Section 80C of the Income Tax Act, 1961 allows you to claim tax deduction benefits of up to ₹1.5 lakhs on certain investment instruments such as PPF, ELSS, NSC, Senior Citizens Saving Scheme, and life insurance premium(T&C) apply, among others. For example, let’s say your total taxable income is ₹12 lakh. You have invested ₹1 lakh in tax-saving instruments falling under Section 80C. Your total taxable income would be reduced to ₹11 lakhs (₹12 lakh – ₹1 lakh).
However, you can claim tax benefits under Section 80C only if you have opted for the old tax regime. So, which investments or payments/expenses fall are considered for deduction under Section 80c? The table below would help you get a clearer picture of Section 80C along with its sub-sections.
|Tax Saving Section||Eligible Investment Instruments||Tax Deduction Limit|
|Section 80C||EPF, VPF, NSC, ELSS, Life Insurance Premium*, SCSS, PPF, ULIP, Tax-Saving FD, Sukanya Samriddhi Yojana, Home Loan Principal Payment, NABARD Rural Bonds, Infrastructure Bonds, etc.||Up to ₹1.5 lakh|
|Section 80CCC||Contribution to annuity and retirement plans||–|
|Section 80CCD (1)||Employee’s contribution towards Government-backed savings schemes -Atal Pension Yojana, NPS, etc.||–|
|Section 80CCD (2)||Employer’s contribution towards Government-backed savings schemes -Atal Pension Yojana, NPS, etc.||Maximum up to 10% of salary|
|Section 80CCD(1B)||Additional contribution to NPS account||₹50,000|
*Note that the tax deduction limit of ₹1.5 lakh is inclusive of Section 80C, 80CCC and 80CCD(1) deductions. However, Section 80CCD(1B) deduction of up to₹ 50,000 is over and above this limit.
Also, you can only claim tax deduction benefits for premiums paid on life insurance purchased for you, your spouse and your children. Deduction benefits are not available on premiums for life insurance policy you have purchased for your parents.
Budget 2023 Section 80C Update
Though the general appeal from the common taxpayers was to increase the 80C deduction, the Union Government decided to retain the existing limit of ₹1.5 lakh. No other investment instruments have been added to deductions under Section 80C.
To claim deduction under Section 80C, you would need to meet the following eligibility criteria.
Listed below are the schemes that fall under Section 80C deduction list.
|Investment Avenue||Minimum Lock-in Period||Interest Rate|
|NPS||Till 60 years of age (retirement age)||9% – 12% p.a.|
|ELSS Funds||3 years||12% – 15%*|
|SCSS (Senior Citizen Savings Scheme)||5 years (extendable once in 3 years)||8%|
|Tax-Saving Fixed Deposit||5 years||Up to 8%|
|Sukanya Samriddhi Yojana||21 years||7.6% p.a.|
|ULIP||5 years||8% – 10%|
*These are market-linked schemes. The interest varies based on market fluctuation.
Equity Linked Saving Scheme is a tax-saving equity mutual fund that invests mainly in equity and equity-related instruments. It comes with a lock-in period of 3 years. You can save up to ₹46,800 with ELSS investments.
The National Pension System is a voluntary retirement savings scheme that allows you to save money systematically throughout your working life. Although a Government-backed scheme, the scheme doesn’t offer assured returns. It comes with a lock-in period of 5 years.
PPF or Public Provident Fund is a retirement savings scheme provided by the Government of India that allows you to have a financially secure life after retirement. The minimum deposit per year is ₹500 while the maximum amount is ₹1.5 lakh. The lock-in period is 15 years, while partial withdrawal is available after 7 years.
NSC or National Savings Certificate is a fixed income scheme that you can easily open at a post office. It is a secure and low-risk investment instrument. It comes with a minimum lock-in period of 5 years.
Popularly known as ULIP, Unit Linked Insurance Plan offers the benefits of both investment and insurance under one integrated plan. As a ULIP policyholder, you have to make regular premium payments that would cover both insurance and investment.
Sukanya Samriddhi Yojana (SSY) refers to a government-backed small deposit scheme that aims to meet the marriage and education expenses of a girl child. The maturity period is capped at 21 years.
This refers to a certain kind of fixed deposit scheme through which you can avail of tax deductions under Section 80C of the IT Act. Tax-saver FDs usually come with a lock-in period of 5 years.
SCSS is a retirement benefits program launched by the Government of India. Senior citizens of the country can invest a lump sum in the scheme to get regular income along with tax benefits. You can earn up to 8% interest on your SCSS investments.
The National Bank for Agricultural and Rural Development offers NABARD Rural Bonds and Bhavishya Nirman Bonds. However, only investments in NABARD Rural Bonds are eligible for tax exemption under Section 80C of the Income Tax Act. You can avail of a maximum deduction of ₹1.5 lakh.
Also known as infra bonds, these bonds are issued by infrastructure companies. You can avail of 80C deductions by investing in these financial instruments.
The post office deposit scheme is quite similar to fixed deposits of banks. These schemes usually come with a duration ranging between one year and five years. You can claim tax deductions only on the interest earned on a five-year post office time deposit scheme.
Individuals and HUFs can claim tax deduction benefits under Section 80C of the Income Tax Act by investing or spending in the eligible investment instruments and expenditure categories. The maximum combined contributions, available only under the old regime, is ₹1.5 lakh in a financial year. Moreover, the combined 80C contributions would be deducted from the taxpayer’s gross total income before calculating the tax payable as per the applicable slab rate. Do note, that taxpayers would be required to submit receipts and statements of the eligible 80C instruments to validate their tax-saving measures.
Ideally, you should diversify your 80C investments to reap the benefits of investing. Let’s say, you have invested ₹1 lakh in ELSS, ₹10,000 in NPS, ₹10,000 in life insurance premium payments, and ₹30,000 in PPF. That way you would not only be able to claim deductions of up to ₹1.5 lakh, you would also have the luxury to make necessary financial preparations for your retirement.
By claiming deductions under Section 80C of the Income Tax Act, you can reduce your tax outgo. So, go through our Section 80C deduction list and invest carefully in the above-mentioned schemes based on your investment objective, investment horizon and financial goals.. Note that these deductions are not available if you opt for the new tax regime.
One of the best ways to maximise tax benefits would be investing in ELSS funds. These funds not only let you save tax on your investments but also help leverage your investment with equity exposure. You can start investing with Navi Mutual Fund’s ELSS Tax Saver Nifty 50 Index Fund which lets you invest in the top 50 Indian companies at the lowest cost. The other benefit is you can save taxes up to ₹46,800. Download the Navi app and start investing today!
There are various factors such as age, amount of investment and risk appetite that will determine which options would be suitable for you to reduce your tax liability. You have to consider the type of investment that you wish to opt for.
No, the interest that you earn through most of these investment options does not qualify for deduction under this section. However, in the case of NSC, if you reinvest the interest, it gets eligible for deduction.
If you want to save on tax, you can make an investment of Rs. 1.5 lakh in any of the investment instruments. Also, you can invest in NPS to avail of additional tax benefits under Section 80CCD (1B).
Form 16 is a certificate that is issued by an employer. This acts as proof for your annual TDS. It shows that your employer has made necessary tax deposits in your name. In addition, Form 16 also provides a break-up of yearly salary.
Here are the lock-in periods of the different options by investing in which you can claim tax deductions under Section 80C:
– ULIP – 5 years
– ELSS funds – 3 years
– PPF – 15 years
– Tax Saving Fixed Deposits – 5 years
– NPS – Till 60 years of age
You can claim tax deduction benefits on your premiums paid towards life insurance policy (if the policy is purchased by you for your spouse and children; deduction benefits are not available for premiums paid towards your parents’ life insurance plan), ELSS, NPS, NSC, SCSS, EPF, VPF, tax-saving FD, ULIP, and PPF investments and payments paid towards the principal amount of your home loan.
You have to declare and submit your investment proof to claim tax benefits. Without submission of such, you won’t be allowed to claim tax deduction benefits.
The new income tax regime doesn’t allow taxpayers to claim benefits under Section 80C. You can claim deduction benefits if you have opted for the old income tax regime.
As per the Income Tax Act, 1961, the tax deduction limit under Section 80C is capped at ₹1.5 lakh.
Yes, you can claim both 80C and 80D deductions provided you have investments in instruments that fall under sections 80C and 80D.
|Section 145A||Section 80P||Section 92CD|
|Section 281||Section 32(2)||Section 270A|
|Section 1399||Section 192A||Section 11|
|Section 35AD||Section 80C||Section 32|
|Section 206AA||Section 92E||Section 9|
|Section 153||Section 10(10D)||Section 194DA|
|Section 10AA||Section 80GG||Section 80TTB|
|Section 80JJAA||Section 1940||Section 23B|
|Section 206AB||Section 44AB||Section 87A|
|Section 115JB||Section 154||Section 194D|
|Section 194J(1)(ba)||Sectio 80U||Section 194K|
|Section 56-59||Section 80TTA||Section 234C|
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