Investments – Section 80 C of Income Tax Act, 1961

Section 80 C of Income Tax Act, 1961 specifies qualifying investments/ payments eligible to be considered for deduction from gross income. Main among them are contributions/ investments in:

Provident Fund account (PF account)
Voluntary Contribution to PF (VPF account)
Public Provident Fund (PPF account)
Life Insurance premium 
Senior Citizen Saving Scheme (SCSS)
Tax Saving Fixed Deposits for 5 years
Pension Plans by Mutual Funds
Pension plans of Insurance Companies
New Pension Scheme (NPS)
Equity Linked Saving Schemes (ELSS) by Mutual Funds
Central Government Employee’s Pension Scheme. 

The following expenditure can also be considered under section 80 C

Principal payment on Housing Loan
Stamp duty and Registration cost of the house.
Tuition fee for two children.

Certain norms with regard to eligibility under section 80 C  

a)    Life Insurance Premia : The amount of eligible deduction under section 80 CCC in respect of payment/deposit to annuity plan of LIC or any other insurer  is Rs.1,50,000/-. One can claim up to Rs.1,50,000/- as deduction u/s 80 CCC, but the aggregate deduction u/s 80 C, 80 CCC and 80 CCD (1) cannot exceed Rs.1,50,000 /-. 

For the premium payment towards a life insurance policyto  becomes eligible for consideration under section 80 C, the IT act stipulates certain relation between the annual premium and sum assured.  If the premium paid during the year is more than the following percentage of the sum assured then the excess amount is not eligible for 80C benefit. Actual Sum Assured in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of policy.

b)    Term  deposits for a period of 5 years or more with a Scheduled Bank in accordance with the scheme framed and notified by the Central Government are eligible for deduction u/s 80C within the overall ceiling of  Rs. 1,50,000/-. Similarly, amount deposited as five year time deposit in an account under the Post Office Time Deposit Rules, 1981 is eligible for deduction u/s 80C.

c)    Stamp duty, registration fee and other expenses for the purpose of transfer of house property to the assessee is eligible for deduction u/s 80C.

d)    Deposit in SukanyaSamriddhi Account in the name of a girl child is eligible for deduction u/s 80 C.

e)    Tuition fee for a maximum of two children is eligible for deduction u/s 80C. Tuition fee  includes any sum paid as tuition fee, computer fee, special fee and similar other fees which are in the nature of tuition fee paid at the time of admission or thereafter, to any University, College, School or other educational institution situated within India for the purpose of full time education of the children of the assessee. Payments towards development fee, donation, or payment of similar nature, such as contribution to Building Fund, PTA Fund etc. are not eligible. Since deduction u/s 80C is allowed in respect of amounts that are paid / invested during the financial year. Hence, for reckoning tuition fees for deduction purpose, the payment should be done during the year. Payment made in other years even though it is related to current financial year cannot be considered for deduction.

Whether principal repayment of loan taken for renovation of house eligible for inclusion under Section 80 C?

Repayment of loan availed for addition or alteration to, or renovation or repair of, the house property which is carried out
1.    after the issue of the completion certificate in respect of the house property by the competent authority  OR
2.    after the house property (or any part thereof) has either been occupied by the assessee/ or other persons/ let out
does not qualify for the purpose of 80C.