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Income Tax Deductions under Section 80C, 80CCC and 80CCD
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Disclaimer: This Article is for information purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. (“Bank”) or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers and it does not constitute legal advice from the Bank. The Bank, its directors, employees and the contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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Understanding Deductions Under Sections 80C, 80CCC, and 80CCD
If you want to maximize your tax savings, sections 80C, 80CCC, and 80CCD of the Income Tax Act are your new best friends. These sections give you tax benefits on a wide range of investments and expenses. And by planning your major investing and spending activities smartly, you can maximize your total deductions under Section 80C each year.
To do this, however, you need to have a clear idea of all the deductions you can claim under this section, as well as the total deduction limit available. So, let's check out these details below.
Deductions offered under Section 80C of the Income Tax Act, 1961
The following investments and expenses are eligible for deduction under Sections 80C, 80CCC, and 80CCD: Some investments offer fixed returns, while others are market-linked.
Particulars
Details
Nature of the investment or expense
Public Provident Fund (PPF)
Public Provident Fund (PPF) is a Government scheme that has a lock-in period of 15 years.
You can invest as little as ₹500 or as much as ₹1.5 lakh each financial year.
The amount you invest is eligible for deduction u/s 80C.
Retirement-oriented fixed income investment
Employee Provident Fund (EPF)
Your employer may deduct 12% of your salary as the employee contribution to your EPF account.
This sum is eligible for deduction u/s 80C.
Retirement-oriented fixed income investment
5-year tax-saver FD
The amount invested in a tax-saver fixed deposit is also deductible u/s 80C in the year of investment.
The FD cannot be prematurely withdrawn.
Fixed-income, long-term debt investment
5-year tax saver time deposit with the Post Office (FD, RD)
The amount invested in a tax saver fixed deposit or recurring deposit is deductible u/s 80C in the year
of investment. For purposes of deduction, the minimum tenure of FD is 5 years.
Fixed income investment
Senior Citizen Savings Scheme (SCSS)
This is an investment scheme for individuals over the age of 60 (55 years for those who have retired on
superannuation and subject to fulfilment of other conditions). It comes with a lock-in period of 5 years
(which can be extended by further 3 years), and you can invest up to ₹15 lakhs# in a year up 31st March 2023.
#From 1st April 2023 onwards, the investment limit is proposed to be increased to ₹30 lakhs in a year.
Fixed income investment
National Savings Certificate (NSC)
The NSC is a low-risk post office savings instrument that has a lock-in period of 5 years.
The amount you invest in this scheme is also eligible for tax deduction u/s 80C.
Fixed income investment
Sukanya Samriddhi Yojana
This is a Government scheme introduced to help parents save for the future of their girl children.
You can claim the amount invested in this scheme as a tax deduction u/s 80C.
Fixed income investment
National Pension Scheme (NPS)
Any contribution made during a financial year to your NPS account is
deductible u/s 80CCD(1).
Government-backed pensions scheme
Atal Pension Yojana (APY)
Any amount invested in this scheme is deductible u/s 80CCD(1).
Government-backed pensions scheme
Equity Linked Savings Scheme (ELSS)
ELSS is a kind of equity-oriented mutual fund scheme with a lock-in period of
3 years. The amount you invest in this scheme is also eligible for deduction u/s 80C.
Market-linked investment
Life insurance premiums
The amount paid as premium during any given financial year for any kind of life insurance policy
(like term insurance, endowment plans, ULIPs etc.) is deductible u/s 80C subject to fulfilment
of conditions prescribed.
Spending activity
Home loan principal repayment
The total of the principal component of the home loan EMIs paid to Central and State Governments, banks, including cooperative banks, LIC, the National Housing Bank,
Public companies, and other specified persons during the financial year is also deductible u/s 80C.
Spending activity
Stamp duty and registration charges
The stamp duty and registration charges you pay when you buy a house are one-time
deductions offered u/s 80C.
Spending activity
Tuition fees for children’s education
The tuition fees (excluding any payment towards development fees and donations)
you pay in India for up to two children’s school, college, or university education can be claimed as a deduction u/s 80C.
Spending activity
Note: Before making the above investments, you shall have to take into consideration the period for which the investments are to be made, the rate of returns and the taxability of such returns/withdrawal/redemption of such investments.
What is the maximum deduction you can claim?
The provision for the maximum deduction permitted is defined in section 80CCE of the Income Tax Act. Essentially, the total amount of deductions you can claim under sections 80C, 80CCC, and sub-section (1) of section 80CCD together is capped at ₹1.5 lakhs.
So, for instance, let's say you invest the following amounts in various investments and have the following expenses eligible under Section 80C during FY 2022–23.
Here, although the sum total of these eligible investments/expenses comes up to ₹1,75,000, you can only claim deductions up to ₹1,50,000 u/s 80C for this financial year.
Conclusion
The best part about the above investments and expenses is that, in addition to the tax benefits they offer, they also help you save for long-term goals like having your own house or retiring with a significant corpus in your name. So, if you have not yet fully utilized the benefits under Section 80C, there is still time this year to plan your investments and optimize your tax deductions.
This Article is for informational purposes only. The views expressed in this Article do not necessarily constitute the views of Kotak Mahindra Bank Ltd. ("Bank") or its employees. The Bank makes no warranty of any kind with respect to the completeness or accuracy of the material and articles contained in this Article. The information contained in this Article is sourced from empanelled external experts for the benefit of the customers, and it does not constitute legal advice from the Bank. The Bank, its directors, employees, and contributors shall not be responsible or liable for any damage or loss resulting from or arising due to reliance on or use of any information contained herein. Tax laws are subject to amendment from time to time. The above information is for general understanding and reference. This is not legal advice or tax advice, and users are advised to consult their tax advisors before making any decision or taking any action.
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