Section 80 C of Income tax falls under chapter VI A of the income tax Act,1961. It provides for the deduction from the gross total income in respect of certain payments or deposits made by the person during the financial year.
The deduction under section 80 C are available only to the Individual or HUF.
The aggregated amount of deduction under section cannot exceed INR 150000.
With respect to various deduction available under section 80C conditions are attached these are required to be complied with.
Section 80C (2) provides for various payments /investment for which deduction can be claimed from the total income. Some options are quite popular amount the individuals when they decide to claim the deductions. It is imperative to know the specific conditions which income tax law attaches with respect to the payments /investments under section 80C.
Life Insurance policies – This is one of the most common investment which people make for claiming deduction. Nowadays Insurance companies are selling different types of life insurance products which provides the benefit of insurance as well as investment. The following points among the others should be considered while taking a life insurance policies from the Income tax point of view:
The policy could be in the name of self, spouse, children. in case of HUF policy can be in the name of any member of the HUF.
The payment for such premium must be made before 31st March of the financial year.
If the policy is acquired after 1st April 2012, the premium payment under the policy shall not exceed 10 % of the capital sum assured. Since deduction would be allowed only so much amount of premium as not in excess of 10 % of the capital sum assured.
Deduction for Tuition fees: “Education is the passport to future, for tomorrow belongs to those who prepare it for today”. The law makers recognized the importance of education and allows a tax incentive in the form of deduction under section 80C for the payments made for the tuition fees. The following are certain points which are relevant while claiming a deduction for the tuition fees:
It covers the payment of tuition fees paid either at the time of admission or after admission.
It does not include any other payments like development fees donation or of similar nature. Hence the tuition fees receipt should be checked with caution while calculating the amount of deduction for tuition fees
The education must be a full-time education. Hence part time education distant learning courses are not covered.
The university, collage, school or institution imparting the education must be situated in India. Hence payment for tuition fees for studying in a institution or foreign university is not covered.
The deduction can be claimed in respect of any two children of the individual.
Principal payments for the housing loan for construction or purchase: “Home is where you feel at home and are treated well” Dalai Lama. Income tax apart from a source of revenue is also a tool of the government to mobilise the resources available, across various sectors of the economy. The deduction in respect of principal payments for the home loans taken for purchase or construction of house are available subject to the following conditions among the others:
The principal payments must be made before the 31st March of the financial year. The deduction is available on paid basis as against the interest on housing loan under section 24 which is available on accrued basis.
The assesse must be the owner of the house property in the financial year in the year in which deduction is claimed. Hence in those cases where EMI payments are started but the builders have not delivered the possession the claim for the deduction for the principal payments is not available.
Stamp duty for the purchase and registration fees paid for the purchase of house can also be claimed as deduction.
The property for which deduction is claimed under this section shall not be transferred before 5 years from the end of the financial year in which possession of house was obtained.
Investment in NSC: NSCs are the government securities. These are issued through the post offices. These are the safe risk free investment payment of which is guaranteed by the Government of India. The following relevant points should be taken into consideration while purchasing a NSCs.
The interest payment on NSCs is taxable but not subject to TDS.
The deduction under section 80C is in respect of amount invested in NSC as well as interest accrued there on.
Tax Saving Fixed Deposits: Tax Saving fixed deposits with the schedule bank is also a good option. Following points shall be taken into consideration while making such deposits;
These are safe investments like the other fixed deposits with the banks.
The interest on these deposits is taxable in the hands of the recipient as per the slab rate applicable. In case the individual is on the highest tax bracket of say 30% the interest will be taxable @ 30%.
The payer bank will deduct TDS if the interest amount exceeds INR 10000.
There is a lock-in period of 5 years during which these cannot be redeemed nor can be pledged.
In case of joint deposits the tax, benefit would be available to the first holder only
Investment in PPF: PPF stands for public provident fund. It is a good investment option. The following points shall be taken into consideration while investing amount in PPF
Interest on PPF if fully exempt from tax
The amount can be withdrawn after 15 years
The withdraws are permissible as per the scheme notified.
Equity linked saving scheme: Commonly known as ELSS: in the scenario of reduction in the interest rates the equity linked saving schemes are becoming more lucrative from an investment and tax saving point of view. The following points must be taken into consideration while investing an amount in ELSS.
Before investing in the mutual fund scheme read the offer document that the amount of investment in the scheme is permissible deduction under section 80C.
The lock in period in the scheme is of 3 years
The investment in the mutual funds are subject to risk read the offer document before investing. Don’t just go by the words as said by the mutual fund selling agents.
Income from investment in the form of dividend in the equity linked scheme is exempt from tax.
Capital gain arising at the time of redemption is also exempt from tax.
Disclaimer: The write up is for general understanding and reading of the readers and does not tantamount to rendering any professional opinion or advice or any solicitation for the purchase and buying of the aforesaid financial products