Detailed Analysis of Options to Save Tax Under Income-tax Section 80C

Section 80C is one of the most well-liked and popular sections among taxpayers because it allows them to reduce their taxable income by making tax-saving investments or incurring eligible costs. It allows a maximum annual deduction from the taxpayer’s gross income of Rs 1.5 lakh. Individuals and HUFs are both eligible to take advantage of this discount, whereas businesses, partnership businesses, and LLPs are not. Section 80C contains the subsections 80CCC, 80CCD (1), 80CCD (1b), and 80CCD (2). (2).

SectionsInvestments that qualify for tax deductions
Section 80C80C permits deductions for investments made in
PPFLIC premiumsPrincipal payments made on home loansEPFSukanya Smriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS), ULIP, tax-saving FDs for five yearsEquity Linked Savings Plans,Stamp duty and registration fees paid for the purchase of property,Infrastructure Bonds, and other financial instruments.
Section 80CCC Deduction for life insurance annuity plansSection 80CCC allows for the deduction of payments made to annuity pension schemes. Taxes, as well as any interest or bonuses that may have accrued, must be paid in the year that you receive your pension or annuity surrender payment.
Section 80CCC (1) Deduction for NPSSection 80CCD employee contribution (1) The maximum allowable deduction is the lowest of the following:
10% of gross salary (in case of the taxpayer is an employee)20% of total gross income (in case of self-employed)1.5 lakh rupees (maximum permitted under Section 80C)
Section 80CCC (1b) Deduction for NPSAn additional deduction of Rs 50,000 is made on the amount invested in the NPS account.Contributions to the Atal Pension Yojana are also tax deductible.
Section 80CCC (2) Deduction for NPSUnder this section, employers can deduct up to 10% of their basic salary plus a dearness allowance. This benefit is only available to salaried employees; self-employed individuals are not eligible.

Investments Deductible Under Section 80 C of the Income Tax Act

Here are some tax-deductible investment options under Section 80C. They not only assist you in saving taxes, but they also assist you in growing your money. The following is a quick comparison of the options:

Investment optionsLock-in periodAverage interestRisk involved
ELSS funds3 years12%-15%High
Tax saving FD5 years7%-8%Low
Senior citixen saving scheme7.4%5 years (can be extended for another 3 years)Low
ULIP5 years8%-10%Medium
PPF5 years7.10%Low
NPS schemeTill 60 years of age8%-10%High
National5 years6.8%Low
Sukanaya Samridhi YojanaTill the girl reaches 21 years of age84%Low

Detailed Analysis of Options to Save Tax Under Section 80C

Public Provident Fund

Contributions to the Public Provident Fund (PPF) are deductible under Section 80C of the Internal Revenue Code. The maximum deposit limit for Public Provident Funds is Rs.1,50,000, which allows an investor to claim the entire amount deposited as an income tax exemption under the Income Tax Act.

Employees’ voluntary contributions to the provided fund are also tax deductible under Section 80C of the Income Tax Act.

Unit-Linked Insurance Plans (ULIPs)

Unit-linked insurance plans (ULIPs) outperform traditional insurance policies in terms of long-term returns. The tax benefits provided by Section 80C of the Income Tax Act of 1961 have contributed to their increased popularity in recent years. Investors may receive tax exemptions on their investments up to Rs 1.5 lakh under section 80C of the Income Tax Act.

Life Insurance Premiums

Tax benefits can be obtained on premiums paid for life insurance contracts under the 80C limit. These exclusions apply to policies owned by the policyholder, their spouse, dependent children, and so on. Members of a single family are also eligible for the same exemptions.

A yearly premium of up to 10% (of the total sum assured of the insurance policy) is now tax-free under this programme. Prior to April 1, 2012, premiums of up to 20% (of the total assured) were deductible under Section 80C.

Senior Citizens Savings Scheme

Contributions to the Senior Citizens Saving Scheme (or SCSS) are tax deductible up to the maximum allowed under Section 80C, which is Rs. 1.5 lakh. The SCSS has a 5-year minimum lock-in period and is available to those over the age of 60. (those choosing the voluntary retirement scheme are entitled to participate in SCSS after the age of 55).

National Savings Certificate

The NSC, or National Savings Certificate, is a popular tax-saving tool for risk-averse individuals. The NSC has a maximum maturity period of 5 to 10 years, with interest compounded every two years.

Investors are not required to adhere to any caps on the total amount they contribute to NSC in a fiscal year, but Section 80C exemptions are only available up to Rs. 1.5 lakh per fiscal year.

Tax Saving Fixed Deposits

Tax Saving FDs are fixed deposit products offered by banks and post offices that are tax deductible under Section 80C. These FDs have a 5-year lock-in period and a maximum tax exemption of Rs. 1.5 lakh (on the principal amount). However, the returns on these instruments are taxed.

Sukanaya Samridhi Yojana

Sukanya Samriddhi Yojana is a savings programme designed specifically to pay for a girl’s education and marriage. Parents or legal guardians of a girl child (under the age of 10) and parents of two or more girls can open this account (only in the case of twins). The interest earned from this investment strategy is tax-free under Section 80C.

Infrastructure Bonds

Section 80C of the Income Tax Act allows for tax exemptions on infrastructure bonds if the investment is equal to or greater than Rs. 20,000. The Rs. 1.5 lakh limit still applies to these long-term secured bonds.

More about Section 80

Section 80 TTA: Interest on Savings Account

Interest on savings bank account deducted from gross total income
Individuals and HUFs can deduct up to Rs 10,000 in interest income from savings accounts with a bank, co-operative society, or post office. Include savings account interest in your other income.

Interest income from fixed, recurring, or corporate bonds is not deductible under Section 80TTA.

Section 80GG: House Rent Paid

Deduction for paid house rent in the absence of HRA

  • When HRA is not received, a Section 80GG deduction is possible for rent paid. The taxpayer, nor their spouse or minor child, should live near their place of employment.
  • The taxpayer should not own other self-occupied residential properties.
  • The taxpayer is required to pay rent and reside in an apartment.
  • Everyone can benefit from the deduction.

Section 80E: Interest on Education Loan

Interest on higher education loans is deductible.
Individuals may deduct interest paid on student loans used to fund their higher education. This loan could have been used for the borrower, their spouse, their children, or a student over whom they have guardianship authority.

80E deductions are allowed for up to 8 years (beginning with the year interest is reimbursed) or until all interest is paid, whichever comes first. There is no cap on the amount that can be claimed.

Section 80D: Medical Insurance

Deductions for medical insurance premiums
Section 80D allows you to deduct Rs. 25,000 for insurance for yourself, your spouse, and your dependent children (as a person or HUF). You can deduct an additional Rs 25,000 for your parents’ insurance if they are under the age of 60. This amount was increased from Rs 30,000 to Rs 50,000 in the 2018 Budget for parents over the age of 60.

The maximum deduction allowed by this clause is Rs. 1 lakh if both the taxpayer and the taxpayer’s parent(s) are 60 years of age or older.

Beginning with the fiscal year 2015-16, a cumulative additional deduction of Rs. 5,000 is allowed for preventive health checks.

Section 80DD: Disabled Dependent

Deduction for handicapped dependent relative rehabilitation
The Section 80DD deduction is available to a resident individual or a HUF on the following:

a. Expenses for a dependent person with a disability’s medical care (including nursing care), education, and rehabilitation.

b. Making a payment or deposit to a designated programme for the support of a disabled dependent.

i. When a disability is 40% or higher but less than 80%, a fixed deduction of Rs. 75,000 is made.

ii. Rs. 1,25,000 fixed deduction in cases of severe disability (disability of 80% or more).

This deduction requires a certificate of disability from a recognised medical authority.

The deduction thresholds of Rs. 50,000 and Rs. 1,000,000 have been raised to Rs. 75,000 and Rs. 1,25,000, respectively, for the fiscal year 2015-16.

Section 80DDB: Medical Expenditure

Deduction for medical expenses incurred by the taxpayer or dependent relatives

  1. Individuals and HUFs under the age of 60.

A resident individual or a HUF is eligible for an Rs. 40,000 deduction. It can be used to cover the costs of treating specific medical conditions for the owner or any of his dependents. A HUF may make such a deduction for medical expenses related to these specified illnesses for any HUF member.

  1. For the elderly and the super-elderly

2. Individual or HUF, taxpayers may deduct up to Rs 1 lakh from their taxes if the person for whom the expenses are incurred is a senior citizen. Up until the fiscal year 2017-18, a senior citizen and a super senior citizen could claim a deduction of Rs. 60,000 and Rs. 80,000, respectively. Unlike in the past, all senior citizens (including super senior citizens) can now take advantage of this common deduction of up to Rs 1 lakh.

  1. Reimbursement claims

Any reimbursement for medical expenses provided by an insurance company or an employer reduces the amount of the deduction that the taxpayer may claim under this section.

Remember that in order to claim such a deduction, you must have a prescription from the relevant physician.

Section 80U: Physical Disability

Deduction for a person with a physical disability:
A resident with a physical impairment (including blindness) or disorder is eligible for Rs. 75,000 deductions. In cases of extreme disability, a deduction of Rs. 1,25,000 may be available.

For fiscal year 2015-16, the Section 80U deduction limits were raised from Rs. 50,000 to Rs. 75,000 and from Rs. 1,000,000 to Rs. 1,25,000.

Section 80G: Donations

Donations to charitable organisations
The various donations listed in Section 80G are tax deductible up to 100% or 50%, with or without restrictions.

As of FY 2017-18, cash donations in excess of Rs 2,000 will no longer be deductible. Donations over Rs 2000 must be made using a method other than cash to qualify for an 80G deduction.

  1. Donations with 100% deduction without any qualifying limits
  • National Defence Fund set up by the Central Government
  • Prime Minister’s National Relief Fund
  • Any fund established by the Gujarat State Government solely for the purpose of providing relief to earthquake victims in Gujarat.
  • Clean Ganga Fund
  • National Fund for Control of Drug Abuse (applicable from the financial year 2015-16)
  • National Sports Fund
  • National Cultural Fund
  • Fund for Technology Development and Application
  • National Children’s Fund
  • Any trust, institution, or fund to which Section 80G(5C) applies for the purpose of providing relief to earthquake victims in Gujarat (contributions made between January 26, 2001 and September 30, 2001)
  • Prime Minister’s Armenia Earthquake Relief Fund
  • Africa (Public Contributions – India) Fund
  • Swachh Bharat Kosh (applicable from financial year 2014-15)
  • Chief Minister’s Relief Fund or Lieutenant Governor’s Relief Fund with respect to any State or Union Territory
  • Andhra Pradesh Chief Minister’s Cyclone Relief Fund, 1996, The Army Central Welfare Fund or the Indian Naval Benevolent Fund or the Air Force Central Welfare Fund
  • The Maharashtra Chief Minister’s Relief Fund during October 1, 1993 and October 6,1993
  • National Foundation for Communal Harmony
  • An approved university/educational institution of National eminence
  • Zila Saksharta Samiti constituted in any district under the chairmanship of the Collector of that district
  • A fund established by a state government to provide medical assistance to the poor
  • National Illness Assistance Fund
  • National Blood Transfusion Council or to any State Blood Transfusion Council
  • Cerebral Palsy, National Trust for Welfare of Persons with Autism, Multiple Disabilities
  • andMental RetardationChief Minister’s Earthquake Relief Fund, Maharashtra
  1. Donations with a 50% commitment with no qualifying limit
  • Prime Minister’s Drought Relief Fund
  • Indira Gandhi Memorial Trust
  • Jawaharlal Nehru Memorial Fund
  • The Rajiv Gandhi Foundation

3 Donations to the following organisations are tax-deductible up to 10% of adjusted gross total incomeDonation made by a Company to the Indian Olympic Association or to any other designated association or institution located in India for the purpose of building a sports and games infrastructure there or of sponsoring sports and games thereGovernment or any authorised local authority, institution, or organisation to be used in order to promote family planning

  1. Donations to the following organisations are eligible for a 50% deduction, up to 10% of adjusted gross total income
  • Any other organisation or fund that meets the requirements of Section 80G(5)
  • Government or local government to be used for any charitable purpose other than promoting family planning
  • Any organisation established in India with the goal of addressing the housing shortage and providing housing for those in need, or of planning, developing, or improving cities, towns, villages, or both
  • Any organisation mentioned in Section 10(26BB) for advancing the interests of the minority population
  • Any informed temple, mosque, gurudwara, church, or other location that requires repairs or renovations

Section 80GGB: Company Contributions

Deductions for corporate contributions to political parties

  • An Indian company may deduct from its profits the amount it contributed to a political party or electoral trust.
  • Deductions are available for contributions made in any form other than cash.

Section 80GGC: Contributions to Political Parties

Deductions for contributions made to political parties by anyone.

  • Section 80GGC allows individual taxpayers to deduct contributions to a political party or an electoral trust.
  • Companies, municipal governments, and artificial juridical persons that receive full or partial government funding are not eligible. This deduction is only available to those who pay by a method other than cash

Section 80RRB: Royalty of a Patent

Deductions for patent royalties
For patents registered under the Patents Act of 1970 on or after April 1, 2003, royalty income may be deducted up to Rs. 3 lakh or the amount of revenue received, whichever is less. A taxpayer must be an individual patent holder residing in India. The taxpayer must provide a certificate in the appropriate format, signed by the appropriate authority.

Section 80TTB: Interest Income

Interest on deposits is deducted for senior citizens.
Senior citizen deposit interest income will now be deductible owing to the addition of a new section 80TTB in the 2018 budget. The maximum allowed deduction is Rs. 50,000.

Section 80TTA will no longer allow any additional deductions. In addition to Section 80 TTB, the threshold level for TDS on interest income payable to seniors will be raised by amending Section 194A of the Act. The previous limit of Rs 10,000 was raised to Rs 50,000 in the most recent Budget.

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