Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund etc. - Section 80C - Income Tax - Ready Reckoner - Income Tax

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Deduction in respect of life insurance premium, deferred annuity, contributions to provident fund etc. - Section 80C Section 80C states that qualifying investments, up to a maximum of ₹1,50,000 are deductible from your income. Qualifying Investments : Provident Fund (PF) - Statutory Provident Fund, Recognised Provident Fund or Approved Superannuation Fund Voluntary Provident Fund (VPF) PF is automatically deducted from your salary. Both you and your employer contribute to it. While employer s contribution is exempt from tax, your contribution (i.e., employee s contribution) is counted towards section 80C investments. You also have the option to contribute additional amounts through voluntary contributions (VPF). Public Provident Fund (PPF): In case of Individual - For Self, Spouse Children In case of HUF - Any member of HUF Life Insurance Premiums: LIC premium paid by the taxpayer for insurance policy on own life, spouse life and life of any children (Child may dependent, independent, married or unmarried) in case of HUF the policy can be any member of the family shall be included in Section 80C deduction. Life insurance premium paid for parents (father / mother / both) or in-laws is not eligible for deduction under section 80C. In case if the premium is paid for more than one insurance policy, all the premiums can be included. Notes: In case of an individual, policy should be taken on his own life, spouse, or any child (Dependent/independent, major/minor, married/unmarried). In case of a HUF, policy can be taken on the life of any member. Insurance premium cannot exceed the maximum celling limit given below: If policy is issued: Policy on the life of a person given in 80U / 80DDB Policy on the life of any other person Before 1 st April 2012 20% of sum assured* 20% of sum assured* During 2012-13 10% of sum assured** 10% of sum assured** On or after 1 st April 2013 15% of sum assured** 10% of sum assured** *Sum assured does not include any premium agreed to be returned and/or any benefit by way of Bonus. **Sum assured means minimum amount assured under the policy without including any premium agreed to be returned and/or any benefit by way of Bonus. Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering the tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that is made in ELSS are eligible for deduction under Sec 80C . Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that is paid every month to repay the home loan consists of two components Principal and Interest. The principal component of the EMI qualifies for deduction under Sec 80C . Even the interest component is treated in section 24 of the Act . Stamp Duty and registration charges for a home: The amount you pay as stamp duty when you buy a house, and the amount you pat for the registration of the documents of the house can be claimed as deduction under section 80C in the year of purchase of the house. Sukanya Samriddhi Account: It is a special deposit scheme launched for girl child. The details are as follows: The Sukanya Samriddhi Scheme allows provisions for one depositor to deposit money on behalf of the girl child. This depositor could either be a parent or a legal guardian. While contributions towards this scheme are eligible for tax deductions, only one depositor can claim tax exemptions under Section 80C of the Income Tax Act . This means that either a parent or a legal guardian can claim exemptions, not both. From Financial Year 2014-15 the interest earned on account will be tax exempted. National Savings Certificate (NSC) (VIII Issue): Deposits up to Rs, 1.50 lakh in NSC qualify for Deduction u/s 80C . Accrued interest on NSC also qualifies for deduction u/s. 80C . NSC interest is taxable. The accrued interest which is deemed to be reinvested qualifies for deduction under Section 80C . Only the final year s interest, when the NSC matures, does not receive a tax deduction as it does not get reinvested, but is paid back to the investor along with the interest of the earlier years and the capital amount. Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies and not by the Government. The amount invested in these bonds are included in 80C deductions. 5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction. Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is meant only for senior citizens. Current rate of interest is 9.20% per annum payable quarterly. Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life insurance with benefits of equity investments. They have attracted the attention of investors and tax-savers not only because they help us save tax but they also perform well to give decent returns in the long-term. Tuition Fees: Any sum paid as tuition fees whether at the time of admission or otherwise to any university/college/educational institutional in India for full time education of any two children of an individual. 5 years post office time deposit (POTD) scheme: POTD are similar to bank FDs. Although available for varying time duration like one year, two year, three year and five year, only 5 year POTD qualifies for tax saving u/s 80C. Interest is compounded quarterly but paid annually. The interest is entirely taxable. NABARD Rural Bonds: There are two types of bonds issued by NABARD: NABARD Rural Bonds and NABARD Bhavishya Nirman Bonds. Only NABARD rural bonds qualifies for exemption u/s 80C. Pension funds: Section 80CCC stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of section 80C i.e., total deduction available under 80CCC and 80C should not exceed ₹ 1.50 lakh. Pension scheme An employee of the Central Government, as a contribution to a specified account of the pension scheme referred to in section 80CCD Available for a fixed period of 3 years specified account means an additional account referred to in sub-section (3) of section 20 of the Pension Fund Regulatory and Development Authority Act, 2013 Notes: If in any PY, an assessee: Terminates his LIP or has not paid premium after 2 years, Terminates ULIP or has not paid any premium for atleast 5 years, Transfers House before 5 years from the end of FY in which possession is obtained, Amount withdrawn from FD or Senior Citizen Saving Scheme before 5 years, Then all deductions allowed earlier will be demmed to be income in the year of violations/withdrawal. Section 10(10D) provides that any sum received under a life insurance policy including the sum allocated by way of bonus on such policy, shall be exempt from tax. However, the following are not exempt and therefore shall be taxable: i. any sum received under section 80DD(3) or section 80DDA(3) or ii. Any sum received under Keyman Insurance Policy. ii. Any sum received under an insurance policy issued on or after the 1st day of April, 2012 in respect of which the premium payable for any of the years during the term of the policy exceeds ten per cent of the actual capital sum assured However, the amount received on such policy on death of the insured shall not be taxable.