The total limit of Deduction u/s 80C is Rs.150000/- from AY 2014-15. Under this section of Chapter VIA, a number of small deductions are provided to the assessee in the form of NSC, PPF and other pension plans. Payment of LIC Premiums is also eligible for deduction u/s 80C. Most of the Income Tax assessee tries to save tax by saving under Section 80C of the Income Tax Act. However, it is important to know the Section on an overall basis to make the best use of the deductions available overall.
The ways in which deductions can be claimed under the specified section are:
Life Insurance Premium: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction. An individual or an HUF only can claim deduction for life insurance premium paid. The HUF can claim deduction for premium on life of any of its members. Moreover there is also a lock-in period of two years till then you cannot terminate or let the policy lapse. In case this happens, the deductions allowed in earlier years are added to your income of the current year.
Public Provident Fund (PPF): You can claim deductions in respect of PPF contributions made for yourself, your spouse and your children even if not dependent on you. Current rate of interest is 8.70% tax-free (Compounded Yearly) and the normal maturity period is 15 years. Minimum amount of contribution is Rs 500 and maximum is Rs 1,50,000. A point worth noting is that interest rate is assured but not fixed.
ELSS contributions: The units allotted under ELSS schemes have a restriction as to holding period of three years. This is the shortest holding period in for pure saving based investments under Section 80C. In case the investment was made through systematic investment plan (SIP), three years will be calculated with reference to the date of each such SIP installment. The investments that you make in ELSS are eligible for deduction under Sec 80C
Home Loan Principal Repayment: The deduction can be claimed only if the loan has been taken from specified financial institutions or entities like your employer a public limited company, central government or state government or board, corporation, university established by law. However in respect of loans taken from your relatives though you can claim deduction under Section 24b for interest, the deduction under Section 80 C for repayment is not available. The claim for Tax deduction can only be made after you have obtained possession of the house though the repayment might have begun when property is still under construction. In case the property is sold within 5 years, then the deduction claimed earlier will be withdrawn.
SukanyaSamriddhi Account: SukanyaSamriddhi Account meaning Girl Child Prosperity Scheme is a special deposit scheme launched by Prime Minister NarendraModi on 22 January 2015 for girl child. This scheme states that per girl child only single account is allowed. Parents can open this account for maximum two girl child. In case of twins this facility will be extended to third child. Minimum deposit amount for this account is Rs.1,000/- and maximum is Rs. 1,50,000/- per year. Money to be deposited for 14 years in this account. Interest rate for this account is 9.1% per annum, calculated on yearly basis, yearly compounded.
National Savings Certificate (NSC): NSC is a saving instrument with a maturity period of Five and Ten Years. Presently, the interest is paid @ 8.50% p.a. on 5 year NSC and 8.80 % Per Annum on 10 year NSC. Interest is Compounded Half Yearly. While the minimum investment amount is Rs 100, there is no maximum amount.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure of 5 years are also entitled for section 80C deduction.
These are few of the many ways in which you can save tax u/s 80C.