Section 80C is an income tax exemption and deduction opportunity available to taxpayers. It can be claimed up to Rs. 1.5 lakh annually. Section 80C is applicable only to Individuals and Hindu Undivided Families (HUFs) and not to corporate bodies, partnership firms, and other businesses.

What is Section 80C?

Section 80C of the Income Tax Act offers assistance to individuals and Hindu Undivided Families (HUFs) from the income tax, which has been incurred on specific expenses and investments. Individual taxpayers and HUFs can claim an exemption of up to Rs. 1.5 lakh each year, which reduces their tax liabilities. Tax exemptions are not available for corporate bodies, partnership firms, or any other business entities.

Finance Minister Nirmala Sitharaman made no new changes to the rules of section 80C as of December 2023.

Deduction Limits Under Section 80C, 80CCC, 80CCD(1), and 80CCD(2)

The sections and sub-sections that allow deductions from income tax are as follows:

List of Investments Qualified under Section 80 C

The list of Investments qualified to get deductions under Section 80C of the Income Tax Act of India is as follows:

Life Insurance Premium

If an individual buys a life insurance for himself or other dependents, the contributions made by him towards the insurance qualify as deductions under the Section 80C of the Income Tax Act. However, if an individual has several life insurance coverages with different insurance firms, then he can claim deductions for all premiums so collected up to Rs 1.5 lakh in a year.

Provision Funds

A Provident Fund is a savings and retirement scheme run by the government. Both the individual and the employer contribute to this fund. The contribution made by the individual is eligible for deductions under Section 80C (up to Rs. 1.5 lakh per year). The lock-in period of five years is applicable for the Provident Fund so that investments get locked for a particular time period to be eligible for the deduction.

Public Provident Fund

Public Provident Fund (PPF) provides guaranteed returns and, therefore, is one of the most popular long-term investments. Any sum placed in a PPF is eligible for a tax deduction under Section 80C of the Income Tax Act, India. Public Provident Funds have a maximum deposit limit of Rs.1.5 lakh and any amount deposited can be fully claimed as an exemption under this act. 

Equity Linked Savings Scheme (ELSS)

Equity Linked Savings programs, or ELSSs, are mutual fund programs that are expressly designed to save taxes. Through ELSS, one can claim up to Rs 1.5 lakh of savings in a year against tax under the Income Tax Act. 

Sukanya Samriddhi Scheme

Under this scheme, a person can open a Sukanya Samriddhi account for a girl child between birth and ten years of age. A person can deposit as little as Rs. 1,000-Rs.1,50,000 in a fiscal year. The interest so accrued is also eligible for deductions under Section 80C.

Principal Repayment of Home Loan

The principal amount an individual pays towards the home loan also attracts tax deductions under section 80C.

Stamp Duty and Registration Charges

If an individual buys a house or a property, then there is the charge of registration and stamp duty; they are allowed to claim this expense under Section 80C of the Income Tax Act.

NABARD Rural Bonds

The National Bank for Agriculture and Rural Development issues Rural Bonds. These Rural Bonds are also eligible to be deducted under the Income Tax Act of India.

Infrastructure Bonds

Individuals who purchase these bonds may claim a tax deduction of up to Rs. 1.5 lakh is available under Section 80C of the Income Tax Act. Instead of the government, infrastructure corporations issue infrastructure bonds.

Senior Citizen Saving Scheme

Individuals over the age of 60 can invest in this scheme and receive tax benefits of up to Rs. 1.5 lakh under Section 80C of the Income Tax Act.

Unit linked Insurance Plus (ULIPs)

These insurance schemes provide good returns in the long run along with coverage to the policyholder. ULIPs provide tax benefits up to Rs. 1.5 lakh per year.

National Savings Certificate

The National Savings Certificate (NSC) is one of the most popular tax saving tools. They have maximum tenure of 5 to 10 years, and their interest is compounded semi annually.

Tax Saving Fixed Deposit

Banks and post offices offer tax-saving FDs with exemptions under Section 80C of the Income Tax Act. These Fixed Deposits offer a minimum lock-in period of five years and tax exemptions of up to Rs.1.5 lakh.

Frequently Asked Questions

Q.1 What are the investments eligible for deduction under Section 80C?

Some investments eligible under Section 80C include EPF, PPF, Life Insurance Premiums, ELSS, NSC, and Tax Saving Fixed Deposits.

Q.2 Is the entire amount of Rs. 1.5 lakh deductible under Section 80C available on a single investment?

No, the limit of Rs. 1.5 lakh is aggregate for all eligible investments and expenses under Section 80C. A person may select a combination of investments and expenses to maximize his deduction.

Q.3 Can a person claim deduction for tuition fees for a child under Section 80C?

A parent can claim tuition fees paid for his or her child’s education under Section 80C of the Income Tax Act in India.

Q.4 Can the deductions of investment made in his or her spouse’s name under Section 80C?

Yes, the deductions for investment made in the name of spouse include life insurance premiums and all other eligible investments under Section 80C.

Read Also – National Pension Scheme (NPS) – Meaning, Eligibility & Goals