Investment under Section 80C for Income tax saving and Planning

Deductions Allowed under Section 80C for Investment made

Section 80C of the Income Tax Act [1] allows certain investments and expenditure to be tax-exempt. The total limit under this section is Rs. 100,000 (Rupees One lac) which can be any combination of the below:
1. Contribution to Provident Fund or Public Provident Fund (PPF)
PPF provides 8.6% return compounded annually.

Maximum limit to contribute in it is Rs 100,000 for each year.

It is a long term investment with complete withdrawal not possible till 15 years though partial withdrawal is possible after 5 years.

 

Besides, there is employee providend fund (EPF)which is deducted from the salary of the person. This is about 10% to 12% of the BASIC salary component. Recent changes are being discussed regarding reducing the instances of withdrawal from EPF especially when one changes the job. EPF has the option of full settlement on leaving the job, taking VRS, retirement after 58.

Withdrawal from EPF: The EPF amount is also taxable for individuals who quit their existing company before five years and withdraw the corpus

2. Payment of life insurance premium

3. Investment in pension Plans:. National Pension Scheme is meant to save money for the post retirement which invests money in different combination of equity and debt. depending upon age up to 50% can go in equity. Annuity payable after retirement is dependent upon age. NPS has six fund managers. Individual can make minimum contribution of Rs6000/- . It has 22 point of purchase (banks).

4. Investment in Equity Linked Savings schemes (ELSS) of mutual funds

5. Investment in National Savings Certificates (interest of past NSCs is reinvested every year and can be added to the Section 80 limit)

6. Tax saving Fixed Deposits provided by banks for a tenure of 5 years. Interest is also taxable.

7. Payments towards principal repayment of housing loans. Also any registration fee or stamp duty paid

8. Payments towards tuition fees for children to any school or college or university or similar institution. (Only for 2 children)or towards coaching fee of various competitive exams.

9. Post office investments – NSC, Post office saving schemes

The investment can be from any source and not necessarily from income chargeable to tax.

Visit here for Conditions for Payment for self, Spouse and children under section 80C

14 Responses to Investment under Section 80C for Income tax saving and Planning

  1. Tushar Chavda says:

    Hi,

    Is Kishan Vikas Patra exempt from income tax ?
    Please advise so that i can invest.

    Regards,
    Tushar

  2. Shraddha says:

    Is Education Loan repayment exempted from income tax? If yes, is it on the principal amount or the repayment amount with interest?
    Kindly advice.

  3. Very well explained. This is the one that i was looking for most of the time. I found in this article if i want to save my tax then i must invest money in different schemes available under Section 80C. Thanks for sharing good information.

  4. K SHANMUGHAM says:

    Till previous year the women-tax payers were allowed a higher
    tax exemption limit than the male tax payers. Whether such a concession is available for the FY 2012-13? Also inform any
    other concession is available to women tax payers for the
    FY 2012-2013.

  5. v.mittal says:

    bank intrest is taxable or not for fincial year 2012-2013 and 2013-2014 .whats limit

    • Income Tax Buddy says:

      Bank interest received in saving account upto Rs 10,000 is tax free for year 2012-2013 and 2013-2014.

  6. Nilesh says:

    Shall I apply my son’s medical expenses like vaccens etc?

  7. VINAYAKA B M says:

    whqt is the maximum Tution fee of 2 children for savings under Sec 80C

  8. Rameshwer Meena says:

    What is the maximum amount for saving under 80C.
    PPF is neccessary or not for max limit.

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