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Know all about Section 80C of
Income Tax Act
ET Bureau Feb 10, 2010, 01.29pm IST
What is Section 80C
In order to encourage savings, the government gives tax breaks on certain financial products under Section
80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments.
Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%,
you save a tax of Rs 30,000. The various investment options under this section include:
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Provident Fund & Voluntary Provident Fund
Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a
retirement account along with your employer's contribution. While employer's contribution is exempt from tax,
your contribution (i.e., employee's contribution) is counted towards section 80C investments. You can also
contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per
annum and interest earned is tax-free.
Public Provident Fund
An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is
tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the
maximum is Rs 70,000.
National Savings Certificate
These are 6-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly.
The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus
eligible for section 80C deduction.
Equity-Linked Savings Scheme
Mutual funds offer you specially-created tax saving funds called ELSS. These schemes invest your money in
equities and hence, return is not guaranteed. Money invested here is locked for a period of three years.
Life Insurance Premiums
Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be
included in section 80C deduction. If you are paying premium for more than one insurance policy, all the
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Understanding Section 80C
premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life
insurance with benefits of equity investments are also eligible for deduction under Section 80C.
Home Loan Principal Repayment
Your EMI consists of two components, namely principal and interest. The principal component of the EMI
qualifies for deduction under Section 80C.
Stamp Duty and Registration Charges For Home
The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the
documents of the house can be claimed as deduction under section 80C. However, this can be done only in
the year in the year of purchase of the house.
Five-Year Bank fixed deposits
Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are also entitled for section
80C deduction.
Others
Apart from the above, things like children's education expenses that can be claimed as deductions under
Section 80C. However, you need receipts to claim the same.
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Readers' opinions (7)
Sort by: Newest | Oldest
21 Feb, 2014 01:59 PM
Lalit Rohit (Vadodara)
In the 5 year post office recurring deposits, is the invest taxable?
10 Mar, 2013 05:29 PM
Raghunathan Padmanabhan (Bangalore)
In the 5 year bank fixed deposits, is the interest taxable?
08 Feb, 2011 02:41 PM
swinder singh (ludhiana punjab)
How about the amount dopsited by asenior citizen for five years in the indian post office under senior citizens
saving plan?does it qualify for tax saving or not?
29 Dec, 2010 10:58 AM
Shripad (Belagavi)
Any document is required to be attached for the premium paid towards the policy in my wife's name, such as she is
not working, she is not claiming for incometax, etc.?
29 Nov, 2010 01:40 PM
pardhu (vskp)
i think all expenses relating to education are all exempted under sec.80c.is it right plz cnfirm
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