If you are a taxpayer, it is important to understand the various tax deductions that you can claim. Knowing the various deductions, you are eligible for and claiming them appropriately can help you reduce your tax liability and save more. In this blog, we discuss the list of deductions available under the most common section most taxpayers are well aware of – 80C.
What are tax deductions?
Tax deductions help you reduce your taxable income by deducting eligible investments or expenses from your income. These deductions are specified under Chapter VI A (Section 80C to 80U) of the Income Tax Act.
Deduction under Chapter VI-A isn’t allowed from the following types of income:
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Long-Term Capital Gains.
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Short-Term Capital Gains covered under section 111A. (STCG arising on transfer of equity shares or units of equity-oriented mutual funds)
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Winnings from lotteries, horse races, etc., referred to in section 115BB.
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Income covered under sections 115A, 115AB, 115AC, 115AD, 115BBA and 115D
Section 80C covers some of the most common investment vehicles and expenses and offers a deduction of up to 1.5 lakhs per financial year. The max cap of 1.5 lakhs also includes two other sections – 80CCC and 80CCD (1). Hence, the total limit of deduction that you can claim under all these sections put together is 1.5 lakhs in a financial year.
Eligible Investments & Expenses:
Equity Linked Savings Scheme (ELSS): ELSS are a type of equity mutual fund, and investments made into the scheme in the previous year are eligible for deduction. The lock-in for these investments is three years.
Life insurance premium: Deductions of up to 1.5 lakhs are available for premiums that you pay towards life insurance for yourself, your spouse or your children. ULIPs are also included here. The maximum premium you can claim is up to 10% of the sum assured, with an overall limit of 1.5 lakhs. The minimum holding period of life insurance policies other than ULIP is two years if you are claiming this deduction. ULIPs have a minimum holding period of five years.
Public Provident Fund & Sukanya Samriddhi Yojana: Investments made into the PPF and SSY account are eligible for 80C deductions.
National Savings Certificate (VIII Issue): Investment amount and interest accrued on NSC investments are eligible. Interest income from NSC is chargeable to tax in the year it accrues. NSC has a maturity of five years.
Provident Fund (PF) & Voluntary Provident Fund (VPF): Employee contributions to provident fund and voluntary provident funds are eligible for deduction under Section 80C.
Home Loan Principal Repayment: The principal component of EMI taken for the purchase of a residential house property qualifies for an 80C deduction. Expenses related to stamp duty and registration fees incurred for the purpose of transfer of house property are also allowed as deductions.
Child’s Tuition Fee: The tuition fee paid to any college, school, university or other educational institution within India for the full-time education of your children is also eligible for tax deductions. The deduction is only available for the child’s education and not for the taxpayer or spouse. Although the eligibility is for a maximum of two children, both the husband and wife can claim if both are taxpayers and have more than two children.
NABARD rural bonds: Investment in NABARD (National Bank for Agriculture and Rural Development) Rural bonds are eligible for deduction.
5-Yr bank fixed deposits/post office time deposit (POTD): Five-year tax savings deposits in banks and post offices are eligible up to the maximum limit of 1.5 lakhs in an FY.
Senior Citizen Savings Scheme (SCSS): SCSS is a government-sponsored pension scheme for senior citizens with an initial maturity of five years. Investments up to 1.5 lakhs are eligible for deduction.
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– Nischay Avichal
