Deduction under Section 80C
Deduction under section 80C shall be allowed only to
(i) an individual
(ii) Hindu Undivided Family
(Deduction under section 80C is not allowed to any partnership firm or a company etc.)
Deduction shall be allowed to the extent of the following investments but as per section 80CCE, maximum deduction allowed shall be Rs.1,50,000 (Including deduction under section 80CCC and section 80CCD).
1. The deduction shall be allowed if the amount has been invested in National Saving Certificate (NSC) and NSC are just like a fixed deposit with a bank.
The amount can be invested in the name of self, spouse, or minor children, and HUF can invest the amount in the name of any of its members.
A deduction shall be allowed equal to the amount invested and the amount received on maturity shall be exempt from income tax but interest shall be taxable every year on accrual basis but payment of interest shall be received on maturity. NSC is issued for 5 years / 10 years.
2. Public provident fund is a deposit scheme run by Central Government and the account can be opened in the bank or post office and maturity shall be after 15 years and the account can be opened in the name of self, spouse or children. HUF can open the account in the name of its members.
The amount received on maturity shall be exempt from income tax and also interest is exempt from income tax. No deduction is allowed under section 80C for interest.
3. Investment in fixed deposit for a period of 5 years or more with scheduled banks, provided the term. deposit is issued in accordance with a scheme notified by the Central Government. (Bank Term Deposit Scheme, 2006 — depositor can be individual or Hindu Undivided Family. The deposit should be for a minimum period of 5 years. Interest income shall be taxable on an accrual basis and it will not qualify for deduction under section 80C.) Principal amount received on maturity shall be exempt. Individuals can deposit the amount only in his own name and HUF can deposit the amount in the name of any of its members.
4. Five Year Post Office Time Deposit Account.
An assessee is allowed to invest the amount in five-year post office time deposit account and a deduction shall be allowed equal to the amount invested. Interest shall be paid on an annual basis and it will be taxable and deduction under section 80C is not allowed. The amount received on maturity shall be exempt. Investment can be made in the name of the assessee.
Pre-mature payment is allowed but the amount received on pre-mature payment shall be taxable.
5. If an assessee has taken a loan from a notified organization like banks or financial institutions etc. for purchase or construction of a residential house, in such cases deduction shall be allowed equal to the amount re-paid by the assessee towards principal (not towards interest). Its loan has been taken for Addition, Alteration, or Repairs etc of the house property, no deduction is allowed.
If the .assessee has transferred the house property before the expiry of 5 years from the end of the financial year in which possession of such properties was taken by him, no deduction shall be allowable in the previous year in which the house property has been transferred. The deduction allowed in the past years shall be considered to be the income of the assessee of the previous year in which the house property is transferred.
6. If any individual or HUF has taken life policy, deduction shall be allowed for the premium paid for such life policy and individuals can take the policy in the name of self, spouse, and children and Hindu Undivided Family can take the policy in the name of any of its members. (Children may be dependent or independent or may be married or unmarried or step or adopted.)
The deduction is allowed equal to the premium paid but maximum up to 10% of capital sum assured, i.e. if the premium paid is more than 10% of capital sum assured, deduction shall be allowed only for 10% of sum assured. (In respect of policy issued before 01.04.2012, 10% shall be taken as 20%)
If LIC policy has been taken in the name of a person who is suffering from disability given under section 80U or from a specified disease given under section 80DDB, 10% shall be taken as 15% but it is applicable for the policies taken w.e.f 01.4.2013
onwards. If an assessee has discontinued a life insurance policy before paying a premium for a period of at least 2 years, the deduction allowed in the earlier years shall be considered to be the income of the year in which policy has been discontinued. As per section 10(10D), any payment received on maturity of the insurance policy shall be exempt from income tax i.e. even the amount of bonus received shall be exempt from income tax. If the policyholder has paid a premium of more than the specified limit (10% / 15% / 20%) in any of the years, amount received on maturity shall be chargeable to tax but if the amount has been received on the death of the policyholder, it will be exempt from income tax.
e.g. Mr. X has paid a premium of one life policy Rs.25,000 and sum assured is Rs.1,00,000 and policy was taken on 01.04.2012 onwards, in this case, deduction allowed shall be Rs.10,000 but if a policy was taken before 01.04.2012, the deduction allowed shall be Rs.20,000. If Mr. X is a handicapped person and policy was taken w.e.f 01.04.2013 onwards, the deduction allowed shall be Rs.15,000
7. Payment of tuition fees to School College University or another Educational Institution in India provided the fees that have been paid in connection with the children of the assessee and further for maximum two children and it should be whole-time education. Children shall include even adopted and step-children also. The deduction is not allowed to HUF. If payment is made outside India, the deduction is not allowed. similarly, if payment is given for part-time education or correspondence course, the deduction is not allowed.
8. Employees contribution to statutory provident fund or recognized provident fund or approved superannuation fund
9. Investment in Units of Unit trust of India or mutual fund including Unit Linked Insurance Plan of UTI or mutual fund.
10. Subscription to Notified Deposit Schemes of NHB e.g. subscription to Home Loan Account Scheme of NHB.
11. Investment in equity shares or debentures etc forming part of an eligible issue.
Eligible issue means an issue made by an Indian Public Ltd Company or Public Financial Institution, a Mutual fund, etc. and the funds so collected are utilized for Developing, Maintaining and Operating Infrastructure Facility If any such equity shares, etc. have been sold within a period of 3 years from the date of purchase, in such cases deduction earlier allowed shall be considered to be the income of such year.
12. Investment in notified bonds issued by the National Bank for Agriculture and Rural Development.
13. Senior Citizens Savings Scheme. Amount should be invested in the name of self and amount received on maturity shall be exempt and interest shall be payable on quarterly basis and interest received is taxable. Deduction under section 80C for interest is not allowed.
14. Investment in Sukanya Samridhi Account and amount can be invested by an individual as guardian in the name of girl child who is of the age of 10 years or less. Interest received is exempt. Amount received on maturity is exempt. Account can be closed after the completion of 21 years of age. In case of marriage, payment is allowed after completion of 18 years of age.
Deduction shall be allowed only if the amount has been actually paid by the assessee i.e. if the amount is due but not paid deduction is not allowed. E.g. Premium of Rs.25,000 was due on 27.03.2018 but it was paid on 10.04.2018, in this case no deduction is allowed in the previous year 2017-18, rather deduction shall be allowed in the previous year 2018- 19.
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