If you are a salaried or self-employed person, you must be filing your income tax returns every year. It becomes of utmost importance to reduce your taxable income by investing in tax-savings instruments. Hence, here is a guide to help you understand the investments that are eligible for income tax deductions under Section 80C.
Eligible Deduction under Section 80C
Public Provident Fund (PPF)
Public Provident Fund is an investment scheme backed by the government with a maximum investment limit of INR 1,50,000 per year and a lock-in period of 15 years. You can claim the contributions made towards PPF under Section 80C and also get tax exemption on the entire corpus received on maturity.
National Pension Scheme (NPS)
National Pension Scheme is a pension plan created for employees that work in a private organisation and do not have a pension system. This scheme was initiated by the Government of India to enable employees working in private sectors to have a pension system and to secure them after retiring from work. This investment option has a lock-in period which cannot be accessed until you reach retirement. But partially withdrawal is allowed after completing 10 years since investment.
Employees’ Provident Fund (EPF)
Employees’ Provident Fund is provided by most organisations where a part of your salary is accumulated on a monthly basis. This amount is exempt from tax which reduces your taxable income. You can claim tax deductions only on the money contributed by you and not on the employer’s share.
The amount kept in a fixed deposit with a bank can be claimed for exemption under Section 80C. For the returns to be eligible, the fixed deposit has to be in a lock-in period of 5 years without any premature withdrawal.
If you have bought a life insurance policy, the premiums are eligible for tax exemption. The premiums paid for securing the insurances can be claimed under Section 80C. Also, your family under Section 10 (10D) can claim the death benefit for deductions.
Senior Citizens Savings Scheme (SCSS)
Senior Citizens Savings Scheme is a scheme devised for senior citizens with a tenure of five years and qualifies for tax exemption under Section 80C. You can invest in this scheme if you are at least 60 years of age. In the case of voluntary retirement, you can opt for SCSS after the age of 55.
National Savings Certificate (NSC)
National Savings Certificate is a saving scheme that has a lock-in period of five years and can be availed at a post office. The contributions made towards NSC can be claimed for deductions under Section 80C.
Some Payments Eligible for Deduction under Section 80C
Repaying Housing Loan
You can claim tax benefits under Section 80C on the repayment of the principal amount of a home loan. This tax exemption also includes the expenses incurred on stamp duty and registration.
Paying Children’s Fees
The fees paid for the admission of your children in schools, colleges or universities in India can be claimed for tax exemption. But this benefit is only limited to full-time courses. Also, the deduction under Section 80C is extended up to two children per financial year.