If you have an income, you are required to pay income tax on it to the government. But there are various ways in which you can reduce your tax liability. One of the most well-known ways of doing this is to invest your money in various Section 80C investment options. Section 80C of the Income Tax Act, 1961 offers tax deduction benefit of up to Rs. 1.5 lakh that you can avail by making such investments. In this blog we will discuss the various investment options that can be used to avail Section 80C tax deduction benefits and some key features of these tax saving investment options. ...Read More
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Disclaimer: A Unit-Linked Insurance Plan (ULIP) comes with the dual benefit of insurance and investment, in which risks in the investment portfolio are borne by the policyholder.
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Section 80C specifies a number of key investment options and expenses that are eligible for tax saving benefits. These investment instruments are collectively known as Section 80C investment options. The number of Section 80C investment options is quite extensive and includes popular instruments like Public Provident Fund, Unit Linked Insurance Plans, ELSS Tax Saver Mutual Funds, National Savings Certificate, National Pension System, etc. However, the cumulative tax benefit from these tax saver investments is limited to Rs. 1.5 lakh annually.
The provisions of section 80c of income tax apply to individuals and Hindu Undivided Family (HUF). Besides, this section covers both Indian residents and NRIs.
However, the deduction in tax for 80C investment is not available to partnerships, companies, and other corporate bodies.
If you want to avail tax deductions under this section, you must file an Income tax return by 31st July. File your income tax on time to reap maximum benefits with 80c investment options.
Whether you're salaried or self-employed, it's important to consider various options to save tax. Tax deduction under section 80C is the most claimed among other tax-saving options.
The good news is that there are several 80C investment options that work as tax-saving instruments in the market. Let's take a look at the best investment options under 80c.
| Section
| Investment Instrument
| Conditions (if any)
| Tax Benefits and Deductions
|
|---|---|---|---|
| 80C | Life Insurance Premiums
| Not applicable if policy is bought for parents or parents in law
| Tax Deduction Limit – INR 1,50,000(if any) Income on maturity is tax -free
|
| 80C
| PPF
| Maximum amount that can be invested in a year – INR 1.5 lakh
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| EPF (Employee Provident Fund)
| NA
| Tax Deduction Limit – INR 1,50,000- Interest is also tax-exempted
|
| 80C
| ELSS (Equity Linked Savings Scheme)
| NA
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| ULIP (Unit Linked Investment Plans)
|
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| Fixed Deposits
| Any bank deposit for a minimum of 5 years is eligible for tax deduction under 80C.
| Tax Deduction Limit – INR 1,50,000 Interest taxed at slab rates.
|
| 80C
| Home Loan Principal Payment
| NA
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| SSY (Sukanya Samridhhi Yojana)
| NA
| Tax Deduction Limit – INR 1,50,000 Maturity amount is exempted from taxes
|
| 80C
| NSC (National Saving Certificate)
| the interest accrued in first 4 years is eligible for deduction.
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| NPS (National Pension Scheme)
| NA
| Tax Deduction Limit – INR 1,50,000
|
| 80C
| SSC (Senior Citizen Scheme)
| NA
| Tax Deduction Limit – INR 1,50,000
|
Another popular investment option under 80C is the Public Provident Fund. It allows you to invest INR 500 - 1,50,000 in a financial year.
Under the provisions of section 80C of the income tax, your taxable income will decrease by the amount invested in the fund.
Moreover, the interest you receive is tax-free, which implies an all-around financial advantage.
Unit Linked Insurance Plan is an excellent option as it offers the dual advantage of life cover and investment benefit. Under section 80C of income tax, it offers a tax-saving benefit of up to INR 1.5 lakhs. Investing your money in Unit Linked Insurance Plan allows maximizing savings through various market-linked fund options. If you wish to get an estimate of how much insurance coverage will be enough for your family and how much you need to pay for the same, you can use a ULIP calculator.
Senior Citizens who are looking for tax-saving investments can invest in the following investment schemes:
As Hindu Undivided Family (HUF) is considered a distinct identity in the eyes of law in India, investment options are different for HUF. Under Section 80C of Income Tax, HUF are allowed a tax exemption of Rs. 2,50,000 in a year.
Apart from that, HUF is exempted from making investments in some investment instruments.
These instruments are government’s small investment plans such as PPF (Public Provident Fund), monthly saving schemes, National Savings Certificate, and recurring deposits.
HUF can however invest in equity, Mutual Funds, Fixed Deposits, Life Insurance and Equity Linked Savings Scheme (ELSS).
The HUF tax benefits under Section 80C for these investment instruments are same as the benefits available for individuals.
A few payments are also eligible for deduction under section 80C:
These investment schemes can help saving tax. For that, you have to submit investment proofs every year to ensure your employer doesn’t deduct higher taxes. Submitting proofs can be perplexing for when you are not aware of the documents required. To make it all easier for you, here’s a table you can refer to:
| Type of Investment | Investment Proof |
|---|---|
| ELSS Mutual Funds | Consolidated email statement of ELSS investment or copy of investment certificate |
| Fixed Deposit | A copy of FD receipt or bank statement |
| Insurance Policy | Copy of policy document and premium payment proofs |
| PPF | Copy of deposit receipt |
| ULIP/ Pension Schemes | Premium Payment proofs |
| House Loan | Interest Certificate from bank with proof of principal payment and interest |
| Interest accrued on NSC | Copy of NSC bought |
| Children Tuition Fees | Copy of Payment Receipt |
| All other Tax Saving Funds | Copy of Investment Certificate |
A resident individual or Hindu Undivided Family can claim tax deduction under section 80C of the income tax. In addition, NRIs are also eligible for tax deduction under this section.
Yes, section 80C covers all types of life insurance premium, including personal accident insurance and the ones which will get paid in case of demise due to accident.
The equity-linked saving scheme, also known as ELSS, is the only type of mutual fund covered under section 80C of income tax.
By investing money in ELSS, you become eligible to claim a tax deduction of up to Rs 1,50,000 a year.
Tax exemption under section 80C cannot be availed by companies, partnerships and corporate bodies.
While it is possible to invest in different tax-saving instruments, an individual can only claim a maximum of INR 1,50,000 in a financial year.
Yes, investment in Unit Linked Investment Plans or ULIPs are eligible for tax benefits u/s 80C. ULIP plans have a lock-in period of 5 years, after which you can choose to surrender your policy and withdraw the proceeds.
Yes, Sukanya Samriddhi Yojana is one of the popular Section 80C investment options that provides tax saving benefits to investors. Partial withdrawal of the investment can be made for higher education of the girl child under whose name the investment has been made. Full withdrawal can be made when the girl child turns 21 years old or gets married after the age of 18 years.
Section 80C is a subsection of the Chapter VI A of the Income Tax Act. The larger Chapter VI A includes additional tax saving options like House Rent Allowance (HRA) tax benefit for rent paid.
To calculate the overall deduction u/s 80C, you just need to sum up all investments made in various Section 80C investment options made during the financial year. However, if the sum total of these investments exceeds Rs. 1.5 lakh for the year, you will get tax benefit of up to Rs. 1.5 lakh limit for the year.
ARN NO: Aug23/Bg/04M
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