Investments and Payments eligible for deduction under section 80C

 This article will help you understand about the Investments and Payments that are eligible for deductions under section 80C

 Investments those are eligible for tax deductions u/s 80C of the Income Tax Act, 1961.

 Under Section 80C of the Income Tax Act 1961, there are provisions of tax exemption for certain investments. The maximum limit for claiming tax exemption is Rs. 1.5 lakh. This benefit is available for people of all the three tax brackets. Below are some of the investments which qualify for tax exemption under section 80c :

  1. The investment made in People Provident Fund (PPF) – The whole amount invested in PPF is exempt from tax, and the maximum amount that can be invested is Rs. 1.5 lakh and the minimum amount is Rs. 500. Both interests earned and withdrawal made are tax-exempted for all the tax brackets. The interest rate for PPF is 8.1% which is compounded annually and has a tenure of 15 years.
  2. The investment made in Employee Provident Fund (EPF) – The contribution made by the employees towards Employee Provident Fund (EPF) is also tax deductible. The money deducted from the employee’s salary by the employers amounts to 12% of the employee’s salary for the depositing in EPF or any other provident fund and the current interest rate on EPF is 8.8%.
  3. The investment made in ELSS (Equity Linked Savings Scheme) – ELSS or Equity Linked Savings Scheme is a portfolio where one can invest in equity through mutual funds and avail the benefit of saving taxes. It has an advantage over other tax saving investments as it has the shortest lock-in period of 3 years. All the investments made in ELSS funds are tax-deductible.
  4. Purchasing National Savings Certificate (NSC) – The NSCs are the certificates used for saving income taxes in India and can be purchased from any Post Office by an adult. They have a lock-in period of 5 years and the interest is liable to tax payment @ 8.1%. The investment made in NSCs is tax deductible.
  5. The investmentt made in National Pension System (NPS) – The National Pension System (NPS) has been started by the Government of India to allow the working professionals and the workers ofthe unorganized sector to avail the benefit of pension after retirement. The investments made under NPS up to Rs. 1.5 lakh are tax-deductible. Moreover, an additional Rs. 50,000 can be invested in NPS for tax deduction under Section 80CCD.
  6. Investment made in Tax Saving Fixed Deposits (FD) – The Tax Saving Fixed Deposits (FD) are similar to general fixed deposits and are available for a lock-in period of 5 years. The returns on these fixed deposits area guaranteed and they offer 100% capital protection. After the maturity, the interests  on these fixed deposits are liable to tax payment. The tax exemptions  on these FDs are applicable under Section 80C. Different banks charge different interest rates on these fixed deposits varying from 7 to 9%.
  7. Investment in Unit Linked Insurance Plans (ULIP) – Unit Linked Insurance Plans/ULIPs are help in covering the life insurance with the advantage of equity investments. They don’t offer guaranteed returns . Of the total amount invested in ULIPs, some of the amount is used to provide insurance and the rest of the amount is invested in the stock markets.  The amount invested is totally tax exempt under the Act.
  8. Investment in Sukanya Samriddhi Yojana – In the Sukanya Samriddhi Yojana, the deposit is made for a girl child by the parents. The account matures after 21 years and the interest is compounded annually. The current interest rate is 8.6%. The amount deposited in this scheme is fully tax deductible under the Act.
  9. Investment in Senior Citizens Savings Scheme (SCSS) – This scheme is mainly for the people above the age of 60 years or someone who is above 55 years of age and has opted for retirement. It has a maturity period of 5 years and provides interest rate at 8.6% per annum. The amount of up to Rs. 1.5 lakhs can be invested in this scheme to save taxes.

NOTE : There are many other such investments that are tax-exempt under the Section 80C of the Income Tax Act, 1961 like : 5 year deposit scheme in Post Office, Amount invested in National Housing Bank’s Home Loan Scheme, subscriptions to securities like NSS, etc.

Payments those are eligible for tax deductions u/s 80C of the Income Tax Act, 1961.

  1. Life Insurance Premiums – The premium amount which is due for payment of the Life Insurance Premium (for self, spouse, children, father, mother or anybody else) is eligible for tax deduction only if the premium is less than the 10% of the sum assured.
  2. Home Loan Principal Repayments –  The principal amount for the home loan is eligible for tax deduction under the  Act.
  3. Educational Fees – The fees (school, college, a university which is situated in India) of the children (2 only) is eligible for tax deduction.

For any help on ITR Filing feel free to consult the tax experts at Taxraahi. You can file ITR yourself via our ITR software or get CA’s help on filing income tax return. You can also use the option of Business Return, and Bulk Return.

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By | 2018-08-08T09:16:40+00:00 June 10th, 2016|Categories: Tax Savings|Tags: , , |0 Comments

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