Deduction under VI-A section 80C, 80CCC, 80CCD

Hello, in this post we will discuss about VI-A deduction under section 80C, 80CCC, and  80CCD. Also, we will learn about the investments, expenses, and payments to be claimed u/s 80C.

This is the part 1 of deductions under VI-A. You can go ahead and read the entire post or go to the Part-2 of the deductions under VI-A where we have discussed the section 80TTA, 80EE, 80GG, 80CCG, 80D, 80DD, 80DDB, 80U, 80G, 80GGC, 80RRB.

 VI-A deduction – Section 80C

A deduction of Rs. 1,50,000 can be claimed on your total income u/s 80C. This deduction is allowed to an Individual / HUF.

Below given are several investments, expenses, and payments allowed to be claimed under section 80C. Also, the maximum deduction allowed cannot exceed Rs. 1,50,000.

Investments

1. Investment in Public Provident Fund (PPF)

A PPF account can be opened and deposit made in the account can be claimed for deduction. A maximum of Rs. 1,50,000 is allowed to be invested in one financial year. The minimum investment required in each year is Rs. 500. Interest is compounded annually and is reset quarterly. Interest on PPF account is fully tax-free. The PPF account matures after 15 years. Receipts on maturity or withdrawals are tax-free. The amount invested is allowed to be withdrawn after 5 years. PPF account deposit in the name of your spouse or child can also be claimed for the tax deduction in your tax return.

2. Purchase of NSCs

National Savings Certificate or NSC is eligible for deduction in the year they are purchased. These can be bought from designated Post Office. Their term is for 5 years and interest earned is compounded annually. Interest earned is taxable. Interest earned is also eligible for deduction under section 80C during the term of the NSCs (except the last year).

3. Investment in Sukanya Samridhi account

A maximum of Rs 1,50,000 can be deposited in the Sukanya Samridhi Account for a girl child. The interest rate is compounded annually. This interest is fully exempt from tax. A minimum of Rs 1,000 must be deposited in a year. Receipts on maturity from the account are tax-free. The account matures after 14 years.

4. Investment in ELSS

ELSS or Equity Linked Savings Scheme is a type of a mutual fund investment. Investments made in ELSS funds during the financial year are eligible for deduction under section 80C. These funds have a 3-year lock-in period.

5. ULIPS or Unit Linked Insurance Plan

ULIPS sold with life insurance are also eligible for deduction under section 80C. This includes Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanraksha 1989 and contribution to Other Unit Linked Insurance Plan of UTI. Deduction claimed under ULIP will be withdrawn if the policy terminates before paying the premium for 5 years. ULIP proceeds after maturity is exempt from tax. ULIPin the name of your spouse or child can also be claimed for the tax deduction in your tax return.

6. Five Year Post Office Time Deposit Scheme

This is similar to bank fixed deposits. Although available for varying time duration like one year, two years, three years and five years, only 5-Yr post-office time deposit (POTD) qualifies for tax saving. Interest is compounded quarterly but paid annually. The Interest is entirely taxable.

7. Fixed deposit with a bank

Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years.

Amount deposited under Senior Citizens Saving Scheme

The amount deposited under Senior Citizens Saving Scheme: A recent addition to the list, Senior Citizen Savings Scheme (SCSS) is a small savings schemes but is meant only for senior citizens. 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. The account may be opened by an individual,

  • Who has attained an age of 60 years or above on the date of opening of the account?
  • Who has attained the age 55 years or more but less than 60 years and has retired under a Voluntary Retirement Scheme or a Special Voluntary Retirement Scheme on the date of opening of the account within three months from the date of retirement.
  • No age limit for the retired personnel of Defence services provided they fulfill other specified conditions.

8. Subscription to any notified securities / notified deposits scheme. e.g. NSS

9. Contribution to notified Pension Fund set up by Mutual Fund or UTI.

10. Sum paid as a subscription to Home Loan Account Scheme of the National Housing Bank or contribution to any notified deposit scheme / pension fund set up by National Housing Bank.

11. Subscription to deposit scheme of a public sector, company engaged in providing housing finance (public deposit scheme of HUDCO).

12. Contribution to notified annuity Plan of LIC (e.g. Jeevan Dhara and Jeevan Akshay) or Units of UTI / notified Mutual Funds.

13. Subscription to equity shares / debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.

14. Subscription to any notified bonds of NABARD (National Bank for Agriculture and Rural Development).

Expenses

1. EPF or Employee’s share of PF Contribution

Employee contribution to EPF is eligible for deduction under section 80C i.e. 12% of your Basic + DA is deducted by the employer and deposited as your contribution in Employee’s Provident Fund Scheme or Recognized Provident Fund.

2. Life Insurance Premium Payment

The policy must be in the taxpayer’s name or spouse’s or any child’s name (child may be dependent/independent, minor/major, or married/unmarried). The deduction is valid on insurance policies purchased after 1st April 2012 only if the premium is less than 10% of sum assured. Benefits for existing purchased policies continue. The deduction is also allowed on payments made by Government employees to Central Government Employees Insurance Scheme. Receipts on maturity are tax-free. Deduction claimed will be withdrawn if the policy terminates with 2 years.

3. Children’s Tuition Fee Payment

The deduction can be claimed for Tuition fees paid to any school, college, university or other educational institution situated within India for the purpose of full-time education of any two children (including payments for play school, pre-nursery and nursery).

4. Principal Repayments on Loan for purchase of House Property

Principal repayment of loan taken for buying or constructing a residential house property is also eligible for deduction in 80C. The deduction is also allowed for stamp duty, registration fees and other expenses of transfer of such property to the taxpayer. However, if the property is transferred or sold before the expiry of 5 years from the end of the financial year in which its possession was taken; the total deduction allowed for various years shall be taxed in that year.

5. Sum paid for securing Deferred Annuity

A deduction is allowed on the sum paid under non-commutable deferred annuity for an individual on the life of the taxpayer, spouse or any child. This is also allowed on sum deducted from the salary payable to Govt. Servant for securing deferred annuity for self, spouse or child. Payment limited to 20% of salary or actual contribution, whichever is less.

Section 80CCC

Deduction for Premium Paid for Annuity Plan of LIC or Other Insurer The deduction is allowed to an Individual for any amount paid or deposited in any annuity plan of LIC or any other insurer. The plan must be for receiving the pension from a fund referred to in Section 10(23AAB). If the annuity is surrendered before the date of its maturity, the surrender value is taxable in the year of receipt.

Section 80CCD

Deduction for Contribution to Pension Account

Employee’s contribution – Section 80CCD(1)

Allowed to an Individual who makes deposits to his/her Pension account. Maximum deduction allowed is 10% of salary (in case of a taxpayer being an employee) or 10% of gross total income (in case of taxpayer being self-employed) or Rs. 1,50,000 whichever is less.

Employer’s contribution – Section 80CCD(2)

Deduction is allowed for employer’s contribution to employee’s pension account up to 10% of the salary of the employee. There is no monetary ceiling on this deduction.

Deduction for self-contribution to NPS – Section 80CCD(1B)

A new section 80CCD(1B) has been introduced for additional deduction for the amount deposited by a taxpayer to their NPS account. Contributions to Atal Pension Yojana are also eligible under this section. The deduction is allowed on contribution up to Rs. 50,000.

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