Section 80C Deduction FAQs
Below are the FAQs you must go through to know about general questions on Income Tax Section 80C(IT Section-80C)
What is Sec. 80C of Income Tax Act?
In order to encourage savings by individuals, the government gives tax breaks on investment in certain financial products under Section 80C of the Income Tax Act. Some kinds of expenses incurred are also allowed as deduction.
What is the amount of deduction available under Sec. 80C of Income Tax Act?
The maximum amount eligible is Rs. 1.50 Lacs from financial year 2022-23.
How does deduction under Sec. 80C reduce my tax liability?
The amount of investment or eligible expenses you make under Sec. 80C is deducted from your taxable income. This reduces your tax liability.
Who is eligible for availing deduction under Sec. 80C of Income Tax Act?
The deduction benefit under Sec. 80C is available only to assessees falling under the category “Individuals” and “Hindu Undivided Family”.
Can NRIs also avail deduction benefit under Sec. 80C of Income Tax Act?
Yes. An NRI individual who is liable to pay tax under the Income Tax Act in India can also avail deduction benefit under Sec. 80C of Income Tax Act.
On which source of income the deduction under Sec. 80C of Income Tax Act can not be claimed?
Deduction under Sec. 80C can not be claimed on income arising out of the following sources:
1. Capital gain on sale of an asset; and
2. Income by winnings from lottery or crossword puzzle or race including horse race (not being income from the activity of owning and maintaining race horses) or card game and other game of any sort or from gambling or betting of any form or nature.
What are the investments which are allowed as deduction under Sec. 80C of Income Tax Act?
The investments made in following are allowed as deduction under Sec. 80C of Income Tax Act:
1. Life Insurance Premium
2. Deferred Annuity Scheme
3. Employee Provident Fund(EPF) and Public Provident Fund(PPF)
4. Equity Linked Saving Scheme (ELSS) of Mutual Fund
5. National Savings Certificate (NSC)
6. Notified Pension Fund set up by Mutual Fund
6. 5-year Fixed Deposit with a Scheduled Bank
7. Senior Citizens Savings Scheme
8. 5-year Post Office Time Deposit
9. Sukanya Samriddhi Account
10. Senior Citizen Savings Scheme
Note: There may be conditions attached depending upon your specific circumstances.
What are the expenses which are allowed as deduction under Sec. 80C of IncomeTax Act?
The following expenses are allowed as deduction under Sec. 80C of Income Tax Act:
1. Children’s Tution Fee Payment
2. Principal repayments on Loan for purchase of House Property
3. Stamp Duty and Registration Charges for a house
Can I claim deduction for premium paid on life insurance policy taken in the name of my family members?
You can claim deduction for life insurance premium paid only if the policy is in the name of your own life, life of your spouse or your children. Child can be married/unmarried, dependent/independent, male/female or minor/major.
Can I claim deduction for premium paid on life insurance policy taken in the name of my parents?
No. Deduction under Sec. 80C is not available for the premium paid towards the life insurance of parents.
Can a Hindu Undivided Family (HUF) claim deduction for life insurance premium paid?
Yes, a HUF can claim deduction for premium paid on the life insurance policy taken in the name of any of its members.
Can I sell the bonds before completion of 5 years?
The bonds can be converted into cash before the stipulated time. However, the amount exempted under Section 54EC will automatically be deemed as long-term capital gains for the previous financial year and will subsequently incur tax at the applicable rate. The same scenario applies if a loan is taken against the bonds.
What if I am not able to invest in the bonds within the stipulated time?
If the individual is not able to invest in the bonds within 6 months, he/she can deposit such amount in a specified deposit of a PSU bank and claim the same tax exemptions. However, such deposits must be converted to an investment within 2 years, or else Short Term Capital Gains apply.