UNIVERSAL KNOWLEDGE HUB
SOURCE - Investments which qualifies for deduction u/s. 80C
Under this section, you can invest a maximum of Rs l.5 lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,900. The various investment options under this section include:
Provident Fund (PF) & Voluntary Provident Fund (VPF: PF is automatically deducted from your salary. Both you and your employer contribute to it. While
employer’s contribution is exempt from tax, your contribution (i.e.,
employee’s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF).
Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Current rate of interest
is 8.7% tax-free and the normal maturity period is 15 years. Minimum
amount of contribution is Rs 500 and maximum is Rs 1,00,000. A point
worth noting is that interest rate is assured but not fixed.
Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.
Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C. If you are paying premium for more than one insurance policy, all the premiums can be included. It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) – even insurance bought from private players can be considered here.
Equity Linked Savings Scheme (ELSS): There are some mutual fund
(MF) schemes specially created for offering you tax savings, and these
are called Equity Linked Savings Scheme, or ELSS. The investments that
you make in ELSS are eligible for deduction under Sec 80C.
Home Loan Principal Repayment: The
Equated Monthly Installment (EMI) that you pay every month to repay
your home loan consists of two components – Principal and Interest.The
principal component of the EMI qualifies for deduction under Sec 80C.
Even the interest component can save you significant income tax – but that would be under Section 24 of theIncome Tax Act. Please read “Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage”, which presents a full analysis of how you can save income tax through a home loan.
Stamp Duty and Registration Charges for a 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 in the year of purchase of the
house.
National Savings Certificate (NSC): National
Savings Certificate (NSC) is a 6-Yr small savings instrument eligible
for section 80C tax benefit. The interest accrued every year is liable
to tax (i.e., to be included in your taxable income) but the interest is
also deemed to be reinvested and thus eligible for section 80C
deduction.
Infrastructure Bonds:
These are also popularly called Infra Bonds. These are issued by
infrastructure companies, and not the government. The amount that you
invest in these bonds can also be included in Sec 80C deductions.
Pension Funds – Section 80CCC: This
section – Sec 80CCC – stipulates that an investment in pension funds is
eligible for deduction from your income. Section 80CCC investment limit
is clubbed with the limit of Section 80C – it maeans that the total
deduction available for 80CCC and 80C is Rs. 1 Lakh.This also means that
your investment in pension funds upto Rs. 1 Lakh can be claimed as
deduction u/s 80CCC. However, as mentioned earlier, the total deduction
u/s 80C and 80CCC can not exceed Rs. 1 Lakh.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
Senior Citizen Savings Scheme 2004 (SCSS): Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest
is 9.2% per annum payable quarterly. Please note that the interest is
payable quarterly instead of compounded quarterly. Thus, unclaimed
interest on these deposits won’t earn any further interest. Interest
income is chargeable to tax.
5-Yr post office time deposit (POTD) scheme:
POTDs are similar to bank fixed deposits. Although available for
varying time duration like one year, two year, three year and five year,
only 5-Yr post-office time deposit (POTD) qualifies for tax saving
under section 80C. The Interest is entirely taxable.
NABARD rural bonds: There are two types of Bonds
issued by NABARD (National Bank for Agriculture and Rural Development):
NABARD Rural Bonds and Bhavishya Nirman Bonds (BNB). Out of these two,
only NABARD Rural Bonds qualify under section 80C.
Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with
benefits of equity investments. They have attracted the attention of
investors and tax-savers not only because they help us save tax but they
also perform well to give decent returns in the long-term.
Others: Apart form the major avenues listed above, there are some other things, like children’s education expense (for which you need receipts), payment in Sukanya Samriddhi Account that can be claimed as deductions under Sec 80C
0 comments