What is Section 80C?
Section 80C, including Sections 80CCC & 80CCD, prescribes a combination of activities. If you want to utilise your income in some of these activities during the Previous Year (PY) you can claim the amount as a deduction from your total taxable income for the PY.
For Example: Assuming you earned a gross total income of `10,00,000/- as taxable income in PY 2015-16 (Assessment Year will be 2016-17 when you will estimate and pay the tax on this income). If you invest `100,000/- of this income in any or multiple activities listed under Section 80C, your total taxable income will be reduced to `900,000/- for the PY.
How to avail tax deductions under Section 80C?
Activities under Section 80C can be divided into two parts:
- Investment Activities: You park your money in an investment for some time and then get it back.
- Spending Activities: You spend your money on the activities listed under Section 80C.
| Investments | Nature of Investment |
|---|---|
| Fixed Income Products | |
| Provident Fund (EPF/VPF) | Retirement |
| Public Provident Fund (PPF) | Retirement/Long-Term Fixed Income |
| National Saving Certificate (NSC) | Long-Term Fixed Income |
| Tax Saving 5 years FD from Banks | Long-Term Debt |
| 5 years Post Office Time Deposit (POTD) | Long-Term Debt |
| Senior Citizen Saving Scheme (SCSS) | Long-Term Debt |
| NHB deposit scheme | Long-Term Debt |
| Market-Linked Products | |
| Life Insurance Premium (Participating Endowment Plans) | Life Insurance + Investment |
| New Pension Scheme (NPS) (under Section 80CCD) Atal Pension Yojana | Retirement Plan |
| Equity Linked Savings Scheme (ELSS) | Equity Mutual Fund |
| Pension Plans from Insurance Companies (under Section 80CCC) | Retirement Annuity |
| Unit Linked Insurance Plan (ULIP) | Life Insurance + Investment |
| Spending Activities | |
| Tuition fee for 2 children | Full-time Education cost |
| Stamp duty and registration cost of the House | Only at the time of purchase of a house |
| Home Loan Principal Payment | Purchase of house on loan |
Table 1: Investments & other venues for Deduction under Sections 80C, 80CCC & 80CCD
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 circumstances. 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(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 tax* 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.
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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| COMP/DOC/Apr/2022/254/0135 | |
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