The government has offered many exemptions under the various sections of the Income Tax Act that you can avail to your advantage. But to do that first, you need to understand what the multiple sections of the Income Tax Act have to offer. One of these is Section 80 of the Income Tax Act, 1961. Deduction under Section 80 includes various options like investments, premiums paid, loan repayment etc. These options can reduce your tax liability considerably if you optimize them.
This is a list of the various expenditures and investments that can be claimed under section 80C for the current financial year-
- Investments in EPF (Employee Provident Fund) – Most salaried employees have a retirement benefits scheme. The EPF is generally 12% of the basic salary plus DA that is deducted from your salary by your employer and deposited in your EPF account. But this rate can change from time to time. The employer and employees both contribute to this fund. An employee needs to earn a minimum basic salary of Rs 15,000 per month. This balance can be withdrawn by the employee 2 months after leaving the job if they do not take up employment within the next two months with another employer who is covered by the act. The interest rate for EPF is 8.55%. The whole of this balance is tax-free if you withdraw it after 5 years of continuous service. The entire amount that is deducted in a year from the employee can be claimed as a deduction while calculating your total taxable income.
- Public Provident Fund – The Public Provident Fund or PPF is a scheme the government provides, and the investments you make in this are eligible for deductions under 80C. A resident of India, whether salaried or non-salaried can open a PPF account. A Hindu Undivided Family cannot open this type of account. In a year, the lowest contribution you can make towards PPF is Rs 500, while the maximum is Rs 1.5 lakh. The interest on this account is tax-free at present and is compounded yearly. Currently, the interest rate is 8% per annum. The maturity period of PPF is 15 years, but you can extend this period by an additional 5 years. You can make partial withdrawals from your account after 7 years. The interest rate is not fixed, but is assured, and is revised every three months.
- Equity Linked Savings Scheme (ELSS) – Certain mutual fund schemes were explicitly designed to save tax.The investments you make in Equity Linked Savings Scheme are eligible for tax deductions under 80C. This scheme offers the chance to earn higher returns when compared to similar tax-saving investments because it is linked with equity. But, this also means that this has more risks involved. There is no upper limit to the amount you can invest in this scheme. However, the tax benefits you can avail are limited to Rs 1.5 lakh. The Equity Linked Savings Scheme has a lock-in period of 3 years, which is the shortest one of all the options available under 80C. The capital gains you make from the ELSS are taxed under long-term capital gains tax.
- Sukanya Samriddhi Scheme – The Sukanya Samriddhi Scheme is a popular scheme that is offered by the Indian government. It aims to better the lives of women in India, right from a very early age. A Sukanya Samriddhi Scheme can be opened in the name of a female child at any point between her date of birth to her 10th The minimum amount that can be invested in this scheme is Rs 1000 in a financial year, while the maximum limit is set at Rs 1.5 lakh. You can prematurely withdraw as much as half of the amount deposited when the child reaches the age of 18. The interest in the Sukanya Samriddhi Scheme is calculated and compounded every year and is 8.5% at present. The interest you receive is eligible for tax deduction under 80C. The investments, withdrawals, and maturity amount in the Sukanya Samriddhi Scheme are all tax-free.
- Home loan principal repayment – The EMI we pay as repayment of our home loans comprises two parts- the principal and interest. The principal amount is qualified for tax deduction under 80C. Even the interest you pay helps you save income tax significantly, and it comes under section 80EE. So, if you have a home loan that you are currently repaying, then the principal amount you repay in a financial year can be claimed by you for the deduction. If you make use of the tax deductions offered by section 80C to its limits in home loan repayment itself, you do not need to worry about investing in other tax-saving products for the sole purpose of tax benefits. Any payment to development authorities like the Delhi Development Authority or other similar ones for the purchase of a house that has been assigned to you by a scheme is also eligible for tax deduction under section 80C.
- National Pension System – The Indian Government started this pension scheme that permits the unorganized sector and working professionals to receive a pension after they retire. Investments made in this system can avail tax deductions under 80C too, and the maximum amount that can be claimed is Rs 1.5 lakh. Every Indian citizen in between the ages 18 to 60 is eligible to open a National Pension System account. This account permits partial withdrawals under special conditions after 15 years are over. Rate of returns vary from 12% to 14%, and there is no upper limit to the investment permitted.
- National Savings Certificate – The National Savings Certificate is one of the most widely used tax-saving instruments that are at the disposal of Indian citizens. The maturity period of the NSC is 5 years, and the interest is compounded annually. But, since the interest remains in the account, it is considered as a reinvestment. A reinvestment qualifies for deduction under 80C in the next year. The current rate of interest is 8%. The minimum amount for investment is as low as Rs 100, and there is no upper limit. The sum you invest in the NSC is eligible for tax exemption under 80C, with the upper limit for such a tax deduction being Rs 1.5 lakh per year.
- Senior Citizen Savings Scheme – One of the best possible investment schemes for senior citizens is the Senior Citizen Savings Scheme. It provides moderate returns compared to other options, and interests are paid every three months. Individuals above 60 years can make long term investments under this scheme and can also claim tax benefits amounting to Rs 1.5 lakh for it under section 80C. Individuals who have retired using a Voluntary Retirement Scheme are also eligible to open this scheme. They need to be between 55 to 60 years old and must open the account within 3 months of their retirement. The rate of interest that is being offered at present is 8.7% per annum.
- Unit linked Insurance Plans – If you want a plan that is a mixture of insurance and investment, you should go for Unit-linked Insurance Plans. A portion of the amount you invest in a ULIP is used to provide coverage, while the rest is invested in the stock market. An individual can purchase a ULIP for the benefit of oneself, spouse or child. The interest rates fluctuate since it is linked to the market. The rate of return you can expect on your ULIP investment is between 12% – 14%. In the long term, a ULIP offers substantial profits. There is no upper investment limit of this plan. These plans have gained so much popularity in recent times because of these features. Investments and withdrawals are free of tax, as is the maturity amount.
- National Bank offers NABARD Rural Bonds – Two types of bonds for Agriculture and Rural Development- the NABARD Rural Bonds and the Bhavishya Nirman Bonds. The NABARD Rural Bond is eligible for tax deductions under 80C of the Income Tax Act. But, it is essential to note that the availability of these bonds for investment that is eligible for the section 80C tax benefit depends on the government.
- Five-year Post Office Time Deposit Scheme – The deposit schemes offered by post offices are quite similar to the fixed deposits of banks. These schemes could range from 1 year to 5 years in duration. The interest is eligible for the section 80C tax deductions. It is paid annually, even though it is compounded quarterly. The interest rate is also revised by the government each quarter. The interest you earn is entirely taxable.
- Tax Saving FDs – Tax saving Fixed Deposits are like regular fixed deposits but have 5 years as the lock-in period. You can receive tax deduction benefits under 80C on investments going up to Rs. 1.5 lakh. The interest rates vary from 5% to 7.75%. The minimum investment amount in this kind of investment is Rs 1000.
- Children’s Tuition Fees – The amount you pay as tuition fee, whether it is at the time of admission or later, is eligible for deduction. This excludes the development fee you pay of the donation amount, and it must be a school, college or university in India.
Section 80CCC of the Income Tax Act
Under Section 80CCC, individuals can claim tax deductions on investments made in pension plans offered by public or private sector insurers. Whether it’s buying a new policy or renewing an existing one, payments made towards such a fund are eligible for tax deductions. However, it’s essential to know that the final pension amount you receive as well as the interest and bonuses are taxable and hence cannot be claimed as tax deductions
The maximum tax deduction that you can claim under Section 80CCC is Rs. 1.5 Lakhs. This amount is clubbed with Section 80C and Section 80CCD.
Who is eligible for deductions under Section 80CCC?
Individual taxpayers who have subscribed to an annual pension plan offered by approved insurance companies. HUF or Hindu Undivided Families are not eligible for Section 80CCC deduction. The above provisions apply to both Indian residents and NRIs.
Important things to know about Section 80CCC deductions
- Section 80CCC deduction can only be claimed if some payment towards purchase or renewal of pension plan has taken place
- The payment of the pension fund must happen from the accumulated funds as per Section 10 (23AAB) of the Income Tax Act
- The maximum deduction you can claim under Section 80CCC is Rs. 1,50,000. This is a cumulative amount which also includes deductions from Section 80C and Section 80CCD
- If for some reason the policyholder surrenders the policy, the amount received upon surrendering is taxable in its entirety
- All bonuses and interests received from the policy are taxable
Section 80CCD of the Income Tax Act
Under Section 8CCD of the Income Tax Act, 1961, contributions made to Pension plans offered by the Central Government are eligible for tax deductions. These are namely the National Pension Scheme (NPS) and the Atal Pension Yojana (APY).
Who is eligible for claiming tax deductions under Section 80 CCD?
- Resident Individuals, both salaried and self-employed can claim tax deductions under this section
- Citizens of India, including NRIs, can claim tax benefits under this scheme
- HUF (Hindu Undivided Families) are not eligible to claim tax deductions under Section 80CCD
- NPS is mandatory to the central government employees whereas for the others it is voluntary
- To claim tax deduction under NPS tier-1 account, individuals must contribute a minimum of Rs. 6000 per year or Rs. 500 per month
- To claim tax deduction under NPS tier-2 account, individuals must provide a minimum of Rs. 2000 per year or Rs. 250 per month
Section 80CCD has subdivisions for further clarity on the tax deductions that can be claimed under this section:
Section 80CCD (1) is related to the contribution made by the individual towards the NPS. Provisions under this section apply to individuals irrespective of whether they are government employee, private employee or self-employed. These provisions are also applicable to NRIs.
The deduction amount under this section is capped at 10% of the salary or 10% of the gross income of the individual. This limit has been increased to 20% for self-employed individuals from FY 2017-2018.
Section 80CCD (2) is related to the employer’s contribution to the NPS on behalf of the employee. This contribution made by the employer is in addition to the one made towards PPF and EPF. Employers can contribute as much as the employee does or more. Under this section, employees can claim tax deductions up to 10% of their salary which includes basic pay and dearness allowance or matches the contribution made by their employer towards the NPS.
Section 80 CCF of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim tax deductions on long-term infrastructure bonds issued by the government. You can claim as much as Rs. 20,000 under this section.
Section 80 CCG of the Income Tax Act offers tax deductions on investments made in Equity Saving Schemes issued by the government. The maximum amount you can claim under this section is Rs. 25,000.
Section 80 D of the Income Tax offers deduction on premium paid for medical insurance – You can claim up to Rs. 25,000 in any financial year. These insurance policies could be for yourself, your spouse or your children. In case, one of the insured members is 60 years or more, the tax deducted can be claimed up to Rs. 30,000. Additional tax deduction on medical insurance for parents is allowed to the extent of Rs. 25,000. In case, parents are over 60 years or more; you can claim up to Rs. 30,000. The maximum permissible deduction under Section 80D is Rs. 60,000.
Section 80D has subdivisions which if applicable to you, can be used to claim deductions. The subdivisions are as follows:
Section 80DD is for tax deductions in two scenarios – If you pay for treatment of dependents with a disability, deduction of Rs. 1.5 Lakh can be claimed in case of severe disability and deduction of Rs. 75,000 in other disability cases.
Section 80DDB of the Income Tax Act offers provisions for deductions on expenditures incurred on the treatment of a particular disease. The maximum deduction under this section is Rs. 40,000. In case the treatment is for senior citizens, a deduction can be claimed up to Rs. 60,000.
Section 80E of the Income Tax offers deduction on interest paid towards education loans taken for higher studies. So, if you are repaying the education loan taken for yourself, your spouse or your children’s higher education, then you can claim a tax deduction on the interest amount you’ve paid towards the repayment of this loan. This deduction is valid for 8 years from the time when the loan was taken or until the interest is paid – whichever is earlier. If you’ve taken a loan for foreign education, that can be claimed as deduction under Section 80E too.
Section 80GG of the Income Tax Act offers deductions on House Rent Paid. If HRA is not a part of your salary, you can claim deduction on house rent paid. However, you, your spouse or your children mustn’t own residential accommodation in the place of employment. The individual claiming the deduction should be the one living on rent and paying the rent. The deduction under this section is capped at Rs. 60,000.
Section 80GGA of the Income Tax Act offers deductions on donations towards the National Poverty Eradication Fund or as a contribution to further social, scientific or education research. The amount paid towards this contribution can be claimed as a tax deduction
Section 80GGB of the Income Tax Act offers tax deductions to Indian Companies who make donations to electoral trusts or political parties.
Section 80GGC of the Income Tax Act offers tax deductions to tax-paying individuals who donate or contribute to electoral funds or political parties.
Section 80 IA of the Income Tax Act offers tax deductions on the gains received from various industrial activities related to power generation, telecommunication, SEZs, industrial parks etc. There are several subsections under this act that give you more clarity on what kind of tax deductions can be claimed under this section.
Section 80 IAB of the Income Tax Act allows Special Economic Zone (SEZ) developers to claim deductions on the profits generated via the development of SEZs
Section 80 IB of the Income Tax Act offers tax deductions on profits generated from theatres, cold storage plants, ships, convention centres, hotels, scientific research & development, etc.
Section 80 IC of the Income Tax Act offers tax deductions to a resident of states falling under a select category. These states are Manipur, Himachal Pradesh, Tripura, Mizoram, Arunachal Pradesh, Nagaland, Uttarakhand, Assam and Meghalaya
Section 80 ID of the Income Tax Act offers tax deductions on profits from hotels and convention centres, provided that the location of these businesses is in some specific regions.
Section 80 IE of the Income Tax Act offers tax deductions to all individuals who have projects in North-eastern states in India, subject to several conditions
Section 80 JJA of Income Tax Act allows deductions on profits that have been generated from businesses related to processing or treatment on biodegradable waste to produce products like bio-pesticides, bio-fertilisers, biogas, etc.
Section 80 JJAA of the Income Tax Act offers deductions on profits generated on the sale of goods and products manufactured in factories. Under this section, companies can claim a deduction of up to 30% salary of new full-time employees for an assessment period of 3 years. A Chartered Accountant must audit these accounts and present a report highlighting all the returns of the company.
Section 80 LA of the Income Tax Act allows Scheduled Banks that have offshore accounts in SEZs, Entities of International Finance Centres, and banks set up in foreign countries to claim tax deductions equal to 100% of the income for the first 5 years and 50% of the income earned by transactions for the next 5 years.
Section 80 P of the Income Tax Act offers tax deductions to cooperative societies under certain conditions. If these cooperative societies earn income from cottage industries, fishing, sale of agricultural harvest, production and sale of milk, etc., then these societies are eligible for tax deductions. It is important to note that all cooperative societies can claim the following tax deductions:
- Income earned by renting the warehouses owned by the society
- Income earned in the form of interest on loans offered to other entities
- Income earned in the way of interest on properties or other securities
Section 80 QQB of the Income Tax Act allows Indian authors to claim tax deductions on royalties earned on the sale of books. Only Indian authors are eligible to claim this deduction, and the maximum amount that can be claimed is Rs. 3 Lakhs. Literary, artistic or scientific books are exempted from taxes whereas textbooks, journals, diaries, etc., are not considered eligible for tax exemption.
Section 80 RRB of the Income Tax Act allows Indian residents to claim tax deductions on income earned via royalty on their patent. They can claim up to Rs. 3 Lakhs as deductions. If you’re receiving a fee on patent from foreign countries, then that amount needs to be brought to the country within a specific time to be eligible for tax deductions.
Section 80 TTA of the Income Tax Act allows individuals taxpayers and Hindu Undivided Families (HUFs) to claim deductions of up to Rs. 10,000 every year on the interest earned on their investment in savings bank accounts within the country.
Section 80 U of the Income Tax Act allows individual local taxpayers with disabilities to claim tax deductions of up to Rs. 75,000 per year. These individuals will need to have a certificate of Person with Disability (PwD) issued by a medical authority as proof. In case of severe disabilities, you can claim deductions up to Rs. 1.25 Lakhs, subject to several conditions as set by the government.
Summary of Section 80 Deductions
|Section of Income Tax Act||Who can claim?||Maximum limit|
|80 C||Individuals & HUFs||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCC||Individuals||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCD||Individuals||Rs. 1.5 Lakh (80C + 80CCC + 80 CCD)|
|80 CCF||Resident Individuals & HUFs||Rs. 20,000|
|80 CCG||Resident Individuals||Rs. 25,000|
|80 D||Resident Individuals & HUFs||Rs. 20,000|
|80 DD||Resident Individuals & HUFs||Rs. 75,000 for general disability & Rs. 1.25 Lakhs for severe disability|
|80 DDB||Resident Individuals & HUFs||Rs. 60,000 for senior citizens & Rs. 40,000 for everyone else|
|80 E||Individuals||No specific limit|
|80 EE||Individuals||Rs. 3 Lakhs|
|80 G||All taxpayers||The limit depends on donation|
|80 GG||Individuals who don’t get HRA||Rs. 2000 every month|
|80 GGA||All taxpayers||The limit depends on donation|
|80 GGB||Indian companies||The limit depends on donation|
|80 GGC||All taxpayers||The limit depends on donation|
|80 IA||All taxpayers||No limit defined|
|80 IAB||All taxpayers||No limit defined|
|80 IB||All taxpayers||No limit defined|
|80 IC||All taxpayers||No limit defined|
|80 ID||All taxpayers||No limit defined|
|80 IE||All taxpayers||No limit defined|
|80 JJA||All taxpayers||All profits from the first 5 years|
|80 JJAA||Indian companies||30% of augmented income|
|80 LA||IFSCs, Scheduled Banks, Banks set up in foreign countries||A fraction of their income|
|80 P||Cooperative societies||A fraction of their income|
|80 QQB||Authors who are Indian residents||Rs. 3 Lakhs|
|80 RRB||Resident Individuals||Rs. 3 Lakhs|
|80 TTA||Individuals & HUFs||Rs. 10,000 per year|
|80 U||Resident Individuals||Rs. 75,000 for people with disabilities, Rs. 1.25 Lakhs for people with severe disabilities|
With a comprehensive understanding of all the tax deductions available to taxpayers under the Income Tax Act, reducing your taxable income is much easier. The key is to plan and start investing early. With the above list, you can quickly identify all the avenues where your income is spent, calculate the amount, and whatever fits in the categories mentioned above can be used to claim deductions.