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Deduction Under Section 80C and 80U

What is Tax Deduction?

Eligible tax deductions reduce your tax liabilities, enabling you to save a considerable percentage of tax that is otherwise applicable on your income bracket. You have to file for tax deductions, with relevant proof to support your claims, to avail the provisions mentioned in the Income Tax Act, 1961. The Government of India offers deductions on expenses that contribute to the social good to garner active participation in such activities from citizens. While your contributions towards charity, medical expenditures and tuition fees is tax deductible, you can also claim deductions and exemptions through investments in relevant schemes like insurance plans, national savings schemes, retirement savings schemes, etc.

Let’s take a look at the tax deductions that an individual is eligible for on investments under Section 80C and Section 80U of the Income Tax Act, 1961.

Tax Deductions under Section 80C

This Section makes both individuals and Hindu Undivided Families eligible for claiming deductions of up to INR 1.5 lakh annually on certain payments. This specified amount can be claimed on a combination of deductions under Sections 80C, 80CCC and 80CCD.

Deductions can be claimed on the following investments:

  • Payment towards Provident Fund/Superannuation

  • Payment towards Life Insurance Policies for self, spouse or children

  • Payment towards tuition fees for the education of maximum two children

  • Payment towards a Fixed Deposit with a minimum tenure of 5 years

  • Payment towards the construction or purchase of a residential property

  • Additional deductions like investment in Mutual Fund, purchase of NABARD bonds, Senior Citizens Saving Schemes, etc.

The list of schemes one can invest in to be eligible for tax deductions under Section 80C:

  • Employee Provident Fund (EPF)

  • Public Provident Fund (PPF)

  • Voluntary Provident Fund (VPF)

  • 5 Year Post Office Time Deposit

  • 5 Year Tax Saving Bank Fix Deposit

  • Equity Linked Saving Schemes (ELSS)

  • Unit Linked Insurance Plans (ULIP)

  • NABARD Rural Bonds

  • Sukanya Samriddhi Scheme

  • National Savings Certificate (NSC)

  • Senior Citizens Saving Scheme

Sub-sections under Section 80C

The extensive list of deductions that an individual can claim under Section 80C has encouraged the creation of a sub-section for enhanced transparency of the provisions to the taxpayers and their better understanding. Here is the list of sub-sections and the tax benefits that an individual can claim.

Section 80CCC

This includes deductions on investment towards Pension Funds, irrespective of the insurer, up to a maximum of INR 1.5 lakh. This deduction is applicable for individual taxpayers only.

Section 80CCD

This section provides tax deductions for investments towards specific pension schemes, as notified by the Central Government. This section serves as a boost for taxpayers to inculcate the habit of savings. Individuals and their employers are eligible for tax deductions that are made under this section, provided the deduction is less than 10% of his/her salary. This sub-section has been categorised into 3 parts –

  • Section 80CCD(1): This is applicable to employees who contribute to NPS voluntarily, the tax deduction limit is up to a maximum of 10% of one’s salary (Basic + DA)

  • Section 80CCD(1B): An employee who contributes to NPS voluntarily is eligible for claiming an additional deduction of a maximum INR 50,000 subject to 10% off salary (Basic + DA). However, he/she will not be eligible for tax deductions under this section if he/she has already been allowed deductions under 80CCD(1).

  • Section 80CCD(2): This is applicable for employees whose employer contributes to the NPS Funds for employees. In that case, the employees will be eligible for a maximum 10% deduction on his/her salary (Basic + DA). Schemes considered for deduction under this section are Atal Pension Yojana and National Pension Scheme.

Section 80CCF

This sub-section provides tax deductions on subscription of specific long-term infrastructure bonds, as notified by the government. Both individuals and Hindu Undivided Families were eligible to claim a deduction of INR 20,000. Benefits under this section have been discontinued from A.Y. 2013-14.

Section 80CCG

Tax deductions under this section pertain to investments in equity savings schemes as specified by the government with individuals being eligible for tax deductions of up to 50% of the invested amount, with the maximum deduction being INR 25,000 annually for three consecutive Assessment Years.

Tax Deductions under Section 80U

This section is aimed at providing tax deductions for physically disabled individuals. A physically disabled individual suffering from blindness or mental retardation is eligible for tax deductions of up to INR 75,000, increased from INR 50,000 to INR 75,000 from FY 2015 – 16. The maximum amount for deduction for severe disability has been raised from INR 1,00,000 to INR 1,25,000 from FY 2015 – 16. Individuals suffering from physical conditions like autism, cerebral palsy, etc. are considered as severe disabilities.

Frequently Asked Questions

Who is eligible for filing deductions under 80C?

You can claim deductions under 80C if you are an individual or belong to the ‘Hindu Undivided Family’ category.

What are the expenditure that make me eligible for tax exemptions under Section 80C of the Income Tax Act?

You will be able to claim tax deductions under Section 80C of the Income Tax Act, 1961, if you invest in any of the following:

  • Payment towards Provident Fund/Superannuation

  • Payment towards Life Insurance Policies for self, spouse or children

  • Payment towards tuition fees for the education of maximum two children

  • Payment towards a Fixed Deposit with a minimum tenure of 5 years

  • Payment towards the construction or purchase of a residential property

  • Additional deductions like investment in Mutual Fund, purchase of NABARD bonds, Senior Citizens Saving Schemes, etc.

What is the maximum deduction that I can claim under 80C?

An individual is eligible to claim tax deductions of a maximum of INR 1.5 lakh under the Section 80C of the Income Tax Act, 1961.

What are the conditions for being eligible for claiming deductions on my child’s tuition fees, under Section 80C?

vSection 80C of the Income Tax Act, 1961, makes an individual eligible for claiming tax deductions towards tuition fees for full-time courses at educational institutions like school, colleges and universities in India, for a maximum of two children.

What are the schemes that I can invest in to be eligible for tax deductions under 80C of the Income Tax Act, 1961?

The schemes that are tax deductible under 80C of the Income Tax Act, 1961, are:

  • Employee Provident Fund (EPF)

  • Public Provident Fund (PPF)

  • Voluntary Provident Fund (VPF)

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