Section 80C allows individuals and HUFs to claim tax deduction of up to Rs. 1,50,000 from their gross total income for certain investments and payments. NRI's can also claim this deduction.
The following investments and payments are eligible for deduction under Section 80C of the Income Tax Act, 1961:
1. Life Insurance : Premiums paid toward all life insurance policies are eligible for tax benefits under Section 80C. This deduction can be claimed for premiums paid towards insuring self, spouse, dependent children and any member of Hindu Undivided Family. Minimum two premium must be paid.
2. Sukanya Samriddhi Yojana : Investments made in Sukanya Samriddhi Yojana, which is a saving scheme for the girl child, are eligible for tax deduction under Section 80C of the Income Tax Act, 1961. A parent or legal guardian of a girl child, who has not reached the age of 10 years, can open this account. Sukanya Samriddhi Yojana account can be opened for two girl children.
3. Public Provident Fund : Public Provident Fund (PPF) contributions are eligible for tax deductions under Section 80C. PPF accounts have a maximum deposit limit of Rs. 1,50,000 per year, therefore, all deposits made to your PPF account can be claimed as deductions under Section 80C. The money that you put into a PPF account will be locked-in for a period of 15 years. Partial withdrawals are permitted after 7 years.
4. Equity Linked Saving Scheme : Investments in equity linked savings scheme qualify for tax deduction under section 80C of the Income Tax Act. ELSS have a mandatory lock-in period of three years from the date of investment.
5. Five Year Bank Deposit : Most banking institutions offer tax saving fixed deposits where deductions can be claimed under Section 80C of the Income Tax Act. The condition associated with tax saver fixed deposits is that they come with a lock-in period of 5 years. Interest earned on tax saver fixed deposits are taxable.
6. Stamp Duty and Registration Charges : While buying a property, one of the largest expenses you will have to bear is the stamp duty and registration charges.
7. Senior Citizens Savings Scheme : Investments in Senior Citizens Saving Scheme, which as the name would suggest is suitable for senior citizens, qualify for deduction under Section 80C of the Income Tax Act. This scheme has a tenure of 5 years. To participate in the Senior Citizens Saving Scheme, an individual has to be at least 60 years of age. Those who have taken VRS can opt for it after the age of 55.
8. National Savings Certificate : Investment in NSC is eligible for deduction u/s 80C. Interest earned on National Savings Certificates are liable to tax. However, if this interest is reinvested, it will be eligible for deduction under Section 80C. The interest rate on this scheme is similar to that of tax savings fixed deposits, PPF and other fixed income earning instruments.
9. Home Loan Principal Repayment : The amount that goes into repaying the principal on a home loan is eligible for deduction under Section 80C.
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