An individual or HUF can claim a Section 80C deduction. Companies, Limited Liability Partnerships and other bodies cannot claim this deduction under Section 80C.
The following deductions are available under this section:
1) Life Insurance Premiums either for yourself or family members. However the insurance policy cannot be terminated within two years of commencement if it is a single premium policy. If it is a multiple premium policy, you must pay at least two years’ premiums. Failure to do so will lead to reversal of Section 80C deduction. Unit Linked Life Insurance Policies (ULIPs) are also eligible for deduction under Section 80C.
Tax on Returns: The returns on life insurance policies, where the insurance cover is at least 10 times the annual premium, are exempt from tax under Section 10(10)(D) of the Income Tax Act.
2) Investment in ELSS mutual funds . ELSS mutual funds have a lock-in of 3 years and invest 80% of their corpus in equities (stocks).
Tax on Returns: ELSS returns above Rs. 1 lakh are subject to long term capital gains tax at a rate of 10%.
3) Public Provident Fund (PPF): This is a government savings scheme with a government-administered interest rate. You can invest in it through most banks and post offices. It has a tenure of 15 years.
Tax on Returns: PPF returns are exempt from tax. However, you have to declare PPF returns in your income tax return each year.
4) Employees’ Provident Fund (EPF): Employees’ contribution to the EPF account is eligible for deduction under Section 80C. Employer’s contribution is also tax free but it is not eligible for deduction under Section 80C.
Tax on Returns: EPF interest rate is tax-free. However, it becomes taxable when you leave service at an EPF registered company. The interest also becomes taxable if EPF is withdrawn before completion of 5 years of service with an EPF-registered company.
5) Tax Saving Fixed Deposit: The 5 year tax-saver fixed deposits at banks and post offices are eligible for tax deduction.
Tax on Returns: The interest on such fixed deposits is fully taxable.
6) National Pension System (NPS): The NPS deduction is granted by Section 80CCD (1) and (2).Employer’s and employees’ contributions to the NPS are both tax deductible under Section 80C. However employer’s contributions cannot be more than 10% of your basic salary + dearness allowance, in order to get the benefit of this section. Self-employed person can also claim this benefit for contributions up to 20% of gross income. In addition, voluntary contributions to the NPS up to Rs. 50,000 are exempted over and above Rs. 1.5 lakh under Section 80 C. These voluntary contributions are covered under Section 80CCD (1B).
Tax on Returns: NPS returns are tax-exempt until maturity. At maturity, 40% of the accumulated corpus is tax free.
Read more on NPS – National Pension System Eligibility, Types, Contribution & Charges
7) National Savings Certificate: National Savings Certificates are a government-backed savings instrument with a 5 year tenure. The interest on these certificates is also eligible for tax deduction under Section 80C.
Tax on Returns: Returns on NSCs are also eligible for tax deduction under Section 80C
8) Senior Citizens’ Savings Scheme (SCSS): This is a government-guaranteed savings instrument with a tenure of 5 years which can be extended for an additional 3 years.
Tax on Returns: SCSS returns are fully taxable at your slab rate
9) Sukanya Samriddhi Yojana: This is a government supported savings scheme for the girl child. It can be opened by parents of a girl child who is below the age of 10. The scheme has a tenure of 21 years or until the girl child gets married after the age of 18.
Tax on Returns : Returns on the Sukanya Samriddhi Scheme are tax free.
10) Tuition fees for any school, college or university for up to two children.
11) Home loan repayment
12) Stamp duty/fee for the transfer of house property to yourself
13) Investment in a tax-saver 5 year fixed deposit
