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What falls under Section 80C?

Rachna C | December 26, 2005

In Time to start your tax planning, we explained why Section 80C is better than Section 88.

Over here, we tell you what qualifies for exemption under Section 80C.

The investments

1. Contribution to Provident Fund

2. Contribution to Public Provident Fund

3. Payment of life insurance premium

4. Investment in pension plans

5. Investment in Equity Linked Saving Schemes of mutual funds

6. Investment in Infrastructure bonds

7. Investment in National Savings Certificate

The expenditure

1. Payments towards the principal amount of your home loan are eligible for an income deduction.

2. Payments towards the education fees for children are also eligible for an income deduction.

The limit

Overall, the limit under Section 80C is Rs 1,00,000. Unlike Section 88, there are no sub-limits.

This is irrespective of how much you are earn and under which tax bracket you fall.

However, there may be individual limits under each.

For instance, the maximum that you can invest in PPF is Rs 70,000 per annum.

Also, under Section 80CCC, the contribution made to pension funds is subject to a maximum of Rs 10,000.

Barring these exceptions, you can choose to invest the entire amount in ELSS or infrastructure bonds. The choice is entirely up to you as to how you want to reach this limit.

Or, if you are repaying a home loan and the principal repayment amounts to Rs 1,00,000,you can claim the entire amount as a deduction.

Similarly, the deduction for tuition fees under Section 80C is available towards payment of education fees for children upto a ceiling of Rs 1,00,000. However, in order to avail of this deduction, you will have to produce the feereceipt.

The calculation

Let's take an example to better explain the tax working:

Net taxable income

Tax rate

Upto Rs 1,00,000

Nil

Rs 1,00,001 1,50,000

10%

Rs 1,50,001 2,50,000

20%

Rs 2,50,001 onwards

30%

Salary income: Rs 3,20,000

Home loan interest payment: Rs 1,20,000

Home loan principal repayment: Rs 80,000

NSC investment: Rs 30,000

Salary (a)

320,000

Income from house property (b)*

120,000

Gross total income (c) (c = a b)

200,000

Home loan principal repayment

80,000

NSC investment

30,000

Section 80C investments

1,10,000

Limit for Section 80C deduction (d)

1,00,000

Taxable income (c d)

100,000

Tax on taxable income

Nil

* The tax man views the home loan interest payment as negative income from house property.

You don't have a long way to go for the financial year to come to an end (March 31, 2006). So, if you have not already done your tax planning, get cracking.




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Number of User Comments: 40




Sub: Deduction under Section 80C

Will the Tuition fees paid for my children studying at Pre- Nursery, Nursery and KG eligible for deduction u/s 80C? Since these are full time ...


Posted by Bikash Mani Bharadwaj





Sub: Non taxable allowances

Please let me know except Housing Loan Repayment, which are other expenses for which one get deduction in the gross income which is not included ...


Posted by Mohan Sawant





Sub: Home Stamp duty amd registration fees

Can the following be deduted from total taxable income under any section? 1. Home registration fees. 2. Home stamp duty. 3. Home loan processing fees.


Posted by Sachin Patil





Sub: Insurance premium

Can a emoployer claims 80C deduction in respect of premium paid by his wife who is employed but taxable income is nil for the current ...


Posted by Uma k





Sub: Date of payment for the purpose of claiming tax benefit

An insurance premium paid by credit card in the month of March, and payment toward the credit card made in the month of April of ...


Posted by akila




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