The most important aspect that needs to be kept in mind is that the total exemption limit under section 80c of Income Tax act is Rs 1,50,000/- only.
This is the best Income tax planning tool available to all salaried , Business and Professionals. Benefit under section 80C is allowed only to Individuals and HUF. Our advice to all tax payers is to take full benefit of section 80C. Invest full Rs 1,50,000/- to save Income tax of upto Rs 46.350/-. ( Based on maxmium Income tax slab of individual)
Provident Fund (PF) & Voluntary Provident Fund (VPF: EPF is automatically deducted from employees salary. Both employee and your contribute to it. While employer’s contribution is exempt from tax, Employee contribution is included under section 80C investments.
Individuals also have the option to contribute additional amounts through voluntary contributions (VPF). Current rate of interest is 8.5% per annum (p.a.) and is tax-free.
Public Provident Fund (PPF): Among all the assured returns small saving schemes, Public Provident Fund (PPF) is one of the best. Current rate of interest is 8.7%.
Interest under PPF is completely Income tax-free. It has normal maturity period of 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000.
Life Insurance Premiums
Any Life Insurance premiums (for one or more insurance policies) paid by you for yourself, your spouse or your children is eligible under income tax deduction under section 80C of Indian Income Tax Act.
Please note Insurance Premium paid for your parents /or Parents in law is not allowed as deduction under section 80C.
ELSS Equity Linked Saving Schemes
Any investment made in certain Mutual Funds called equity linked saving schemes qualifies for section 80C deduction. Please note that not all mutual fund investments are eligible for this deduction. Some examples of ELSS funds are – SBI Magnum Tax Gain, HDFC Tax Saver, HDFC Long term advantage, etc.
ULIP – Unit Linked Insurance Plan
Investments made in certain ULIPs of Unit Trust of India and LIC of India are eligible for 80C deduction.
Bank Fixed deposits or Term deposits of term greater than 5 years
According to a relatively new provision amount saved in fixed deposits of term at least five years is eligible for income tax deduction under section 80C of Indian Income Tax Act.
Principal part of EMI on Housing Loan deduction under section 80C
If you are paying EMI on a housing loan, you would be aware that the EMI (equated monthly installments) consists of two parts – principal part and interest part. The principal part of the EMI on your housing loan is eligible for income tax deduction under section 80C. The interest on housing loan is also eligible for Income tax deduction, however not under section 80C but section 24.
Registry/ Stamp duty on registration of House property
Stamp duty paid on registration is also eligible and included in computation of Rs 1,50,000/- under section 80C
Tuition Fees deduction under section 80C
Amount paid as tuition fee for the education of two children of the employee / Tax Payer is eligible for deduction under section 80C of Indian Income Tax Act.
Investment made in National Saving Certificate (NSC)
Any Investment made in NSC is also eligible for Income Tax Deduction under section 80C.