Section 80C provides tax benefit on investment and savings upto Rs.150000 in a Financial Year. This deduction is available only for Individuals
Eligible Investments under Sec 80C are:
- Tax Saving Fixed deposits
- PPF – Public Provident Fund
- EPF – Employee provident fund
- NPS – National Pension System
- NSC – National Savings Certificate
- ULIP – Unit linked Insurance Plans
- Investment in ELSS Fund or Tax Saving Mutual Fund
- LIC – Life Insurance Premium
- Children Tuition Fees
- Housing loan Principal Repayment
Let’s know in details about each eligible investment:
Tax Saver FD:
An FD will be considered eligible under section 80C only if it is having lock in period of 5 years. Interest earned on FD is taxable.
PPF (Public Provident Fund)
A person can invest in PPF to avail the benefit of section 80C. This is long term investment have lock-in period of 15 years, but can be further extended by 5 years. Partial withdrawals are allowed after 7 years. Minimum and maximum investment limit is Rs 500 and Rs 1.5 lakh respectively. Interest earned on PPF is also Tax Free.
EPF (Employee Provident Fund)
Usually PF account is opened by employers for employees so benefit of this is available to salaried employees only. Normally 12% of basic salary + DA, that is deducted by an employer for employees having basic salary more than Rs.15000 Per month and deposited in the EPF or other recognised provident funds but employee can choose to deposit higher amount in their PF account. Employees can easily withdraw PF amount after leaving the job and now this facility is fully online. PF balance (including interest) is tax-free, if withdrawn after continuous service of 5 years.
NPS (National Pension System)
In order to provide benefits of pension to unorganised sectors and working professional’s government started NPS scheme. NPS can be opened by every Indian citizen between the age of 18 and 60. Extra 50000 deduction can be claimed under section 80CCD (1B) for employee contribution.
ULIP (Unit linked Insurance Plans)
ULIPs are a mix of insurance and investment. A part of the invested amount in ULIPs is used to provide insurance and the rest of the amount is invested in the stock markets. An investor can buy ULIP for self or spouse or child. Investment and withdrawals & maturity amount are tax-free
Sukanya Samriddhi Yojana
To save Girl Child in india Sukanya Samriddhi Yojana/Scheme is one of the most popular schemes by the Government of India. The scheme is aimed at the betterment of girl child in the country. Parents can open an account in the name of a girl child till she attains the age of 10 years 50% of the deposit amount can be prematurely withdrawn once the girl reaches the age of 18 years. It’s Investment and withdrawals & maturity amount are tax-free
ELSS and Tax Saving Mutual Funds
To get benefit under section 80C it’s lock-in period is 3 years which is lowest among many other investments and it will give you 2x better returns than FD/PPF. Before investing read documents carefully to know the eligibility under section 80C.
LIC – Life Insurance Premium
The annual premium paid for life insurance in the name of the taxpayer or the taxpayer’s wife and children is an eligible tax-saving payment under Section 80C. The deduction is valid only if the premium is less than 10% of the sum assured.
Tuition fees of Children’s
If you kids are going to School, University or College than you can claim tuition fee (Only) under section 80C upto 2 Children’s only.
Housing Loan Principal Payment
The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. This deduction is also applicable on stamp duty, registration fees and transfer expenses.