80C Deductions under Income tax act 1961

This article is about 80C Deductions which enables Individuals & HUF to reduce taxable income by upto ₹1.5 lakhs every financial year.

80C Deductions under Income tax act 1961

Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.

Eligible Assessee: Individual or a Hindu undivided family

Allowed Maximum Deduction: Rs 1,50,000.

Deductions allowed Against following sums paid or deposited in the previous year by the assessee:

Life Insurance Premium : Premium paid to effect or to keep in force an insurance on the life of specified persons being- in the case of an individual, the individual, the wife or husband and any child of such individual, and (ii) in the case of a Hindu undivided family, any member thereof;(Refer Explanations👇)

Contribution by an individual to any provident fund to which the Provident Funds Act, 1925 applies;
Contribution to any provident fund set up by the Central Government and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of any specified person;
Contribution by an employee to a recognised provident fund;
Contribution by an employee to an approved superannuation fund;
Contribution by an individual to any pension fund set up by any Mutual Fund referred to in section 10(23D) or by the Administrator or the specified company, as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Contribution, in the name of any specified person for participation in the Unit-linked Insurance Plan, 1971 specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 ;
Contribution in the name of any specified person for participation in any such unit-linked insurance plan of the LIC Mutual Fund referred to in section 10(23D), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

Tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—
(a) to any university, college, school or other educational institution situated within India;
(b) for the purpose of full-time education in the case of an individual, any two children of such individual.

Investment as term deposit—
(a) for a fixed period of not less than 5 years with a scheduled bank; and
(b) which is in accordance with a scheme framed and notified, by the Central Government, in the Official Gazette for the purposes of this clause;

Payment to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify;
Deposit in an account under the Senior Citizens Savings Scheme Rules, 2004;

Investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981;
Subscription, in the name of the individual or any girl child of that individual, or any girl child for whom such person is the legal guardian, if the scheme so specifies, to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf;(sukanya samridhi scheme a/c)
Subscription to any such savings certificate as defined in section 2(c) of the Government Savings Certificates Act, 1959 , as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Subscription to any units of any Mutual Fund referred to in section 10(23D) or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Subscription to such bonds issued by the NABARD, as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Subscription to any such deposit scheme of—
(a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or
(b) any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both,as the Central Government may, by notification in the Official Gazette, specify in this behalf;
Subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed form. ["eligible issue of capital" means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA];
Being an employee of the Central Government, as a contribution to a specified account of the pension scheme referred to in section 80CCD—
(a) for a fixed period of not less than 3 years; and
(b) which is in accordance with the scheme as may be notified by the Central Government in the Official Gazette for the purposes of this clause.

Payment to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (xii), on the life of Individual his spouse and child
Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;

By way of deduction from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum so deducted does not exceed 1/5 th of the salary;
Payment for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head "Income from house property" (or which would, if it had not been used for the assessee's own residence, have been chargeable to tax under that head), where such payments are made towards or by way of— (a) any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or
(b) any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or
(c) repayment of the amount borrowed by the assessee from—
(i) the Central Government or any State Government, or
(ii) any bank, including a co-operative bank, or
(iii) the Life Insurance Corporation, or
(iv) the National Housing Bank, or
(v) any public company formed and registered in India with the main object of carrying on the business of providing long-term finance for construction or purchase of houses in India for residential purposes which is eligible for deduction under section 36(1)(viii), or
(vi) any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
(vii) the assessee's employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or
(viii) the assessee's employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society; or

(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,
but shall not include any payment towards or by way of—
(i) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or
(ii) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or
(iii) any expenditure in respect of which deduction is allowable under the provisions of section 24;

Explanations For Section 80C

(1) Explanation to Life Insurance Premium Paid:

If policy issued before 01/04/2012
Deduction for premium or other payment is restricted to 20% of the actual capital sum assured.
If policy issued on or after 01/04/2012
Deduction for premium or other payment is restricted to 10% of the actual capital sum assured
If policy issued on or after 01/04/2013 for person with disability (under section 80U) or person suffering from specified disease (under section 80DDB)
Deduction for premium or other payment is restricted
to 15% of the actual capital sum assured.

(2) In calculating any such actual capital sum assured, no
account shall be taken—

(i) of the value of any premiums agreed to be returned, or

(ii) of any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person.

(3) Where, in any previous year, an assessee—

(i) terminates his contract of insurance by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—
(a) in case of any single premium policy, within two years after the date of commencement of insurance; or
(b) in any other case, before premiums have been paid for two years; or
(ii) terminates his participation in any unit-linked insurance plan referred to in clause (x) or clause (xi) of sub-section (2), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or
(iii) transfers the house property referred to in clause (xviii) of sub-section (2) before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause,
then,—
(a) no deduction shall be allowed to the assessee under sub-section (1) with reference to any of the sums, referred to in clauses (i), (x), (xi) and (xviii) of sub-section (2), paid in such previous year; and
(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

(4) If any equity shares or debentures, with reference to the cost of which a deduction is allowed under sub-section (1), are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

(5) If any amount, including interest accrued thereon, is withdrawn by the assessee from his account referred to in clause (xxiii) or clause (xxiv) of sub-section (2), before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year:
Provided that the amount liable to tax shall not include the following amounts, namely:—
(i) any amount of interest, relating to deposits referred to in clause (xxiii) or clause (xxiv) of sub-section (2), which has been included in the total income of the assessee of the previous year or years preceding such previous year; and
(ii) any amount received by the nominee or legal heir of the assessee, on the death of such assessee, other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or years preceding such previous year.

(6)
(i) "Administrator" means the Administrator as referred to in clause (a) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(ii) "contribution" to any fund shall not include any sums in repayment of loan;
(iii) "insurance" shall include—
(a) a policy of insurance on the life of an individual or the spouse or the child of such individual or a member of a Hindu undivided family securing the payment of specified sum on the stipulated date of maturity, if such person is alive on such date notwithstanding that the policy of insurance provides only for the return of premiums paid (with or without any interest thereon) in the event of such person dying before the said stipulated date;
(b) a policy of insurance effected by an individual or a member of a Hindu undivided family for the benefit of a minor with the object of enabling the minor, after he has attained majority to secure insurance on his own life by adopting the policy and on his being alive on a date (after such adoption) specified in the policy in this behalf;
(iv) "Life Insurance Corporation" means the Life Insurance Corporation of India established under the Life Insurance Corporation Act, 1956 (31 of 1956);
(v) "public company" shall have the same meaning as in section 3 of the Companies Act, 1956 (1 of 1956);
(vi) "security" means a Government security as defined in clause (2) of section 2 of the Public Debt Act, 1944 (18 of 1944);
(vii) "specified company" means a company as referred to in clause (h) of section 2 of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(viii) "transfer" shall be deemed to include also the transactions referred to in clause (f) of section 269UA.

(ix) "scheduled bank" means the State Bank of India constituted under the State Bank of India Act, 1955 (23 of 1955), or a subsidiary bank as defined in the State Bank of India (Subsidiary Banks) Act, 1959 (38 of 1959), or a corresponding new bank constituted under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1970 (5 of 1970), or under section 3 of the Banking Companies (Acquisition and Transfer of Undertakings) Act, 1980 (40 of 1980), or any other bank, being a bank included in the Second Schedule to the Reserve Bank of India Act, 1934 (2 of 1934);

Section 80CCC :

Contribution to pension fund of LIC or other insurance company

Eligible Assessee: Individual

Maximum deduction allowed : Rs 1,50,000.

Section 80CCD:

Deduction in respect of contribution to pension scheme of Central Government/ New pension scheme / Atal pension yojna

Eligible Assessee: Individual

Allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed,—

(a) in the case of an employee, 10% of his salary in the previous year; and
(b) in any other case, 20% of his gross total income in the previous year.

Section 80CCD(1B) :

Additional Deduction upto Rs 50,000 shall be allowed other than contribution covered under section 80CCD(1).

Section 80CCD(2): Employer's contribution to Pension scheme for the benefit of Employee

Employer's contribution is taxable under salary head first and then allowed as deduction under section 80CCD(2) as follows

whole of the amount contributed by the Central Government or any other employer as does not exceed—
(a) 14%, where such contribution is made by the Central Government;
(b) 10%, where such contribution is made by any other employer,
of his salary in the previous year.

Explanations for section 80CCD :

(1) Where any amount standing to the credit of the assessee in his account referred to in sub-section (1) or sub-section (1B), in respect of which a deduction has been allowed under those sub-sections or sub-section (2), together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any previous year,—
(a) on account of closure or his opting out of the pension scheme referred to in sub-section (1) or sub-section (1B); or
(b) as pension received from the annuity plan purchased or taken on such closure or opting out,
the whole of the amount referred to in clause (a) or clause (b) shall be deemed to be the income of the assessee or his nominee, as the case may be, in the previous year in which such amount is received, and shall accordingly be charged to tax as income of that previous year:
Provided that the amount received by the nominee, on the death of the assessee, under the circumstances referred to in clause (a), shall not be deemed to be the income of the nominee.

(2) Where any amount paid or deposited by the assessee has been allowed as a deduction under sub-section (1) or sub-section (1B),—
(a) no rebate with reference to such amount shall be allowed under section 88 for any assessment year ending before the 1st day of April, 2006;
(b) no deduction with reference to such amount shall be allowed under section 80C for any assessment year beginning on or after the 1st day of April, 2006.

(3) For the purposes of this section, the assessee shall be deemed not to have received any amount in the previous year if such amount is used for purchasing an annuity plan in the same previous year.
Explanation.—For the purposes of this section, "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

Section 80CCE:

Limit on deductions under sections 80C, 80CCC and 80CCD.

The aggregate amount of deductions under section 80C, section 80CCC and sub-section (1) of section 80CCD shall not, in any case, exceed Rs 1,50,000.

Section 80CCF:

Deduction in respect of subscription to long-term infrastructure bonds.

Eligible assessee, being an individual or a Hindu undivided family,

Maximum deduction: Rs 20,000

Deduction against amount paid or deposited, during the previous year relevant to the assessment year beginning on the 1st day of April, 2011 or to the assessment year beginning on the 1st day of April, 2012, as subscription to long-term infrastructure bonds as may, for the purposes of this section, be notified by the Central Government.

Section 80CCG :

Deduction in respect of investment made under an equity savings scheme.

Eligible assessee, being a resident individual

Maximum deduction : 50% of the amount invested in such equity shares or units to the extent such deduction does not exceed Rs 25,000

NOTE:

(1) The deduction under section 80CCG(1) shall be subject to the following conditions, namely:—
(i) the gross total income of the assessee for the relevant assessment year shall not exceed twelve lakh rupees;
(ii) the assessee is a new retail investor as may be specified under the scheme referred to in sub-section (1);
(iii) the investment is made in such listed equity shares or listed units of equity oriented fund as may be specified under the scheme referred to in sub-section (1);
(iv) the investment is locked-in for a period of three years from the date of acquisition in accordance with the scheme referred to in sub-section (1); and
(v) such other condition as may be prescribed.

(2) The deduction under sub-section (1) shall be allowed in accordance with, and subject to, the provisions of this section for three consecutive assessment years, beginning with the assessment year relevant to the previous year in which the listed equity shares or listed units of equity oriented fund were first acquired.

(3) If the assessee, in any previous year, fails to comply with any condition specified in sub-section (3), the deduction originally allowed shall be deemed to be the income of the assessee of such previous year and shall be liable to tax for the assessment year relevant to such previous year.
(4) Notwithstanding anything contained in sub-sections (1) to (4), no deduction under this section shall be allowed in respect of any assessment year commencing on or after the 1st day of April, 2018 :
Provided that an assessee, who has acquired listed equity shares or listed units of an equity oriented fund in accordance with the scheme referred to in sub-section (1) and claimed deduction under this section for any assessment year commencing on or before the 1st day of April, 2017, shall be allowed deduction under this section till the assessment year commencing on the 1st day of April, 2019, if he is otherwise eligible to claim the deduction in accordance with the other provisions of this section.

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80C Deductions under Income tax act 1961