One Stop Website for all your Queries on Investment.

Home   >   Investment FAQ   >   Deduction Under Sec. 80C

What is Sec. 80C of Income Tax Act?

In order to encourage savings by individuals, the government gives tax breaks on investment in certain financial products under Section 80C of the Income Tax Act. Some kinds of expenses incurred are also allowed as deduction.

What is the amount of deduction available under Sec. 80C of Income Tax Act?

The maximum amount eligible is Rs. 1.50 Lacs from financial year 2014-15.

How does deduction under Sec. 80C reduce my tax liability?

The amount of investment you make under Sec. 80C is deducted from your taxable income. This reduces your tax liability.

If I invest Rs. 1.50 Lacs under Sec. 80C, how much tax can I save?

The amount of tax saved depends on the taxable income before availing deduction under Sec. 80C. The following table shows the amount of tax that can be saved:
Taxable Income
Tax Saving (including Surcharge)
Rs. 2,50,000 - 5,00,000/-
Rs. 15,450/-
Rs. 5,00,001 - 10,00,000/-
Rs. 30,900/-
Above Rs. 10,00,000/-
Rs. 46,350/-

Who is eligible for availing deduction under Sec. 80C of Income Tax Act?

The deduction benefit under Sec. 80C is available only to assessees falling under the category "Individuals" and "Hindu Undivided Family".

Can NRIs also avail deduction benefit under Sec. 80C of Income Tax Act?

Yes. An NRI individual who is liable to pay tax under the Income Tax Act in India can also avail deduction benefit under Sec. 80C of Income Tax Act.

On which source of income the deduction under Sec. 80C of Income Tax Act can not be claimed?

Deduction under Sec. 80C can not be claimed on income arising out of the following sources:

1. Capital gain on sale of an asset; and
2. Income by winnings from lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature.

What are the investments which are allowed as deduction under Sec. 80C of Income Tax Act?

The investments made in following are allowed as deduction under Sec. 80C of Income Tax Act:

1. Life Insurance Premium
2. Deferred Annuity Scheme
3. Employee Provident Fund(EPF) and Public Provident Fund(PPF)
4. Equity Linked Saving Scheme (ELSS) of Mutual Fund
5. National Savings Certificate (NSC)
6. Notified Pension Fund set up by Mutual Fund
6. 5-year Fixed Deposit with a Scheduled Bank
7. Senior Citizens Savings Scheme
8. 5-year Post Office Time Deposit
9. Sukanya Samriddhi Account
10. Deposit Scheme of National Housing Bank
11. NABARD Rural Bonds

Note: There may be conditions attached depending upon your specific circumstances.

What are the expenses which are allowed as deduction under Sec. 80C of IncomeTax Act?

The following expenses are allowed as deduction under Sec. 80C of Income Tax Act:

1. Children's Tution Fee Payment
2. Principal repayments on Loan for purchase of House Property
3. Stamp Duty and Registration Charges for a house

Can I claim deduction for premium paid on life insurance policy taken in the name of my family members?

You can claim deduction for life insurance premium paid only if the policy is in the name of your own life, life of your spouse or your children. Child can be married/unmarried, dependent/independent, male/female or minor/major.

Can I claim deduction for premium paid on life insurance policy taken in the name of my parents?

No. Deduction under Sec. 80C is not available for the premium paid towards the life insurance of parents.

Can a Hindu Undivided Family (HUF) claim deduction for life insurance premium paid?

Yes, a HUF can claim deduction for premium paid on the life insurance policy taken in the name of any of its members.

What are the other conditions to get deduction under Sec. 80C for life insurance premium paid?

a. The premium must have been actually paid in the year in which deduction is being claimed.
b. The premium amount paid should not exceed 10% of the Sum Assured.
c. In case of Unit Linked policies, the premium must be paid for 5 years.

Will I get deduction for contribution made in PPF in the name of my family members?

Contribution made by individuals in the name of self, spouse and minor child is eligible for deduction under Sec. 80C. However no deduction will be allowed for contribution made on behalf of your parents (major child).

Can HUF also claim deduction for contribution to Public Provident Fund?

Yes. HUF can also claim deduction under Sec. 80C for contribution made to PPF account in the name of its member(s). Please do note that no new PPF account can be opened in the name of a HUF.

Is the interest received on NSC also qualify deduction under Sec. 80C?

Interest on NSC accumulates and is paid at the maturity. The interest amount accrued every year also qualify for deduction under Sec. 80C. However, the interest for the financial year in which the NSC matures does not qualify for deduction under Sec. 80C.

What deduction is available for children school fees under Sec. 80C?

Tution fees paid to any university, college, educational institution in India for full time education for any two children is allowed as deduction under Sec. 80C.

Is there any additional deduction of Rs. 50,000/- available under Sec.80C(over and above Rs.1.50 Lacs) for contribution made to National Pension Scheme (NPS)?

Yes. But the same is available under Sec. 80CCD.