Section 80C

Section 80C: Overview

What is Section 80c Deductions

Income Tax is a vital component of any country’s revenue collection which in turn is utilized in various welfare programs provided to the citizens. Income Tax is implied on the annual earning after a certain limit and according to prevailing tax slabs. However, the government provides a rebate on the tax under the various provisions of the IT Act of 1961. Tax rebate not only helps an individual to lower their tax liability but also plays a pivotal role in savings. The rebates are applicable in various categories & different provisions are available for a different rationale.

The provisions offered under Income Tax are cited under Income Tax Act.1961 and is applicable to every citizen of India. The act provides a methodology for determination of taxable income, determination of tax liability, the procedure for assessment penalties, etc.

Sections of Income Tax U/S 80C

The different sections under which one can avail tax rebates are:

  1. Section 80C in IT act 1961
  2. Subsections under 80C
  3. 80D of IT act 1961
  4. Subsections of 80D
  5. Section 80(E) of IT act 1961
  6. Subsections  of  80E
  7. Section 80(G)of IT act 1961
  8. Subsections in Section 80G
  9. Section 80IA of IT act 1961
  10. Section 80(J) of IT act 1961
  11. Section 80LA of IT act 1961
  12. Section 80P of IT act 1961
  13. Section 80QQB of IT act 1961
  14. Section 80RRB of IT act 1961
  15. Section 80TTA of IT act 1961
  16. Section 80U of IT act 1961

Let’s discuss the sections 80 C of Income Tax.

  • The Section 80C and various subsections under the head of 80C of Indian IT Act 1961 offer various alternatives for tax rebate applicable to manifold payments and investment made.
  • Under the sections 80C along with its subsections, any individual or HUF is entitled to tax rebates up to Rs. 150,000 every fiscal year.
  • The rebates availed under section 80 C helps an individual in reducing their overall taxable income.
  • Not only this decreases the tax liabilities but also inducts the inclination of savings amongst the salaried people.
  • A number of rebates depend on the nature of investment & annual earning.
  • As per section 80C of IT Act of 1961, an individual can avail tax liability for payments done towards various natures. This includes amount spent towards tuition fees of children, medical expenses as well as charitable contributions.
  • Not only payments but various types of investments can also help an individual to earn rebate as per section 80C.

The payments which are entitled to exemptions under the sections 80C are

  • Premium towards life insurance for either self or family members.
  • Payment paid towards Superannuation/provident fund
  • Tuition fees being paid for children (Up to 2 children only)
  • Expenses for purchase or construction of housing property
  • Amount invested in tax saving fixed deposit for minimum term of five years
  • Apart from the above stated rebates, various other payments and investment such as mutual funds, investment in NABARD bonds etc are also entitled to tax rebate as per section 80C
  • Amount paid towards Deferred Annuities paid self or the Government
  • Amount deducted towards PPF
  • Tuition fees of max 2 children in a financial year
  • Home loan Repayment for a self-occupied residential property
  • The investment done in special Mutual Funds schemes under Central Board of Direct Taxes
  • Investment did in SCSS
  • Contribution towards recognized Provident Funds Scheme, managed by the Union Government
  • Subscription money paid for Government endorsed Deposit Scheme
  • Subscription money paid for National Saving Certificates
  • Investments in ULIP Plans, 1971
  • Investment in any notified Pension Fund offered by National Housing Bank

The Subsections of Section 80C

The Section 80C of Income Tax has various subheads that offers tax rebate on specific type of payments.
  1. Section 80 CCC:  The Section 80 CCC of the Indian IT Act 1961 offers rebate on payment done towards investment in various pension funds. The entitle pension funds can be offered by any regulated provider. The maximum exemption amount entitled under this subsection is Rs 1.5 lakhs for resident taxpayers only.
  2. Section 80 CCD:  The Section 80 CCD of the Indian IT Act 1961 intends to promote the inclination towards savings through investment in various pension schemes. The pension funds should fall under the regulation and notification of the central government. The contributions made by both individual and their employer up to 10% of the basic salary are entitled to the tax exemption. The section is applicable only for the resident individual taxpayers.
  3. Section 80 CCF: The Section 80 CCF of the Indian IT Act 1961 provides rebates on the investment in long-term infrastructure bonds offered under the ambit of government notification. The rebate is offered to both individuals & HUF. As per section 80 CCF, a taxpayer can avail exemption of amount up to Rs 20,000/- per financial year.
  4. Section 80 CCG: As per section 80 CCG, any resident individual is entitled to an exemption for amount up to 25,000 or 50% of invested amount every per fiscal year. Investment only into government notified equity schemes is taken into count as per this section.
The limits under sections 80C for FY 2016-2017
Section Entitle Claimants Maximum Permissible Limit
80 C Individuals/HUF Rs 1.5 lakh (cumulative of 80C, 80CCC & 80CCD)
80 CCC Individuals Rs 1.5 lakh (cumulative of 80C, 80CCC & 80CCD)
80 CCD Individuals Rs 1.5 lakh (cumulative of 80C, 80CCC &80CCD)
80 CCF Individuals/HUF Rs 20,000
80 CCG Resident individuals Rs 25,000

Top Ten Tax-Saving Investments Options under Section 80C

I.ELSS Funds

Equity Linked Savings Scheme or ELSS is tax-saving mutual funds scheme with a lock-in period of three years. The investor can avail rebate up to 1.5 lakhs under the Income Tax Section 80C.  Approximately 65% of the assets under ELSS mutual funds are directly invested in the stock markets. One of the biggest advantages of ELSS mutual funds is the lower lock-in period as compared to other tax savings fund. Apart from this, it also offers smart returns in long-term due to their exposure to equity. Even though the ELSS mutual funds don’t proffer guaranteed returns,  an average return of 12-15% annual yield has been noticed in the long-term.

II.Public Provident Fund (PPF)

Investments done in a Public Provident Fund account are entitled to tax rebate as per section 80C. The rebate is available up to a quantum of Rs 1.5 lakh in a single fiscal year. The Public Provident Fund offers assured return and a fixed interest is applicable as advised by the central government for each financial year. At present, the interest rate on PPF is 8.1% per annum and compounded yearly. The PPF have a term of 15 years and after maturity the withdrawal is tax-free. Even though premature withdrawal is not permitted in PPF, in the event of any financial exigency, the investor can avail personal loans for the amount in their respective PPF account.

III.Employee Provident Fund

A salaried individual can avail rebate on their contribution made in favor of the Employee Provident Fund (EPF) account. The maximum permissible amount to avail a tax rebate is up to Rs 1.5 lakh. The monthly contribution by the employee is 12% of the monthly salary and is deducted by the employer and later on deposited along with employee contribution. The prevailing interest rate offered by the Employee Provident Fund is 8.8%.Apart from the employee; the employer can also avail a tax rebate under Section 80C against the payment to the Employee Provident Fund (EPF) account up to Rs 1.5 lakhs.

IV.Tax-Saving Fixed Deposits

Tax-saving FD is offered by all the scheduled commercial banks. All the features of Tax Saving FD are similar to standard fixed deposits and the only difference being the lock-in period of five years. The investment is done in Tax Saving FD is entitled to tax rebate up to Rs 1.5 lakh under Section 80C. The interest rate offered in tax saving FD is different in each bank and is generally between 7-9% PA. The Tax Saving FDs ensures 100% capital protection and guaranteed returns.  The maturity amount after 5 years would be liable for the tax calculation in the year FD has got matured

V.National Pension System

National Pension System is a government endorsed pension scheme focused on unorganized sector & working professionals. The investments done in NPS are entitled to tax exemptions under Section 80C. Apart from this, one can invest Rs. 50,000 additionally under the subsection 80CCD (1B). The NPS has different variants which the investor can opt for as per risk profile category they opt.

VI.National Savings Certificates

National Savings Certificates are entitled to tax rebates up to 1.5 lakhs for the fiscal year. NSCs are offered at selected post office branches and the lock-in term is 5 years. The applicable interest gets accrued yearly, however, paid only at the time of maturity and subject to taxes. The interest rate in FY 2016-17 is 8.1% on NSC.

VII.ULIP or Unit Linked Insurance Plans

Unit Linked Insurance Plan is a blend of investment & insurance services. A fraction of the investment amount is capped for the insurance cover and the remaining amount is invested in stock markets. Under the IT Section 80C, the investments for amount up to 1.5 lakh are entitled to a tax rebate. One of the drawbacks with ULIP plans is the uncertainty on the return as they are an equity oriented product.

VIII.Sukanya Samriddhi Yojana

Sukanya Samriddhi Yojana scheme is exempted from Income Tax as per section 80C. The scheme offers Tax Benefit under Triple E regimen (Principal, Interest and Outflow) all are tax exempted. Sukanya Samriddhi Account was introduced vide the Government of India & Reserve Bank of India on 11th March 2015. Sukanya Samriddhi Scheme is an exclusive product offered to only girl child aged 10 years or less. The maturity tenure of the account is 21 years from the account opening date and the payment term is until 14 years. After that, the benefits continue to accrue until the 21st year of the policy

IX.Senior Citizens Savings Scheme

The Senior Citizens Savings Scheme is for investors who are more than 60 years. The scheme comes with a fixed maturity term of 5 years wherein the return interest is offered @ 8.6% per annum. The senior citizen can avail tax rebates up to 1.5 lakh by investing in in SCSS under Section 80C.

X.Voluntary Provident Fund

The Investments under VPF are done from the pre-tax income of employer and the employee’s contributions are entitled to exemption as per section 80C of IT act, 1961, wherein the maximum exemption cap is Rs.1 Lakh. The interest income is non-taxable till the interest rate exceeds 9.5%. The redemption is also tax-free unless the same is not withdrawn prior the maturity period of 5 years. VPF is considered to be one of the safest investment options especially for those who are looking for long-term capital appreciation.

Comparison of Popular 80C Investment

S no Options Interest Lock-in Period Guaranteed Returns Risk Profile
1 ELSS funds 12-15% 3 years No Equity-related risk
2 PPF 8.10% 15 years Yes Risk-free
3 NPS 8-10% Till retirement No Equity-related
4 NSC 8.10% 5 years Yes Risk-free
5 FD 7-9% 5 years Yes Risk-free
6 ULIP 8-10% 5 years No Equity-related risk
7 Sukanya Samriddhi 8.60% 21 years Yes Risk-free
8 SCSS 8.60% 5 years Yes Risk-free
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