Deductions are those expenses that are allowed to be deducted from the total taxable income of the assesse and thus reduce the tax amount. All the provisions and rules regarding deductions are covered by Chapter VIA of the Income Tax Act, 1961.
These deductions are of different types some are allowed on investing the income in specified sectors or instruments, some are allowed for incurring particular types of expenditure. In this article we will look at the allowable deductions and their applicability under section 80C.
Deductions under Section 80C
Deduction under section 80C is allowed when investment is made by the assessee in specified instruments or sectors up to a certain amount. The maximum deduction available by investing in such sectors is Rs 1,50,000.
Such deduction is applicable only for Individuals and Hindu Undivided Family. Further to claim such deductions payment should have been completed.
Following are the sectors from where deductions can be claimed.
- Life Insurance premium paid subject to max 20% of sum assured (policy before 01.04.12), on own, spouse or children’s life. -If policy issued on or after 01.04.2012, deduction up to 10% of sum is assured.
– If policy issued before 01.04.2013 for a person suffering disability, deduction up to 15% of sum is assured.
Any sum received under life insurance policy shall not be included in total income of the person. [Section 10(10D)]
- Contribution to Statutory fund or Recognized Provident Fund. Deduction = amount invested in the RPF or SPF account.
- Contribution to Unit Linked insurance plan
- Repayment of housing loan excluding interest on such loan (minimum 5 years) Thus, if installment of housing loan is 2,00,000 where in interest is Rs.80,000 total deduction allowed = Rs 1,20,000 i.e. the principal repaid.
- Deduction will be allowed for Amount deposited in five year time deposit scheme in post office.
- Deduction is allowed for investment made in payment in respect of non-commutable deferred annuity taken in own, spouse or children’s name.
- Contribution to approved superannuation fund is deductible as deduction.
- Payment of tuition fees excluding any payment towards any development fees or donations or payment of similar nature, whether at the time of admission or thereafter to any university, college, school or other educational Institution situated in India for full time education of any 2 children.
- National Savings Certificate are eligible for deductions in the year they are purchased. Interest accrued on such certificates is eligible for tax deductions each year under section 80C, but becomes taxable at the time of maturity.
- An individual can claim deduction on the basis of contribution made towards any pension fund set up by any mutual fund as notified by the central government.
- Amount paid for subscription of bonds issued by National Bank for Agriculture and rural development, as the Central Government may, by notification in the official gazette specify in this behalf.
- Any Contribution made towards the Senior Citizens Savings Scheme Rules, 2004
- Deduction from the salary payable by or on behalf of the Government to any individual, in accordance with the conditions of his service, for securing to him a deferred annuity or making provisions for his wife or children, to the extent of one-fifth of salary.
- Any Contribution to effect or keep in force any notified annuity plan of the LIC or any other insurer.
- Expense incurred in the nature of Stamp Duty, registration fees and other expenses for the purpose of transfer of such house property to the assessee.
- Subscription in the name of girl child of an individual or any girl child for whom the individual is legal guardian to any such security of the Central Government or any such deposit scheme notified by the Government (special small saving instrument under Sukanya Samriddhi Account Rules 2014) is allowed as deduction under section 80C.
- Investment in Equity linked saving scheme.
- Investment in equity shares or debentures of an approved eligible issue.
Note:- In case of any single premium policy, if such policy is surrendered within 2 years of the date of commencement of insurance, the amount of deduction of income-tax allowed earlier shall be deemed to be the tax payable in the year of surrender.
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