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What is Section 80C?
Section 80C of the Income Tax Act, 1961 enables you to avail tax exemptions through strategic investments. This section allows you to benefit from financial growth and reduce your tax liabilities. By diversifying your investments in options like the Life Insurance Plan, National Savings Certificate (NSC) and Public Provident Fund (PPF), among others, you can claim deduction under Section 80C up to ₹ 1.5 lakh per financial year.
Apart from the 80C deduction, you can also ease your overall tax burden by leveraging Section 80CCD(1), which allows deductions capped at 10% of the basic salary plus Dearness Allowance (DA). Further, self-employed individuals can benefit from a more flexible deduction limit of 20% of their gross total income within the ₹ 1.5 lakh cap of Section 80C.
Who are Eligible for Sec 80C of Income Tax Act
Individuals
Individuals, both Indian residents and Non-Resident Indians (NRIs), are eligible to claim a deduction under Section 80C of The Income Tax Act, 1961. This category covers salaried individuals and self-employed professionals such as businesspersons and doctors.
HUFs (Hindu Undivided Families)
HUFs are recognised as separate assessable entities under The Income Tax Act, 1961 and can avail benefits under Section 80C deduction limit of ₹ 1.5 lakh per financial year. HUFs have the flexibility to invest in various instruments such as life insurance, tax-saving Fixed Deposits (FDs) and Equity Linked Savings Schemes (ELSS) to claim deductions under this section.
Senior Citizens and Others
Senior citizens are individuals aged 60 and above. These individuals can benefit from the deduction under 80C. They can utilise all the investments mentioned in the Section 80C deduction list as well as specified investment options like the Senior Citizen Savings Scheme (SCSS) to claim deductions.
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Section 80C Deductions List
ELSS funds
Equity-Linked Savings Scheme is a type of mutual fund that invests in equity and equity-related instruments. ELSS funds have a lock-in period of three years.
National Pension Scheme
The National Pension Scheme is a government-backed savings scheme for employees of private, public, and unorganised sectors. It cannot be used for investment by the armed forces. The NPS has a lock-in period for up to the age of 60 years.
ULIPs
A Unit-Linked Insurance Plan (ULIP) is a life insurance plan that offers investment opportunities along with a life cover. It offers the choice to invest in equity, debt and hybrid funds to fulfil your financial goals. The returns from a ULIP can vary based on the funds you choose. ULIPs have a five-year lock-in period.
Tax saving fixed deposits
These type of fixed deposits offer tax^ benefits subject to conditions under Section 80C of the Income Tax Act, 1961. They have a lock-in period of five years. Fixed deposits offer fixed returns.
Public Provident Fund
PPF is a government savings scheme that can be used for long-term financial goals. It matures 15 years after the date of account opening. However, you can withdraw money from your PPF account every year from the seventh financial year.
Senior Citizen Savings Scheme
It is a savings scheme for people over the age of 60. However, it can be used by people over 50 and 55 years under some special circ*mstances. It has a lock-in period of five years, after which it can be closed or extended for another three years.
Sukanya Samriddhi Yojana
The Sukanya Samriddhi Yojana is a savings scheme backed by the Government of India. It is an investment option for parents who have a girl child. The plan matures when the girl child reaches the age of 21.
How much can be claimed under Section 80C?
There are limits to the amounts that can be claimed for different activities and the total that can be claimed under these activities.
The total amount that can be claimed under Sections 80C, 80CCC and 80CCD(1) combined is `150,000/-.
There is an option to increase the total deduction by an additional `50,000/- under Section 80CCD. Here’s how it works:
80 CCD(1) and 80 CCD(2) applies for contributions by employee and employer respectively.
| *80CCD (1) & 80CCD(1B) |
|---|
| Deductible in the year contribution is made, up to 10% of the salary |
| Additional Deduction of ` 50,000/- over and above 80C limit |
Table 2: Deductions on Contribution to NPS Schemes
| *80CCD (1) & 80CCD(2) |
|---|
| Deductible in the year contribution is made, up to 10% of the salary |
| Additional Deduction of ` 50,000/- over and above 80C limit |
Table 2: Deductions on Contribution to NPS Schemes
Note that, the deduction of `50,000/- is available on NPS over and above `150,000/- deduction available under Sections 80C, 80CCC & 80CCD(1).
How does ICICI Prudential Life help you save tax?
ICICI Prudential Life Insurance plans offer tax1 benefits subject to conditions under Section 80C of the Income Tax Act, 1961. The premiums paid towards the life insurance plan qualify for tax deductions of up to ₹ 1.5 lakh in a financial year. Additionally, the maturity benefits under the policy are also exempt subject to the conditions of Section 10(10D) of the Income Tax Act, 1961.
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How long should you stay invested?
This is an important obligation often ignored by taxpayers while investing under Sections 80C, 80CCC & 80CCD. Different investment instruments have different time limits which you must follow to avoid reversal of the deduction:
| Investment | Minimum Holding Period |
|---|---|
| Unit Linked Insurance Plan | 5 years |
| Term Life Insurance Plan | 2 years |
| Repayment of Home Loan Principal/Cost of purchase or construction of residential house | 5 years |
| Deposit in Senior Citizen Saving Scheme | 5 years |
| Time Deposit in Post Office/Bank | 5 years |
| Equity Linked Savings Scheme (ELSS) | 3 years |
| PPF | 6 years |
| NPS | Till Retirement |
Table 3: Minimum Holding Period for Various Instruments under Section 80C
Thus, you can reduce your total taxable income up to `200,000/- by fully utilising Sections 80C, 80CCC and 80CCD.
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Section 80C Income Tax Act FAQs
Are 80C and 80CCC the same?
Section 80C provides deductions on various investments up to ₹ 1.5 lakh per year from your taxable income. In comparison, Section 80CCC provides a deduction of up to ₹ 1.5 lakh per annum for the contribution made by an individual towards specified pension funds. Section 80CCE thereby limits the total exemption limit up to ₹ 1.5 lakh per annum.
What is the maximum tax exemption under Section 80C?
You can claim a maximum deduction of up to ₹ 1.5 lakh from your total income under Section 80C.
Who is eligible for an 80C deduction?
It is available for individuals and Hindu Undivided Families (HUFs).
How much should I invest to save tax?
To save tax, invest ₹ 1.5 lakh under Section 80C. Buy medical insurance and claim a deduction of up to ₹ 25,000/- (₹ 50,000/- for senior citizens) for medical insurance premiums paid under Section 80D. Also, an investment of up to ₹ 50,000/- in NPS could help you with additional tax savings under Section 80CCD (1B).
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