Deduction under section 80C (Chapter VI-A)
Deduction under section 80C is available to Individual or HUF, irrespective of their income levels. The Maximum permissible limit of deduction u/s 80C is Rs 1.50 lakh from AY 2015-16 (FY 2014-15). Deduction under section 80C is available if assessee pays such specified amount.
Payments /Contributions/ Investments Qualifying for deduction under section 80C
1) Deduction in respect of Life Insurance Premium paid
– in case of individual, such individual or his spouse or any child of such individual.
– in case of HUF, on life of any member of the HUF
Some General Conditions which we must note:
Deductions u/s 80C
|if policy is issued before 1-4-2012||Premium paid or 20% of actual sum assured whichever is lower|
|if policy is issued after 1-4-2012||Premium paid or 10% of actual sum assured whichever is lower|
|if policy is issued after 1-4-2013(Only allowed to person with disability or severe disability referred to in section 80U or suffering from disease or ailment specified in section 80DDB/rule 11DD)||Premium paid or 15% of actual sum assured whichever is lower|
Note: premium paid by individual for policy of father/ mother /brother/ sister is not allowed as deduction u/s 80C.
2) Payment towards Deferred Annuity Plan :
Sum paid under a contract for a deferred annuity on life of the individual, individual’s spouse and any child of such individual OR on life of any member of the HUF.
Note : Contract for deferred annuity need not necessarily be with an insurance company (can be any person).
3) Contribution towards EPF Scheme and Public Provident Fund(PPF) :
- Contribution by an employee to a recognised provident fund and statutory provident fund
- By an employee to an approved superannuation fund
- Contribution to Public Provident Fund Account in the name of:
– in case of individual, such individual or his spouse or any child of such individual
– in case of HUF, any member of HUF
Public Provident Fund (PPF) scheme is a popular long term investment (15 years) option backed by Government of India which offers safety with attractive interest rate and returns that are fully exempted from Tax.
Assessee can invest minimum Rs. 500 to maximum Rs. 1,50,000 in one financial year and also can get the many useful facilities such as loan etc.
4) Sukanya Samriddhi Account Scheme:
Sukanya Samriddhi Account Scheme is a notified deposit scheme of the Central Government. Government introduces this scheme to promote and ensure the bright future of girl child.
Any sum deposited during the previous year in Sukanya Samriddhi Account by an individual in the name of himself/herself or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian would be eligible for deduction u/s 80C.
Minimum of Rs 1000 as a initial deposit with multiple of one hundred rupees thereafter with annual ceiling of Rs 150000 in a financial year.
5) National Saving Certificate
Subscription by individual or HUF to National Savings Certificates (VIII Issue) would be eligible for deduction u/s 80C.Any Interest accrued on these investment which is deemed to be reinvested and automatically qualifies for deduction u/s 80C.
Note : Interest income on these investment is chargeable to tax on accrual basis.
6) Unit Linked Insurance Plan:
ULIPs cover Life insurance with benefits of equity investments. Any Contribution for participation in unit-linked Insurance Plan of UTI or unit-linked insurance plan of LIC Mutual Fund.
– in case of an individual, in the name of the individual, his spouse or any child of such individual.
– in case of a HUF, in the name of any member thereof.
7) Tution Fee
Any sum paid as Tuition fees (excluding development fees, donations, etc.) by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children.
8) Home Loan Installment :
Repayment of the home loan borrowed by assessee for purchase or construction of a residential house property.
a) Home loan installment consists of two components – Principal and Interest. The principal component of the EMI qualifies for deduction under Sec 80C if it was paid during previous year. (Interest allowed u/s 24)
b) Stamp duty, registration fee and other expenses incurred for the purpose of transfer of such house property is allowed as a deduction u/s 80C in the year of payment.
Note : principle portion of installment is allowed u/s 80C only if installment is actually paid during the previous year whereas interest u/s 24 can be claimed even if the installment is not paid.
9) Tax Free Fixed Deposit with scheduled bank :
Tax free term deposits for a fixed period of not less than 5 years with a scheduled bank (SBI, Subsidiary bank of SBI etc).
10) Other Payments /Contributions/ Investments eligible for deduction under section 80C
- Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children. [qualifying amount limited to 20% of salary]
- Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer.
- Subscription to notified bonds issued by the NABARD, only nabard rural bond qualifies for deduction under section 80C.
- Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004.
- 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981.
- Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank. [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]
Some Important points :
- Deduction u/s 80C is allowed only if payment has been made during the previous year.
- Deduction u/s 80C is not available from Long term capital gains, Short term capital gain covered u/s 111A, winning from lottery,winning from races etc.
- When we say ‘any child of Individual’, It means the child may be minor or major, married or unmarried , dependent or not dependent on individual.
- Total amount of deduction u/s 80C can not exceed Rs 1,50,000. Also Assessee can not carry forward anything for next year.
- Deduction is allowed only if it is claimed by assessee in his return of Income.
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