Section 80C
Section 80C of the Income Tax Act of India allows a maximum deduction of up to Rs 1.5 lakh every year. This deduction is available only for individual taxpayers & HUF. Corporates, Firms are not qualified to avail deduction under section 80C.
Investments Eligible for Deduction Under Section 80C of the Income Tax Act for the FY 2023-24 (AY 2024-25)
| Investment options | Interest | Lock-in-period | Risk | Taxability |
| ELSS | 12% to 15% | 3 Years | High | Dividend is exempt |
| NPS | 8% to 10% | Till the age of 60 Years | High | Return : Partially exempt |
| PPF | 7.10% | 15 Years | Low | Interest : Exempt Withdrawal : Exempt |
| NSC | 7.70% | 5 Years | Low | Interest is taxable |
| ULIP | 8% to 10% | 5 Years | Moderate | Taxable |
| FD | Up to 8.40% | 5 Years | Low | Interest is taxable |
| Sukanya Scheme | 8.20% | 8 Years | Low | Interest is taxable |
What is covered under section 80C ?
- Public Provident Fund (PPF)
- Sukanya Samriddhi Yojana(SSY) Account
- Mutual Funds (Equity Linked Saving Scheme)
- 5 Year Tax Saving FDR
- National Saving Certificate (NSC)
- Senior Citizen Saving Scheme
- Unit Linked Insurance Plan (ULIP)
- National Pension Scheme (NPS)
- Life Insurance Premium (LIP)
- Children’s Tuition Fees
- Principal Repayment of Housing Loan
- Deferred Annuity Plan
- Stamp Duty & Registration Charges Deduction
Mutual Funds (Equity Linked Saving Scheme)
Equity Linked Saving Schemes, or ELSS, fall under Section 80C’s exemption category for up to its maximum limit (Rs.1.5 lakh). These investment schemes come with a mandatory 3-year lock-in period.
Public Provident Fund (PPF)
Any contribution towards the Public Provident Fund (PPF) can be filed for tax deduction under Section 80C. Public Provident Funds come with a maximum deposit limit of Rs.1,50,000, allowing an investor to claim the entire deposited amount as an exemption under this Income Tax Act.
Any voluntary contribution made by the employee towards the provided fund is also eligible for tax deduction under Section 80C of the Income Tax Act.
Unit Linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans offer more returns in the long term when compared to conventional insurance policies. They have become especially popular in recent years thanks to the tax benefits offered under Section 80C of the Income Tax Act 1961. Investors can avail of tax exemptions up to Rs. 1.5 lakh on the invested amount u/s 80C income tax provisions.
Tax Saving Fixed Deposit (FD)
Tax Saving FDs are fixed deposit schemes offered by both banks and post offices that allow tax deduction under Section 80C. These FDs have a lock-in period of 5 years and offer a maximum of Rs 1.5 lakh tax exemption (on the principal amount). However, the returns of such instruments are liable for taxation.
Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana is a savings scheme specially designed to meet the financial requirements for a girl’s education and marriage. Parents or legal guardians of a girl child (not older than 10 years of age) can open this account, and parents of 2 or more (only in the case of twins) girls can also invest in this plan.
The interest earned from this investment scheme is eligible for tax exemption under Section 80C.
Principal Repayment made towards Home Loan
Only the repayments made towards the principal component of home loan EMIs are eligible for deduction under 80C. However, the borrower has to fulfil certain clauses to avail of this benefit; these are –
Exemptions can only be claimed if the construction of the property is completed.
Transference of the property within 5 years of possession will exclude it from the tax exemptions provided under Section 80C of the Income Tax Act, 1961.
Any amount claimed as a tax deduction should be taxable in the transfer year if a handover is made after 5 years of the property’s possession. Failing to meet this clause will also render it excluded from Section 80 C’s guidelines.
