Most Popular ‘80C’ Tax Deductions
Most Popular ‘80C’ Tax Deductions
While filing I-T Return, the taxpayer first computes gross income from various sources. This gross income amount is arrived at by excluding the amount of incomes which are exempt from tax for instance an exempt portion of house rent allowance (HRA). The resultant amount is called as Gross Taxable Income (GTI). From this amount the tax-saving investments which are commonly called as deductions are deducted. The amount computed after reducing deductions from GTI is called as Total Income or Total Taxable Income (TTI).
A large number of taxpayers claim these deductions. There are numerous tax deductions, however, not every taxpayer is eligible to claim them. However, few of the deductions are so common that they are almost universally claimed by individual taxpayers since they are linked to common instruments of small savings or investments and mandatory expenses. The most popular tax deductions are known as ‘80C deductions’ since they are claimed under section 80C of the Income-tax Act. This section contains many deductions however most popular of them are discussed below. The deductions claimed u/s 80C of the Act combined with amounts claimed as deductions on account of pension contributions (80CCC) and New Pension Scheme (NPS u/s 80CCD (1)) cannot exceed the aggregate amount of ₹1,50,000/-
1. Life Insurance Premium
This is claimed on the amount of premium paid for life insurance
Such premium should be paid either for the person himself or his spouse or his minor children
This deduction can be claimed by individual or HUF
In case of HUF, any of the members of HUF can claim the deduction
The deduction claimed can not exceed 10% of the amount of sum assured which is 15% in case of persons with disability
2. Public Provident Fund (PPF) Deposits
This is claimed on the amount of deposits made in PPF account in the name of person himself
The deduction is available only in respect of the deposits made. The interest earned on such deposits is independently tax free.
3. Tax Saving Fixed Deposits
The deduction is available on fixed deposits with any bank
The term of deposits should not be less than 5 years
The deduction can be claimed by individual as well as HUF
4. Tax Saving Mutual Funds
These mutual funds are tilted towards equity and hold 65% of their corpus in shares, hence this scheme is also called as Equity Linked Saving Scheme (ELSS)
The lock-in period of these investments is 3 years
The ELSS investments made through SIP are also eligible for tax deductions
This can be claimed by Individual and HUF
5. Employee Provident Fund
The employers are mandated to deduct and pay 12% of the salary to EPF
However, the deduction is available for contribution to EPF made by the employee
This deduction is available to Individual
The withdrawal from EPF and interest income earned is separately tax-free
6. Principal Repayment of Home Loan
The EMI you pay on home loan consists of interest and principal components
Interest component is deductible from house property income
The principal component is deductible under this section
It can be claimed by individual and HUF
7. Tuition Fees Paid
The deduction can be claimed in respect of tuition fees paid at the time of admission or during the year
Fees paid for any school, college or university is eligible
Donation or development fund contributions are not eligible
Late fees paid is not to be included in the claim
Can be claimed in respect of only two children
