Tax Deduction Under Section 80C
It’s the last quarter of the financial year and this is that time of the year when we all look clueless haggard species trying to understand tax, deductions, taxable etc… HR department makes the ordeal more harrowing by harassing poor souls with deadlines to submit their proof of investments that qualify for deductions from their taxable salary income. Don’t worry! Read this informative piece and get clarity on What all Tax deductions come under Section 80C.
Section 80C is the most popular section for everyone who is filing his tax returns. This section can be used by any salaried person regardless of his income, even if a person belongs to the 30% taxation bracket he will be able to apply for 1.5 lakhs deduction, so he saves 45,000 rupees, and who doesn’t like to save money?
The beauty of this particular section is that the amounts spent on expenditure will lead you to save on tax while the amount spent on savings will lead to a deduction under this clause. So let’s check this section out.
Eligibility
Any individual or HUF is eligible for deduction under this section
Expenses Covered under this section
School fees
The school fees you pay for your children, you can claim deduction under this. However, you can claim a deduction for two children only. In case, you have more than two children your working spouse can claim the deduction. The deduction is for tuition fees only. Other components of fees like development charges, activity charges, transport charges or donation to school etc are not be covered in this.
Documents Required
- Photocopies of the Tuition Fees paid to an educational institution during the Financial Year are considered.
Life insurance premium
An insurance premium paid for self, for spouse and for children is covered under this section, which can be for LIC or any private company. However, there is a lock-in period of two years, if your policy lapses between that time the deductions received earlier will get added back to your income and be taxed accordingly. An HUF can claim the deduction for life insurance of any of its members.
Documents Required
- Photo Copy of premium receipt
- If the premium is due after the cut-off date, then one has to submit a declaration about the due date along with previous year receipt.
- One can even use an annual Statement from the respective Insurance Company that shows details of payment.
PF and VPF (Provident Fund & Voluntary Provident Fund)
PF is deducted from your salary while the employer too is required to contribute the same amount. Now, it must be noticed that the employer’s contribution is exempt up to 12% of Salary. Thus, if employer make a contribution exceeding 12% then that is added to employee’s salary Income. However, an individual’s contribution is eligible for deduction under this section. You can voluntarily contribute more to this fund (VPN). The rate of interest is 8.5% and yes its tax-free!
Documents Required
- No Declaration is required for PF and VPF deducted through Salary.
Savings Schemes covered under this section
PPF
It is one of the most popular ways of savings; any individual above the age of 18 years can apply for it. After 2005, HUF can’t open an account in its name however it can claim the deduction in the name of its members.
An individual can contribute for PPF in their own name, in the name of the spouse and children. The rate of interest is 8.7% compounded yearly (tax-free) and maturity period is 15 years. The minimum contribution is 500 and maximum is 1.5 lacs. The interest rate, however, is assured but it’s not fixed.
Documents Required
- Photo Copy of passbook along with the cover page showing investors name and Photo Copy of challan duly acknowledged by the Bank.
Senior Citizen Deposit Scheme
60years and above aged people can claim deduction under Senior Citizen Deposit scheme. The tenure of the deposit should be five years, if its withdrawn before five years the amount shall become taxable.
However, if the senior citizen expires before completion of five years the money which is passed on to the legal heirs shall not be taxable.
Documents Required
- Any investment in an account under the Senior Citizens Saving Scheme Rules will be exempted Under Section 80C.
- Photo Copy of the Payment Receipt
ELSS
There is some market-linked mutual funds offering tax savings, these are popular since the rate of return is higher. These schemes are called ELSS (Equity Linked Savings Scheme) and the contributions made towards such schemes are eligible for deductions under this section.
NSC
National Savings Certificate is again another very popular means of tax-free savings, the rate of interest is 8.5% for 5 years tenure and 8.8% for 10 years tenure.
Documents Required
- Photo Copy of certificates purchased on or after 01.04.2015,
Sukanya Samriddhi Account
This scheme was launched by the current PM in Jan 2015, its intended towards the prosperity of the girl child. Parents can invest minimum 1000, and maximum 1.5 lac for two girls ( in a case of twins the benefit shall extend to the third child) for a tenure of 14 years, a rate of interest is 9.1% compounded yearly. Interest from this scheme is tax-free.
SCSS
Senior Citizen Savings Scheme is a lucrative small saving scheme meant for senior citizens, rate of interest is 9.20% pa payable quarterly
Documents Required
- Photo Copy of the Payment Receipt
5 years POTD scheme
5 years post office time deposit schemes offering a rate of interest of 8.50% qualifies for tax deduction under this section.
Unit Linked Insurance Plans
One can claim for deductions up to Rs 1 lakh for a premium paid on life insurance policies under Section 80C of the Income Tax Act. However, to avail this, the sum assured should be at least 10 times the annual premium or within the overall limit of Rs 1, 50,000.
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