What is Section 80C?

Section 80C, including sections 80CCC & 80CCD, prescribes combination of activities. If you want to utilize 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:

  1. Investment Activities: You park your money in an investment for some time and then get it back.
  2. 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) (u/s 80CCD) Atal Pension Yojana Retirement Plan
Equity Linked Savings Scheme (ELSS) Equity Mutual Fund
Pension Plans from Insurance Companies (u/s 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 house
Home Loan Principal Payment Purchase of house on loan

Table 1: Investments & other venues for Deduction u/s 80C, 80CCC & 80CCD

How much can be claimed u/s 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 U/S 80C, 80CCC & 80CCD(1).

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 u/s 80C

Thus, you can reduce your total taxable income up to `200,000/- by fully utilising sections 80C, 80CCC and 80CCD.

Are 80C and 80CCC are same?

Section 80C provides deductions on various investments upto ₹ 1.5 lakhs per year from your taxable income. In comparison, Section 80CCC provides a deduction of upto ₹ 1.5 lakhs per annum for the contribution made by an individual towards specified pension funds. Section 80CCE thereby limits the total exemption limit upto ₹ 1.5 lakhs per annum.

What is the maximum tax exemption under 80C?

You can claim a maximum deduction of upto ₹ 1.5 lakhs 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 lakhs under Section 80C. Buy medical insurance and claim a deduction of upto ₹ 25,000/- (₹ 50,000/- for senior citizens) for medical insurance premium paid under Section 80D. Also, investment of upto ₹ 50,000/- in NPS could help you with additional tax savings under Section 80CCD (1B).  
COMP/DOC/Feb/2020/192/3239
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1Tax benefit of ₹ 54,600/- (₹ 46,800/- u/s 80C & ₹ 7,800/- u/s 80D) is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000/- and health premium u/s 80D of ₹ 25,000/-. Tax benefits under the policy are subject to conditions under Sections 80C, 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above.

2Tax benefit of ₹ 7,800/- is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on health premium u/s 80D of ₹ 25,000/-. Tax benefits under the policy are subject to conditions under Sections 80D, 10(10D) and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above.

3Tax benefit of ₹ 46,800/- is calculated at highest tax slab rate of 31.2% (including Cess excluding surcharge) on life insurance premium u/s 80C of ₹ 1,50,000/-. Tax benefits under the policy are subject to conditions under Sections 80C, 80D, 10(10D), 115BAC and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates. Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above.

^Tax benefits under the policy are subject to conditions under Sections 80C, 80D, 80CCC, 80CCE and other provisions of the Income Tax Act, 1961. Goods and Services Tax and Cesses, if any, will be charged extra as per prevailing rates.Tax laws are subject to amendments made thereto from time to time. Please consult your tax advisor for details, before acting on the above.

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