Section 80C of the Indian Income Tax Act provides tax benefits on various investments and expenses such as life insurance premiums, Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), etc. up to a maximum limit of Rs. 1.5 lakhs.
Section 80C applies only to individual taxpayers and HUFs( Hindu Undivided Families). Corporate bodies, partnership firms, and other businesses are not eligible for tax exemptions under Section 80C.
Eligibility of Section 80C
Individuals and HUFs are both eligible for Section 80C deductions. This section also applies to both Indian residents and non-resident Indians. The maximum deduction allowed under this section is Rs. 1.5 lakhs per year. Companies, partnerships, and other corporate bodies are not eligible for the deduction.
What is section 80C in Income Tax Acts and its Subsections?
Section 80C of the Income Tax Act provides a deduction of up to Rs. 1.5 lakh from taxable income for investments made in certain specified instruments like Public Provident Fund(PPF), Equity-Linked Saving Scheme(ELSS), National Pension System(NPS), etc. The deduction is available to individuals and Hindu Undivided Families (HUFs).
There are various other subsections under Section 80C that provide for deductions on specific investments or expenses.
| Tax saving Section | Eligible investments for Tax Exemptions |
| Section 80C | Investments such as EPF(Employee Provident Fund), PPF(Public Provident Fund), National Pension Scheme (NPS), Sukanya Samriddhi Yojana(SSY), Mutual fund (Equity Linked Saving Scheme) Tax Saving FD, National Saving Certificate (NSC), SCSS, Unit Linked Insurance Plan (ULIP), etc., payment made towards life insurance premiums, Children’s Tuition Fees, Principal Repayment of Housing Loan, Stamp Duty & Registration Charges Deduction, etc. |
| Section 80CCC | Payments to retirement plans and mutual funds. |
| Section80CCD(1) | Contributions made to government-sponsored programs like the National Pension System(NPS) and Atal Pension Yojana(APY) etc. |
| Section 80CCD(1B) | Under this section, investments in NPS up to Rs. 50,000 are exempt from tax. eligible for an additional deduction of Rs.50000/-. |
| Section 80CCD(2) | employer contribution towards the NPS fund on behalf of employees, This subsection is applicable only for salaried employees and not self-employed. |
Who Investments Eligible for a Section 80C Income Tax Deduction
1. Public Provident Fund(PPF)
Public Provident Fund (PPF) is a popular long-term investment option covered under Section 80C, which offers tax benefits on the investment made. Public Provident Fund (PPF) is a popular long-term investment option that offers tax benefits under Section 80C. It has a lock-in period of 15 years and provides a fixed rate of return, making it a safe and reliable investment option for individuals looking to save for their future.
Investment Amount: The minimum deposit limit is Rs.500 and the maximum deposit limit is Rs.1,50,000 per year.
Lock-in- Period: The PPF account matures after 15 years, but part of the funds can be withdrawn after 7 years.
Taxability: It’s EEE rated which means it’s tax-exempt at the time of investment, returns, and withdrawals.
Advantage:- advantages of PPF is that it offers guaranteed returns and is a safe investment option. Additionally, it has a lock-in period of 15 years, which promotes disciplined savings habits.
Disadvantage:- the disadvantage of PPF is that the interest rate offered on the investment may not always keep up with the inflation of the market rate.
2. Sukanya Samriddhi Yojana (SSY)
Sukanya Samriddhi Yojana (SSY) is a government-backed savings scheme designed to provide financial security for the girl child’s education and marriage expenses. The scheme offers attractive interest rates and tax benefits, making it a popular investment option for parents.
Eligibility: Resident individual parents can invest in this program having a two-girls child up to the age of 10 years.
Investment Amount: The minimum deposit limit for this account is Rs 250 per year and the maximum limit is Rs 150,000.
Lock-in- period: The amount must be paid for 15 years. After 21 years, this account matures. Taxable: Itis an exemt-exempt-examt.
3. Equity Linked Savings Scheme (ELSS)
ELSS is a type of mutual fund that invests primarily in equity and equity-related securities. ELSS offers tax benefits under Section 80C of the Income Tax Act, making it an attractive investment option for individuals looking to save on taxes while also earning potentially higher returns through equity investments.
Advantage:- ELSS has a lock-in period of three years, which means investors cannot withdraw their money before the completion of this period.
Disadvantage:- ELSS carries a higher risk due to its focus on equity market fluctuations investments and may not be suitable for investors with a low-risk appetites Scheme.
4. Tax-Saving Fixed Deposits
Tax-saving fixed deposits are a type of investment option that offer tax benefits under Section 80C of the Income Tax Act. They have a lock-in period of 5 years and offer fixed returns on the invested amount.
Tax-saving fixed deposits are a popular investment option for risk-averse individuals as they offer guaranteed returns and tax benefits under Section 80C of the Income Tax Act. However, it is important to note that the interest earned on these deposits is taxable.
5. Principal Repayment Made Towards Home Loan
Home loan principal repayment eligible investment covered by Section 80C is the principal repayment made towards a home loan, which not only helps in saving tax but also helps in building an asset for the future.
It is a popular investment option among individuals who are looking to buy a house and save on taxes at the same time.
Stamp Duty and Registration Charges
Stamp Duty and Registration Charges are also eligible investments covered by Section 80C. These charges are incurred during the purchase of a property and can be claimed as a deduction under Section 80C, thus reducing the taxable income.
6. Senior Citizens Savings Scheme(SCSS)
SCSS investment option covered by Section 80C is the Senior Citizens Savings Scheme, which is specifically designed for senior citizens and offers a fixed rate of return with a five-year lock-in period. It is a safe investment option for those who are looking for regular income post-retirement while also saving on taxes.
7. Unit Linked Insurance Plans (ULIPs)
Unit Linked Insurance Plans (ULIPs) are another investment option covered by Section 80C, which offers the dual benefit of insurance and investment. They provide flexibility in terms of investment options and have the potential to generate higher returns over the long term. However, they also come with market risks and charges that need to be carefully considered before investing.
8. National Savings Certificate (NSC)
National Savings Certificate (NSC) is a fixed-income investment option covered by Section 80C, which is backed by the Government of India. It offers a fixed rate of return and has a lock-in period of five years, making it a safe investment option for those who want to save on taxes and earn guaranteed returns.
9. National Pension Scheme (NPS)
National Pension Scheme (NPS) is a retirement-focused investment option covered by Section 80Cand 80CCD(1), which allows individuals to contribute towards their retirement fund and receive regular income post-retirement. It offers flexibility in terms of investment options and has the potential to generate higher returns over the long term, making it a popular choice among investors.
Tax Saving Investment Options under section 80C
| Sr. No. | 80C Investment schemes | Lock-in-period | Return % | Risk | Taxability on Risk-free |
| 1 | PPF | 15 YEARS | 7.1% | Risk-free | EEE(Exempt-Exempt-Exempt) |
| 2 | SSY | 21 YEARS | 7.6% | Risk-free | EEE |
| 3 | ELSS | 3 TEARS | 12-18% (depend on market fluctuation) | Risky | Interest Taxable |
| 4 | FD | 5 YEARS | 5-8% | Risk-free | Interest Taxable |
| 5 | SCSS | 5 YEARS | 8-9% approx | Low Risk | Interest Taxable |
| 6 | ULIPs | 5 YEARS | 7-10% approx | Risky | Returns are tax-free |
| 7 | NSC | 5 YEARS | 7% | Risk-free | Interest Taxable |
| 8 | NPS | TILL RETIREMENT | 7-10% approx | Risky | Return Partially Exempt |
Tax Exemption on Investment Returns
tax benefits on investments, Section 80C also offers deductions on certain expenses such as tuition fees for children, home loan principal repayment, Stamp Duty and Registration Charges, and life insurance premiums. Moreover, the tax exemption on investment returns under Section 10(10D) can further enhance the overall benefits of investing in eligible schemes
Know the Maximum Limit
It is important to note that the maximum limit for claiming tax benefits under Section 80C is Rs. 1.5 lakh per financial year, so make sure your investments and expenses do not exceed this limit.