Meaning
Individual or Hindu undivided family can claim deduction under section 80C. The qualifying amount under section 80C of income tax act is deductable form gross total income. Deduction is available on the basis of qualifying investment, contribution or payment made by taxpayer during financial year.
Maximum amount deductable
Maximum amount deductable under section 80C is Rs.1, 00,000. It means maximum amount of tax saving is Rs.30, 000 if taxpayer is in 30% slab rate.
Nature of payment
1 Life insurance premium paid on policy of taxpayer himself, his spouse or any child is allowed as deduction. In case of HUF, premium paid on policy of any family member is allowed as deduction. Kindly note that life insurance premium paid by individual on the life insurance policy of parents or in–laws are not eligible for deduction under section 80C. One more condition for the insurance premium is that insurance premium cannot be exceed 10% of sum assured, however this limit is 15% if policy taken on the life of person with disability.
2 Contribution for participating Unit Linked Insurance Plan (ULIP) of mutual fund is deductable. ULIP may be taken on life of the taxpayer or his spouse or any child. In case of HUF UILP deduction is allowed if ULIP is taken on the life of any family member.
3 Payment of notified annuity plan, example Jeevan Dhara, Jeevan Akshay of LIC or immediate annuity plan of ICICI Prudential Life Insurance Company or Easy retirement plan of Tata AIG Life Insurance Company etc.
4 Contribution towards provident fund or public provident fund is deductable under this section. However repayment of loan taken on provident fund or public provident fund is not considered as contribution therefore not deductable. Prior to 1st December 2011 maximum ceiling was Rs.70000. Now there is no maximum ceiling under income tax act.
5 Subscription to National Saving Certificate (NSC) is deductable. Accrued interest on NSC is also qualified for deduction for first 5 years as accrued interest is considered as deemed to be reinvested.
6 Subscription towards notified units of mutual fund or UTI.
7 Contribution toward notified pension funds set up by mutual fund or UTI.
8 Any some paid to tuition fees to any university, school, college, educational education in India for full time education of any two children of individual. As per circular No.8/2012 dated 5th Oct 2012, the amount allowable as tuition fees shall include any payment except donation, development fees, capitation fees or payment of similar nature.
9 Any installment (not an interest) or part payment towards the cost of purchase or construction of residential house property is allowed as deduction. Stamp duty, registration fees and other expenses of transfer is also deductable. However, repayment of loan taken for cost of addition, alteration, repair, renovation after the completion certificate of house property is not deductable under section 80C.
10 Amount deposited in fixed deposit for 5 years or more with schedule bank in accordance with scheme framed and notified by central government.
11 Subscription to any notified bonds of National Bank for Agricultural and Rural Development (NABARD).
12 Amount deposited under Senior Citizen Saving scheme.
13 Amount deposited in Five Year Time Deposit Scheme in post office.
Deduction taken will withdraw in previous year on happing of following events
1. If insurance contract is terminated within a period of 2 years.
2. If ULIP plan is terminated before the period of 5 years
3. If house property is transfer within a period of 5 years
4. Withdrawal of amount from Deposit under Senior Citizen Saving Scheme or Time Deposit in Post Office within a
period of 5 years.On happing of above events, deduction already taken in preceding year would be deemed as income of the taxpayer in the year in which insurance/ULIP contract is terminated or house is transfer or deposit is withdrawn. So taxpayer should keep in mind the lock in period of investments under section 80C.
