Section 80C of the Income Tax Act is a popular section among taxpayers in India as it offers several deductions from the gross total income. Taxpayers can claim deductions up to Rs. 1.5 lakhs under Section 80C, which can significantly reduce their tax liability. In this blog, we will discuss the bare act of Section 80C of the Income Tax Act.
Section 80C of the Income Tax Act, 1961, provides for deductions from the gross total income of an individual or Hindu Undivided Family (HUF). The section offers a deduction of up to Rs. 1.5 lakhs to taxpayers who have invested in certain specified instruments or made certain expenses during the financial year.
Let’s take a look at the bare act of Section 80C of the Income Tax Act:
(1) In computing the total income of an assessee, being an individual or a Hindu undivided family, there shall be deducted, in accordance with and subject to the provisions of this section, the whole of the amount paid or deposited in the previous year, being the aggregate of the sums referred to in sub-section (2), as does not exceed one lakh and fifty thousand rupees.
(2) The sums referred to in sub-section (1) shall be the following, namely:—
(a) in the case of an individual,—
(i) any sum paid or deposited in any previous year in a provident fund account, or an approved superannuation fund, or a recognised provident fund, or an approved gratuity fund; or
(ii) any contribution made in any previous year by an employee to a pension fund referred to in section 80CCD; or
(iii) the subscription paid in any previous year to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf:
Provided that—
(A) where such subscription is for a period of not less than five years, the subscription to such security shall be made in the name of the individual or, as the case may be, in the name of the spouse or any child of such individual, and the Central Government notifies that such subscription shall not be transferable during the said period of five years; and
(B) where such subscription is for a period of not less than five years, and is made to a deposit scheme, the deposit shall be in the name of the individual or, as the case may be, in the name of the spouse or any child of such individual and the deposit scheme shall be notified by the Central Government in this behalf;
(b) in the case of an individual or a Hindu undivided family, any sum paid or deposited in the previous year in—
(i) a life insurance policy, including a policy for an annuity certain, issued by— (A) the Life Insurance Corporation of India formed under the Life Insurance Corporation Act, 1956 (31 of 1956); or (B) any other insurer: Provided that the policy is on the life of the assessee or on the life of the spouse or on the life of any child of assessee and in the case of HUF, on the life of any member thereof;
(ii) a contract for a deferred annuity, made on or after the 1st day of April, 1971, and issued by an insurer:
Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;
(iii) any unit of any mutual fund referred to in clause (23D) of section 10 or of the Unit Trust of India established under the Unit Trust of
As we saw in the bare act, Section 80C provides various options for taxpayers to claim deductions. These deductions can be claimed by investing in various financial instruments such as Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Saving Scheme (ELSS), Unit Linked Insurance Plan (ULIP), and so on.
Apart from investments, taxpayers can also claim deductions by making certain expenses, such as payment of the tuition fees of children, repayment of the principal amount of a home loan, and so on.
It is important to note that the maximum deduction under Section 80C is Rs. 1.5 lakhs, and any investment or expense beyond this limit will not be eligible for a deduction. Additionally, the deductions claimed under Section 80C are not over and above the total taxable income, but rather from the gross total income.
Another important point to note is that the deductions under Section 80C are available only to individuals and HUFs and not to other entities such as companies, firms, etc.
It is also worth mentioning that some of the financial instruments eligible for deductions under Section 80C come with a lock-in period. For instance, investments made in PPF have a lock-in period of 15 years, and investments made in ELSS have a lock-in period of three years. Taxpayers should keep these lock-in periods in mind before investing in these financial instruments.
In conclusion
Section 80C of the Income Tax Act is an essential provision for taxpayers in India to claim deductions and reduce their tax liability. Taxpayers should carefully consider the various financial instruments and expenses eligible for deductions under Section 80C before investing or making any payments. It is also advisable to seek the help of a tax professional to make the most of these deductions and optimize one’s tax planning.
Other Related Blogs: 80U Deductions
Frequently Asked Questions (FAQs)
Q.1 What is Section 80C of the Income Tax Act?
Section 80C of the Income Tax Act provides for deductions from the gross total income of an individual or Hindu Undivided Family (HUF) for investments made in certain specified instruments or expenses incurred during the financial year. Taxpayers can claim deductions up to Rs. 1.5 lakhs under this section.
Q.2 Who can claim deductions under Section 80C?
Deductions under Section 80C can be claimed by individuals and HUFs.
Q.3 What are the financial instruments eligible for deductions under Section 80C?
Some of the financial instruments eligible for deductions under Section 80C include Employee Provident Fund (EPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Equity-Linked Saving Scheme (ELSS), Unit Linked Insurance Plan (ULIP), and so on.
Q.4 Can expenses be claimed as deductions under Section 80C?
Yes, certain expenses such as payment of the tuition fees of children, repayment of the principal amount of a home loan, and so on can be claimed as deductions under Section 80C.
Q.5 Is there a limit to the deductions that can be claimed under Section 80C?
Yes, the maximum deduction that can be claimed under Section 80C is Rs. 1.5 lakhs. Any investment or expense beyond this limit will not be eligible for a deduction.
Q.6 Are the deductions under Section 80C over and above the total taxable income?
No, the deductions claimed under Section 80C are not over and above the total taxable income, but rather from the gross total income.
Q.7 Are the deductions under Section 80C available to companies and firms?
No, the deductions under Section 80C are available only to individuals and HUFs and not to other entities such as companies, firms, etc.
Q.8 Do the financial instruments eligible for deductions under Section 80C come with a lock-in period?
Yes, some of the financial instruments eligible for deductions under Section 80C come with a lock-in period. For instance, investments made in PPF have a lock-in period of 15 years, and investments made in ELSS have a lock-in period of three years.
Q.9 Can a taxpayer claim deductions under Section 80C for investments made in the name of their spouse or children?
Yes, a taxpayer can claim deductions under Section 80C for investments made in the name of their spouse or children, provided the investment is made for a minimum lock-in period of five years.
Q.10 Is it advisable to seek the help of a tax professional to make the most of the deductions under Section 80C?
Yes, it is advisable to seek the help of a tax professional to make the most of the deductions under Section 80C and optimize one’s tax planning.
