amount spent towards repaying your home loan principal applies for the 80C deduction. However, the construction of the house should be complete to claim the benefits.
In addition, if the property is transferred within 5 years of possession, it does not qualify for the deduction benefit. Also, the funds claimed as the tax deduction in the previous years will become taxable in the year when it is transferred.
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Stamp Duty and Registration Charges
The stamp duty and registration charges incurred while purchasing a new house qualify for a tax deduction benefit.
The deduction is applicable when the construction is complete, and the taxpayer has legal possession of the house.
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Tuition Fees for Children
The tuition fees paid by the parent for the education of two of their children will qualify for the 80C tax deduction. If both parents are taxpayers, the couple can claim the tax deduction benefit for the education of up to four children.
It applies to school tuition fees, graduation, and post-graduation full-time courses from affiliated educational institutions.
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Subsections of Section 80C
Section 80C of the Income Tax Act is further divided into subsections that extend the tax deduction benefits for taxpayers based on certain other investments.
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Section 80CCC
Life insurance providers offer annuity plans to help individuals plan for retirement. Premium payments towards such investments in annuity plans provided by insurance providers qualify for the tax deduction under Section 80CCC.
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Section 80CCD (1)
The deduction is for the employee's contribution to the National Pension Scheme. The maximum allowed deduction is the least of the:
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10% of the salary if the taxpayer is an employee
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20% of the total income if the taxpayer is self-employed (Restricted to the unexhausted limit of ₹1.5L, the 80C deduction limit.)
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Section 80CCD(1b)
In addition to the 80CCD (1) deduction, a further tax deduction benefit of ₹50,000 is applicable for the amount contributed to the NPS scheme under Section 80CCD(1b).
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Section 80CCD (2)
The employer's contribution to the National Pension Scheme qualifies for the tax deduction of up to 10% of the basic salary plus the dearness allowance under Section 80CCD (2). It is a benefit applicable to salaried taxpayers and not self-employed taxpayers.
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Section 80CCF
It is a subsection of 80C that provides the tax deduction benefit on the amount invested in the long-term infrastructure bonds approved by the Government. The maximum limit for claiming the deduction is ₹20,000.
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Section 80CCG
It is a subsection of 80C that provides a tax deduction of up to ₹25,000 for the investments made in equity savings schemes approved by the Government.
Limit for Deductions Under Section 80C
The maximum limit for the 80C deduction list is ₹1.5 Lakh. The 80C deduction limit is ₹1.5 Lakh for the aggregate of expenses and investments and is not separate for individual spending or contribution made to specific products. Therefore, the applicable expenses incurred, and the contribution made to the savings and investment options qualify up to ₹1.5 Lakh in total for the maximum deduction under 80C.
It also needs to be noted that the total 80C deduction limit under Section 80C, Section 80CCC and Section 80 CCD (1) is ₹1.5 Lakh.
However, the tax deduction under Section 80 CCD(1b) of ₹50,000 is over and above the deduction under Section 80C. Therefore, the total tax benefit under Section 80C and the contribution to NPS that qualifies for the tax deduction under Section 80CCD(1b) is ₹2 Lakh.
How To Calculate Tax Deductions Under Section 80C?
Calculating the tax deduction for the respective expenses or contributions to the savings or investments is a simple process.
Let us consider a few scenarios.
Case Scenario 1
Mr. Ramesh has a gross annual income of ₹800000. He has invested in a life insurance plan, and the annual premium is ₹25000. In addition, he has also invested in the Equity Linked Savings Scheme (ELSS) of about ₹50000.
The calculation of taxable income is as follows:
Particulars |
Amount |
Gross income |
₹8,00,000 |
Standard deduction |
₹50,000 |
Life insurance |
₹25,000 |
ELSS |
₹50,000 |
Taxable Income |
₹6,75,000 |
Mr. Ramesh can further calculate the tax liability based on the respective income tax slab.
Case Scenario 2
Ms. Geetha has an annual income of ₹600000. She has invested in a life insurance plan, and the annual premium is ₹80000. In addition, she has invested in the ELSS of about ₹75000. Moreover, she also invested in the NSC for about ₹25000.
The calculation of taxable income is as follows:
Particulars |
Amount |
Gross income |
₹6,00,000 |
Standard deduction |
₹50,000 |
Life insurance |
₹80,000 |
ELSS |
₹75,000 |
NSC |
₹25,000 |
Taxable Income |
₹4,00,000 |
The contribution made to savings and investments is ₹180000. However, as the maximum limit for the 80C is ₹1.5 Lakh, the deduction can be up to that limit. Therefore, MS Geetha can avail of up to ₹1.5 Lakh deductions under Section 80C of the Income Tax Act and further the standard deduction of up to ₹50000, leading to a total taxable income of about ₹4,00,000.
Case Scenario 3
Calculation of deduction under Section 80CCD (1).
Mr. Rajesh is a Central Government Employee with a Basic Salary of ₹500000 and a Dearness Allowance of ₹90000. He contributes ₹50000 to the NPS Account. In addition, he has paid the premium for a life insurance policy of about ₹60000.
The maximum allowable claim under Section 80CCD (1) is the lower among the following:
- Contribution to NPS - ₹50000
- 10% of basic salary and dearness allowance - ₹59000
Restricted to the unexhausted limit of 80C deductions of ₹90000(₹150000 - ₹60000).
The maximum allowable deduction under Section 80CCD (1) is ₹50000. However, if the deductions that qualify under Section 80C is ₹120000, the deduction under Section 80CCD (1) is ₹30000(restricted to the unexhausted limit of 80C deductions, i.e., ₹150000 - 120000).
Important Point to Consider - Old Tax Regime vs New Tax Regime
It is important to note that the taxpayer has to choose the old tax regime to claim deductions under Section 80C of the Income Tax Act.
The new tax regime provides a comparatively lesser rate for income tax slabs. However, it does not provide the option to include most of the deductions under Section 80C.
The choice of the regime is left to the discretion of the taxpayer. Therefore, based on savings and investments, the taxpayer can choose the appropriate tax regime to maximize the financial benefits.
Eligibility Criteria for Deductions Under Section 80C
The stated tax provisions for the 80C deduction list apply to individuals, both resident and Non-Resident Indians and Hindu Undivided Families (HUFs).
They do not apply to companies, partnership firms, etc. Eligible taxpayers can avail of the tax deduction benefits while filing their Income Tax Returns (ITR) every financial year. While having the necessary documents are not essential to file the ITR and claim the benefits, it is important to have them for any future clarifications, if required, from the Income Tax Department.
Tata AIA Life Insurance Plans to Secure your Family
How To Maximize Tax Deduction Benefits Under Section 80C?
Section 80C under the Income Tax Act 1961 provides a tax deduction benefit of up to ₹1.5 Lakh for contributing to various savings and investment financial products.
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01
Diversified portfolio
As it allows for investment in different products, taxpayers can diversify their portfolio and maximize the financial benefits while saving on tax. -
02
Multiple benefits
Investors can choose to secure their family's future by purchasing a life insurance plan, utilizing the pension plans to plan for retirement, and investing in market-linked products to increase wealth long-term. -
03
Compare products
The best way to utilize the maximum deduction under 80C is by analyzing the financial requirements and risk profile, understanding the different products and their features, comparing them based on their tax benefits and costs and deciding on the most appropriate and affordable products. -
04
Starting early
In addition, individuals can start investing early in life to choose a longer policy term to increase the financial benefits. It will help develop the discipline to save regularly and increase investments at different milestones. Also, as 80C investments help enhance the financial benefits for the family members to secure their future, early investments can maximize the benefits and reduce liabilities.
What Is the Minimum Holding Period for The Investments for The Tax Deduction Under Section 80C?
The 80C deduction is applicable for tax-saving investments when the taxpayer stays invested in it for a certain period. For example, the tax benefits are applicable for the Unit Linked Insurance Plan (ULIP Plan) when the taxpayer pays the premium regularly for 5 consecutive years, the lock-in period.
These terms and conditions are less known to the taxpayers. However, it is important to note for claiming the deduction under Section 80C of the Income Tax Act.
The minimum holding period for the different investment options is as follows:
Savings and Investments |
Minimum Lock-In Period |
Equity Linked Savings Scheme |
3 years |
Bank Fixed Deposit |
5 years |
Unit Linked Insurance Plan |
5 years |
Senior Citizens Savings Scheme |
5 years |
National Savings Certificate |
5 years |
Post Office Time Deposit |
5 years |
National Pension Scheme |
Till 60 years of age |
Frequently Asked Questions
When should I invest to claim the tax deduction under Section 80C?
You can invest at any time during the financial year. Individuals tend to invest at the end of the financial year primarily to claim the deductions. However, investing at the start of the financial year is best to ensure thorough research, comparison and the choice of the relevant financial products and interest accrual for the entire year, along with adequate tax benefits.
What is the maximum limit for the 80C deduction?
The maximum limit for the Section 80C deduction is ₹1.5 Lakh. The 80C deduction limit of ₹1.5 Lakh is for the aggregate of the listed expenses and investments and is not separate for individual expenditures or contributions made to specific financial products.
It is also important to note that the total 80C deduction limit under Section 80C, Section 80CCC and Section 80 CCD (1) is ₹1.5 Lakh. However, the tax deduction under Section 80 CCD(1b) for NPS investment of ₹50,000 is over and above the deduction under Section 80C.
Therefore, the total tax benefit under Section 80C and the contribution to NPS that qualifies for the tax deduction under Section 80CCD(1b) is ₹2 Lakh.
What is tax-saving investments?
Tax-saving investments are financial products that offer tax deductions and exemption benefits under the Income Tax Act 1961. It will help the investors reduce the taxable income and further the tax liability for the financial year.
What is Chapter VI A of the Income Tax Act?
The Chapter VI A of the Income Tax Act details the different subsections of Section 80 that allow taxpayers to claim deductions based on their tax-saving investments, donations, etc., for reducing the tax liability for the financial year.
Section 80C is a subsection of Chapter VI A that provides tax deduction benefits on certain expenses and tax-saving investments made during the financial year.
Can I invest in many investment options and claim the tax deduction of ₹1.5L for every investment I have made?
No, the tax deduction under Section 80C has an upper limit of ₹1.5 Lakh that applies to the aggregate of investments made during the financial year and not to every single investment.
Does the total contribution of EPF qualify for the tax deduction benefit?
The employee's contribution of 12% of basic salary and dearness allowance will qualify for the deduction under 80C.
How can I claim tax deductions under 80C of the Income Tax Act while filing ITR?
The 80C deduction can be claimed by providing the required details in Section 3 - Total Deductions while filing ITR using the ITR Form 1.
Does the premium paid for life insurance plans qualify for tax deduction benefits?
Yes, the premium paid for life insurance qualifies for a tax deduction benefit under Section 80 of the Income Tax Act 1961, subject to the 80C deduction limit and, further, the terms and conditions related to the type of life insurance plan.
What are the tax benefits of investing in life insurance?
The premiums paid for life insurance plans qualify for a tax deduction benefit under Section 80C, and the maturity benefit or death benefit qualify for a tax exemption under Section 10(10D).
In addition, if you have chosen health-related riders, the additional premium will qualify for a tax deduction benefit under Section 80D.
However, the benefits are subject to the terms and conditions of the type of life insurance plan.
Should I submit proof for claiming a deduction under Section 80C?
It is important to retain the important documents in case of further references and clarifications by the Income Tax Department. In case of life insurance plans, make sure you pay the premium regularly and submit the latest premium payment receipt.
Does the interest earned through investments qualify for tax deductions under Section 80C?
No, the interest earned through many investments qualifies for a tax benefit based on other sections of the Income Tax Act 1961. However, if the interest earned from the National Savings Certificate is reinvested, it will qualify for the tax deduction in the year it is reinvested.
What investments qualify for tax deduction under Section 80C of the Income Tax Act?
- Life Insurance
- Public Provident Fund
- Employees Provident Fund
- Equity Linked Savings Scheme
- Bank Fixed Deposit
- Unit Linked Insurance Plan
- Sukanya Samriddhi Yojana
- Senior Citizens Savings Scheme
- National Savings Certificate
- National Pension Scheme
- Post Office Time Deposit
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Disclaimer
- The complete name of Tata AIA Sampoorna Raksha Supreme is Tata AIA Life Insurance Sampoorna Raksha Supreme (UIN:110N160V03) - A Non-Linked Non-Participating Individual Life Insurance Plan
- **Under Life Plus Option, an amount equal to the 105% of the Total Premiums Paid (excluding loading for modal premiums) shall be payable at the end of the Policy Term as Maturity Benefit, provided the life assured survives till maturity and the policy is not terminated earlier.
- ^Rider is not mandatory and is available for a nominal extra cost. For more details on benefits, premiums, and exclusions under the Rider, please contact Tata AIA Life's Insurance Advisor/ branch.
- Tata AIA Life Insurance Non-Linked Comprehensive Protection Rider (UIN:110B033V02 or any other later version) - A Non-Linked, Non- Participating Individual Health Rider, Tata AIA Life Insurance Non-Linked Comprehensive Health Rider (UIN: 110B031V02 or any other later version) - A Non-Linked, Non- Participating Individual Health Rider, Tata AIA Vitality Protect (A Non-Linked, Non- Participating Individual Health rider (UIN:110B046V01), Tata AIA Vitality Health (A Non-Linked, Non- Participating Individual Health rider (UIN:110B045V01) are available under this plan
- %Applicable for specific plan options. Please refer brochure for additional details.
- Vitality is a trademark licensed to Tata AIA Life by Amplify Health Assets PTE. Limited, a joint venture between Vitality Group International, INC. and AIA Company Limited. The assessment under the wellness program shall not be considered as a medical advice or a substitute to a consultation/treatment by a professional medical practitioner.
- #Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfillment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implication mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.
- &Tax benefits of up to ₹46,800 u/s 80C is calculated at highest tax slab rate of 31.20% (including cess excluding surcharge) on life insurance premium paid of ₹1,50,000. Tax benefits under the policy are subject to conditions laid under Section 80C, 80D,10(10D), 115BAC and other applicable provisions of the Income Tax Act,1961. Good and Service tax and Cess if any will be charged extra as per prevailing rates. The Tax-Free income is subject to conditions specified under section 10(10D) and other applicable provisions of the Income Tax Act,1961. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on above.
- This plan offers pure risk premium option under Life Option and return of premium benefit under Life Plus Option along with other benefits. Please refer sales brochure for complete details.
- This product is underwritten by Tata AIA Life Insurance Company Ltd. This plan is not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
- Insurance cover is available under this product. For more details on risk factors, terms and conditions please read Sales Brochure carefully before concluding a sale.
- In case of sub-standard lives, extra premiums will be charged as per our underwriting guidelines.
- Buying a Life Insurance policy is a long-term commitment. An early termination of the policy usually involves high costs, and the Surrender Value payable may be less than the all the Premiums Paid.
- This publication is for general circulation only. This document is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. This document is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
- Please know the associated risks and the applicable charges, from your insurance agent or the Intermediary or policy document issued by the insurance company and this document is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
- L&C/Advt/2022/Dec/3279
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