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. 150,000 (Rupees One lac fifty thousand only, This limit was Rs 1 lac for investment made till 31st march 2014) 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 (Upto year ending 31st March 2014).
From 01.04.2014 , You can now invest in PPF upto Rs 1 50, 000 /- p.a .
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.
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