The Income Tax Act, 1961 provides a number of tax deductions for residents of the country. Section 80C of the Act allows individuals and Hindu Undivided Families (HUFs) to claim a deduction of an amount up to INR 1.5 lakh from the gross total income.
Deductions under Section 80C
The following deductions are available under the section of Income Tax.
- Life insurance
Any premium paid towards the term insurance policy will be eligible for tax benefits. This deduction can be claimed for the premium paid for the policy of self, spouse, children, and any member of the HUF.
- Public Provident Fund (PPF)
A traditional investment option, PPF contributions are eligible for tax deductions under Section 80C. The money remains locked in for 15 years and you can earn interest on it.
- Sukanya Samriddhi Yojana
Any investment made in this tax-saving scheme for a girl child will make you eligible for a tax deduction. A parent of a legal guardian of the girl child can open this account. However, the girl child should be below the age of 10 and the account can be opened for maximum two girl children.
- Equity Linked Saving Scheme
An investment made in ELSS will qualify for tax deduction under Section 80C. The scheme has a mandatory lock-in period of three years from the date of investment.
- Five-Year Bank Deposit
Most banks offer tax saving fixed deposits that allow you to claim a deduction under Section 80C. The fixed deposit will have a lock-in period of five years and premature withdrawal is not allowed.
- Registration charges and stamp duty during a property purchase
When you buy a property, the largest expense will be the cost of stamp duty and registration charges. This amount is eligible as a deduction under section 80C and it can only be claimed when you have the legal possession of the property.
- National Savings Certificate
Any investment made in the National Savings Certificate scheme is eligible for a deduction under Section 80C. The interest rate on the investment is similar to that of PPF and tax-saving fixed deposits. However, the interest is liable to tax.
- Senior Citizen Savings Scheme
This tax-saving investment product is ideal for senior citizens and it has a tenure of five years. An individual should be above the age of 60 years to participate in the scheme.
- Home loan principal repayment
Any amount that goes into the repayment of the principal amount of the home loan is eligible for a deduction. However, in order to claim the benefit, the construction of the property should be complete, and if the property is transferred in less than five years from the date of purchase, no tax benefits will be awarded. The amount claimed as a benefit in the past will be taxable now.
Keep these investment options in mind to make the most of the exemptions available under Section 80C of the Income Tax Act.
