Section 80C of Income Tax Act: A Complete Guide with Examples
In this
guide, we’ll explain Section 80C in simple terms, covering:
✅ What is Section 80C?
✅ Eligible
Investments & Expenses Under 80C
✅ How
to Claim Deduction Under 80C?
✅ Examples
& Tax-Saving Calculations
✅ Common
Mistakes to Avoid
What is
Section 80C?
Section 80C is a tax
deduction available to individuals and HUFs (Hindu
Undivided Families) under the Income Tax Act, 1961. It allows you
to reduce your taxable income by up to ₹1.5 lakh per financial year if
you invest in or spend on specified instruments.
Key
Features of Section 80C
✔ Maximum Deduction: ₹1.5
lakh per year
✔ Available
to: Salaried
employees, self-employed individuals, and HUFs
✔ Types
of Benefits: Investments
(like PPF, ELSS) + Expenses (like tuition fees, home loan principal repayment)
✔ Tax
Regime Applicability: Available
under Old Tax Regime only (Not in New Tax Regime from FY
2023-24)
List of
Eligible Investments & Expenses Under Section 80C
Here’s a
breakdown of popular tax-saving options under Section 80C:
1.
Investments
|
Investment |
Lock-in
Period |
Returns
(Approx.) |
Risk
Level |
Official
Website |
|
15 years |
7-8% |
Low |
||
|
ELSS (Equity-Linked Savings
Scheme) |
3 years |
10-15% |
High |
- |
|
NSC (National Savings Certificate) |
5 years |
6-7% |
Low |
|
|
5-Year Tax-Saving FD |
5 years |
6-7.5% |
Low |
- |
|
Sukanya Samriddhi Yojana (SSY) |
Until
girl turns 21 |
7-8% |
Low |
|
|
ULIPs (Unit-Linked Insurance
Plans) |
5 years |
Market-linked |
Medium |
- |
2.
Expenses
- Tuition Fees (for up to 2 children)
- Principal Repayment of Home
Loan (under
home loan EMI)
- Life Insurance Premiums (for self, spouse,
children)
- Senior Citizen Savings Scheme
(SCSS)
How to
Claim Deduction Under Section 80C?
To claim
the deduction:
- Invest or Spend on eligible 80C
instruments in the same financial year (April-March).
- Keep Proof (investment receipts,
premium receipts, tuition fee receipts, etc.).
- Mention in ITR while filing taxes
under "Deductions".
Example:
Tax Saving with Section 80C
Suppose Mr.
Sharma earns ₹10 lakh/year and invests:
- ELSS: ₹50,000
- PPF: ₹50,000
- Child’s Tuition Fees: ₹30,000
- Life Insurance Premium: ₹20,000
Total
80C Deduction = ₹1.5 lakh (max)
Now, his taxable income reduces to ₹8.5 lakh (₹10L – ₹1.5L), saving
him ₹45,000 in tax (30% slab)!
Common
Mistakes to Avoid
❌ Exceeding ₹1.5L Limit –
No extra benefit beyond ₹1.5L.
❌ Not
Keeping Proof –
Always keep investment receipts.
❌ Mixing
New & Old Tax Regime –
80C is not available in New Tax Regime.
❌ Ignoring
Lock-in Periods –
Some investments (like ELSS, FD) have lock-ins.
Final
Thoughts: Is Section 80C Worth It?
✅ Best for: Long-term
savings + tax benefits.
✅ High-Return
Option: ELSS
(3-year lock-in, equity-linked).
✅ Safe
Options: PPF,
NSC, Tax-Saving FD.
If
you’re in the 20% or 30% tax slab, Section 80C can save you
up to ₹45,000/year!
Pro
Tip: Combine
80C with other deductions (80D, HRA, etc.) for maximum tax
savings!
FAQ on
Section 80C
Q1.
Can I claim 80C for my spouse’s investments?
Yes, if you pay the premium or invest on their behalf.
Q2.
Is NPS eligible under 80C?
Partially – Only ₹50,000 under Section 80CCD(1B) (separate
from 80C).
Q3.
Can I withdraw 80C investments anytime?
No, most have lock-in periods (e.g., ELSS – 3 years, PPF – 15 years).
Final
Thoughts
Section 80C is a must-use
tax-saving tool for salaried and self-employed individuals. By smartly
investing in PPF, ELSS, or insurance, you can cut your tax
bill legally while building wealth.
Want more tax-saving tips? Stay tuned for our next post on Section80D (Health Insurance Deductions)!
