SECTION 80C – INVESTMENT TOOL TO SAVE TAXES


(Last Updated On: August 8, 2019)

With every new year comes new joys, new wishes, and new hopes coupled with new responsibilities. Thus financial planning for oneself and for our family is the concern for all. There are many people who are not aware of the basic planning requirements.Thus, for the best investment , Section 80C plays a vital role. Further this blog will make you understand how tax can be saved by investing in section 80C.

Under section 80C, the total investment limit is INR 1,50,000/-. This section has brought a major change in method of providing tax benefits. Here both expenditures and investments have been given the benefit of exemption. So irrespective of the tax bracket in which you fall, you should start planning for the investment.

Some of the investments and expenditures whose deduction you get is listed below:

  1. LIFE INSURANCE PREMIUM- Any amount that you pay towards life insurance premium for yourself, spouse or children is included in this. It does not include premium for your parents or in laws. The maximum limit for the insurance depends on when the policy is issued.If policy is issued on or after 01.04.2012- 10% of actual sum assuredIf policy is issued before 01.04.2012 – 20% of the actual sum assured. Please Note: As per section 10DD, if the premium is more than 10% or 20%(as above), then amount will be 100% taxable. However if amount received due to death then exemption is available. Actual sum assured means minimum sum assured under policy on happening of event at any time during the term of policy. It does not include value of premium agreed to be returned, or any bonus above the sum actually insured.
  2. PUBLIC PROVIDENT FUND – Premium and subscription in name of individual, spouse , child, or any member of HUF.
  3. UNIT LINKED INSURANCE PREMIUM – It covers life insurance with benefits of equity investments.
  4. ANNUITY PLAN – Payment of any notified annuity plans of LIC or any other notified insurer.
  5. NATIONAL SAVINGS CERTIFICATE – It is a time tested saving instrument, and comes with a maturity period of 5 or 10 years. Further, the investments and accrued interest which is deemed to be reinvested also qualifies for the deduction.
  6. SUKANYA SAMRIDHI ACCOUNT – This is a new scheme opened for the parents of girl child. The deposits made can be maximum of 1,50,000/- per year with a minimum of 1,000/-. The deposits made and the interest earne don this account, both are exempted from tax.
  7. HOME LOAN PRINCIPLE REPAYMENT – The monthly installment that you pay to repay your home loan consists of two components, i.e principle and interest. The principle component of EMI qualifies for the deduction under Section 80C.
  8. TUTION FEES – This is the deduction of which most of us are not aware. The amount paid as tution fees for the education of first two children of employee is eligible for the deduction u/s 80C.
  9. BANK FIXED DEPOSITS – Investments in bank fixed deposits for a minimum tenure of 5 Yeras also qualifies the deduction. Each bank provides separate rate for tax saving FD’s, since amount remain manadatorily invested for 5 years.
  10. PENSION POLICIES – The insurance companies offered pension policies whose benefit was earlier available u/s 80CCC. But now it has been clubbed with SEC 80C, so the overall limit for deduction under this is 1,50,000/-.

When to Invest?

This question generally hits our mind. And moreover many of us start looking for avenues in January or February, just before the financial year is getting over. But friends this is a big mistake.! You should start planning for your investments in the beginning of the financial year only. This way you would earn interest on your investments for full year, which in turn makes you eligible for better deductions. So start from today only and take informed decisions.

This benefit is available for everyone, irrespective of their income levels or tax brackets. Thus if you are in the highest tax bracket, and you have invested full INR 1,50,000/- , it will save tax of  INR 45,000/-. Isn’t this great? So Start Investing!!

CA Abhishek Soni

Abhishek Soni is a Chartered Accountant by profession & entrepreneur by passion. He is the co-founder & CEO of Tax2Win.in. Tax2win is amongst the top 25 emerging startups of Asia and authorized ERI by the Income Tax Department. In the past, he worked in EY and comes with wide industry experience from telecom, retail to manufacturing to entertainment where he has handled various national and international assignments.