Section 80C of Income Tax Act

Section 80C of the Income Tax Act allows for certain expenditures and investments to be exempt from income tax.
Section 80 C
3 min
22-June-2024

Section 80C of the Income Tax Act provides exemptions on specific expenditures and investments from income tax. By planning investments in various financial assets like PPF, NSC, ELSS, etc., you can claim deductions up to Rs. 1.5 lakh under Section 80C, effectively reducing your taxable income.

If you on the lookout for smart strategies to cut down on your taxable income this year? Look no further than Section 80C of the Income Tax Act.

This beloved section offers a treasure trove of tax-saving opportunities through various investments and allowable expenses. By tapping into tax saving investments under 80C, taxpayers can significantly reduce their tax burdens.

What is section 80C in income tax?

Section 80C of the Income Tax Act provides a provision that allows individuals to claim tax deductions on certain investments and payments, thus effectively reducing their taxable income.

This section serves as a popular avenue for taxpayers looking to save on taxes through investments in approved financial instruments.

By strategically planning and diversifying investments across various options such as National Savings Certificates (NSC), Unit Linked Insurance Plans (ULIPs), Public Provident Funds (PPF), and others, individuals can claim deductions up to Rs. 1,50,000 for tax benefits under 80C.

Sections and subsections under section 80C of income tax

Below is a table summarising the sections and subsections under Section 80C of the Income Tax Act, detailing the various investment options and expenditures eligible for tax deductions:

Section/Subsection Description
80C The main section allows tax deductions on specified investments and payments
80CCC Allows deductions for contributions to pension plans other than the Employee Provident Fund
80CCD Provides deductions for contributions to the National Pension System (NPS)
80CCE Overall limit on deductions under Sections 80C, 80CCC, and 80CCD combined


These tax-saving investments under 80C allow an individual to claim deductions for life insurance premiums, mutual funds, tuition fees, home loan principal repayment, and more.

Tax saving investment options under section 80C

Tax-saving investment options under Section 80C of the Income Tax Act offer a variety of avenues through which individuals can reduce their taxable income by investing in approved financial instruments.

Investment options under Section 80C include Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity Linked Saving Schemes (ELSS), Tax Saving Fixed Deposits, National Pension System (NPS), and Unit Linked Insurance Plans (ULIPs), among others.

1. Equity linked saving scheme (ELSS)

ELSS funds are mutual funds that invest in equities and are eligible for tax deductions under Section 80C. This 80C investment has a lock-in period of three years and offers the potential for higher returns compared to other 80C investments.

2.. Investments in tax saving FDs

Investments in Tax Saving Fixed Deposits (FDs) are a type of fixed-income 80C investment offered by banks in India that help individuals save on taxes.

Lock-in period: 5 years
Interest rate: Varies, generally higher than regular savings
Tax benefit: Deduction under Section 80C
Safety: High, as FDs are less risky than market-linked investments

3. Investments in PPF (Public Provident Fund)

Investments in the Public Provident Fund (PPF) are a government-backed savings vehicle in India. These investments under 80c offer tax-free interest and returns.

Duration: 15 years, extendable in 5-year blocks
Interest rate: Compounded annually, set by the government
Tax benefit: Contributions, interest, and maturity are all tax-free under Section 80C
Eligibility: All Indian citizens

4. Investments in EPF (Employee Provident Fund)

Investments in the Employee Provident Fund (EPF) are mandatory retirement savings for salaried employees in India, where both employer and employee contributions are tax-deductible under Section 80C.

Contributions: This 80C investment is mandatory for salaried employees
Rate of interest: Annually decided by the government
Tax benefits: Contributions are tax-deductible; interest earned is tax-free
Withdrawal: Partial withdrawals are allowed for specific expenses

5. Investments in NPS (National Pension System)

Investments in the National Pension System (NPS) are voluntary retirement savings plans that provide flexible investment options in equities and fixed income. This 80C investment allows partial withdrawals upon reaching retirement age.

Structure: Tier-1 (mandatory, pension account) and Tier-2 (voluntary, savings account)
Tax benefits: Deduction under Section 80C; additional deduction for investment up to Rs. 50,000 under Section 80CCD(1B)
Withdrawals: Limited before retirement
Returns: Market-linked, depending on the fund chosen

6. Investments in ULIP (Unit Linked Insurance Plans)

The Unit Linked Insurance Plans (ULIPs) is an investment under 80c that combines life insurance with investment options. This allows policyholders to invest in a variety of market-linked assets while enjoying tax benefits on premiums paid and maturity proceeds.

Components: Investment and insurance
Flexibility: Choice of funds
Tax Benefits: Premiums and benefits are tax-free under Section 80C and Section 10(10D)
Lock-in Period: Minimum 5 years

7. Investments in Sukanya Samriddhi Yojana

Investments in Sukanya Samriddhi Yojana (SSY) are a government-backed savings scheme aimed at financial empowerment of the girl child in India, offering high-interest rates and tax benefits under Section 80C.

Purpose: To benefit the girl child
Rate of Interest: Higher than many debt-oriented investments, tax-free
Tax Benefit: Eligible under Section 80C
Account Operation: Till the girl reaches age 21 or upon her marriage after turning 18

How to get tax deduction under section 80C?

To avail of tax deductions under Section 80C, follow these steps:

  1. Invest wisely: Choose from various options like PPF, ELSS, NSC, life insurance, etc., and invest up to Rs. 1,50,000 annually.
  2. Keep documentation: Retain all receipts and documents related to your investments as proof.
  3. Submit proofs: Provide these documents to your employer or include them in your tax return.
  4. Understand limits: The maximum deduction claimable is Rs. 1,50,000 across all investments under Section 80C.
  5. Plan early: Invest early in the financial year to maximise the benefits of accruals and compound interest.

Who is eligible for deductions under section 80C of the income tax act?

All individual taxpayers and Hindu Undivided Families (HUFs) are eligible for deductions under Section 80C of the Income Tax Act for various investments and expenses incurred during the fiscal year. This includes salaried employees, self-employed persons, and freelancers.

How to maximise tax saving under section 80C?

  • Diversify your investments by allocating your Rs. 1,50,000 limit across various instruments like ELSS, PPF, NSC, and tax-saving FDs. This strategy helps manage risks while enhancing potential returns.
  • Begin your investments at the start of the financial year to take full advantage of compound interest and secure all eligible tax deductions.
  • Aim to exhaust the Rs. 1,50,000 deduction cap completely. Utilising this limit fully can significantly decrease your taxable income.
  • Also, consider investing on behalf of family members, such as paying for children's tuition or purchasing life insurance, to fully leverage available deductions.

Conclusion

Utilising Section 80C for tax savings is a strategic approach that benefits various financial goals, including retirement planning, education funding, and wealth accumulation.

By understanding and making the best use of the provisions under this section, individuals depending on their income tax slab can significantly reduce their tax liability while securing their financial future.

Once you have maximised your tax benefit under 80C, you might consider exploring further investment opportunities.

The Bajaj Mutual Fund Platform is equipped with a variety of tools, including an online lumpsum calculator and a SIP calculator, designed to simplify the planning process for mutual fund investments.

With access to more than 1,000 mutual funds, the Bajaj Finserv Mutual Funds Platform offers an excellent starting point for your investment journey.

Calculate your expected investment returns with the help of our investment calculators

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SIP Calculator Lumpsum Calculator Step Up SIP Calculator
Mutual Fund Calculator Brokerage Calculator FD calculator

Frequently asked questions

What is Section 80 C new tax regime?
In the new tax regime, taxpayers are not permitted to claim deductions under sections such as 80C, 80D, 80E, 80G, among others.
Which scheme comes under 80C?
Eligible investments for deductions under Section 80C include Public Provident Fund (PPF), National Savings Certificates (NSC), National Pension System (NPS), tax-saving fixed deposits, Post Office Term Deposits, Equity Linked Savings Schemes (ELSS), Unit Linked Insurance Plans (ULIPs), Senior Citizens Savings Scheme, and Sukanya Samriddhi Accounts.

What is Section 80B of Income Tax Act?
Section 80B of the Income Tax Act outlines the process for calculating income tax liability. This involves initially determining the total income of the assessee by incorporating deductions from various sections of the Act, followed by computing the payable income tax using the tax rates applicable for the corresponding assessment year.
Can I claim both 80C and 80CCD?
No, you cannot claim deductions under both Section 80C and Section 80CCD for the same investment. Section 80C covers deductions for specific investments, whereas Section 80CCD is specifically for deductions related to contributions to the National Pension System (NPS) and Atal Pension Yojana (APY).
How much is 80 C exemption?
Section 80C offers tax deductions on a range of investments, allowing you to reduce your taxable income by up to Rs. 1.5 lakh annually.
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