Section 80C Investments – Explained in Brief

Section 80C takes up considerable space on Form 16 and enables you to reduce your taxable income by up to ₹1,50,000. Deductions under Section 80C are a part of Income-Tax Act, 1961. We will be discussing below various investment options & payments that can be covered under Section 80C.

Provident Fund – PF

• PF is made up of a combination of EPF & VPF.
• EPF(Employee Provident Fund) is compulsory in India and is made up of contribution from employee & employer.
• PF is a part of the ₹1,50,000 deductions under Section 80C.
• If you are too confused with what investments to do, you can straightaway invest as additional contribution which is referred to as Voluntary Provident Fund(VPF).

Public Provident Fund – PPF

• PPF is a scheme by the Indian Government which is tax free and is a part of the ₹1,50,000 exemption under Section 80C.
• In this you can invest as low as ₹ 500 and up to ₹1,50,000.
• PPF has a lock in of 15 years though partial withdrawls(after 5^th Financial Year) and loans against it can be taken.(3^rd FY till 6^th FY)

National Pension Scheme – NPS

For private sector employees to have a pension after retirement, government started NPS –

• Investments up to ₹1,50,000 can be claimed under Section 80C
• No limit on maximum contribution
• Only for exceptional cases partial withdrawls are allowed after 15 years.
• Employer’s contribution is tax free.
• NPS gives an individual to claim deductions up to Rs. 2 Lakhs(1.5 under Section 80CCD(1) and .5 under Section 80CCD(1B))
• Voluntary NPS Account can be opened where there is no lock in period and it can be opened only after a Tier 1 Account is opened.

Unit Linked Insurance Plan – ULIP

As the name suggests, ULIP is a combination of insurance and investment

• A part of the ULIP investment is allocated to provide insurance rest is invested in stock markets.
• Investment up to Rs. 1,50,000 are exempted under Section 80C
• There is no limit on maximum contribution

Sukanya Samriddhi Yojana

• Under this scheme, parents/guardian can open an account in the name of a girl child till she attains age of 10 years.
• Investment up to Rs. 1,50,000 are exempted under Section 80C
• The limit of maximum contribution is ₹ 1.5 Lakhs

Life Insurance Premium

• Premium paid annually is valid for deduction up to a limit of Rs. 1.5 Lakhs
• Deduction is valid only if the premium amount is less than 10% of Sum Insured

Child’s Tuition Fees

• Tuition fee paid for the education of two children is eligible for tax deduction under Section 80C up to Rs. 1.5 Lakh
• Fee paid to any educational institute in India is eligible for tax deduction
• Fees should be only for a full time course

Home Loan Repayment

• Repayment of Principal of Loan is eligible for Section 80C deductions
• Deduction is also applicable on stamp duty, registration fees and transfer expenses

Tax Saving Fixed Deposit’s

• These come in with a lock in of 5 years
• Investing in these FDs is eligible for tax break under 80C
• NSC(National Savings Certificate) is almost similar to the Tax Saving FDs but it has to be purchased from post office

Equity Linked Savings Scheme – ELSS

• These tax saving funds invest at least 65% in stock markets hence giving better ROI
• As these are mutual funds, they do not offer any guaranteed returns
• The only scheme eligible under 80C investments that has a lock in of as low as 3 years

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