Income Tax Deductions Under Section 80C, 80CCC & 80CCD

Union Budget 2024-25 updates regarding Sections 80C, 80CCC & 80CCD

As per the Union Budget 2024 that was announced by the Finance Minister Nirmala Sitharaman, no changes have been made to Income Tax deductions under Section 80C, Section 80CCC, and Section 80CCD.

Union Budget 2023 update regarding Section 80C

Finance Minister Nirmala Sitharaman during the recently concluded Union Budget 2023 did not make any changes to the existing rules regarding Section 80C. Hence, if you are following the old tax regime, you will be able to avail yourself of deductions of up to Rs.1.5 lakh. The deduction rules do not apply if you have opted for the new tax regime option.

Deductions List on Investments under Section 80C

Here are the various investments you can make to save tax under Section 80C of the Income Tax Act:

Provident Fund

1. Provident Fund is a type of retirement investment that is automatically subtracted from your monthly salary.
2. An employee and his/her employer both contribute towards PF.
3. While the contribution made by the employer is exempt from tax, the contribution made by the employee is eligible for deductions under Section 80C.
4. Employees are also allowed to make voluntary contributions towards the Provident Fund Account. Voluntary Provident Fund or VPF as it is called, is also eligible for tax deductions under Section 80C of the Income Tax Act.

Public Provident Fund

1. Public Provident Fund is a popular long-term investment instrument as it offers assured returns.
2. Interest is compounded on an annual basis and the maturity period of the scheme is 15 years.
3. The least that you can contribute towards PPF is Rs.500 and the maximum contribution allowed is Rs.1.5 lakh.
4. The amount you contribute towards PPF is eligible for tax deductions under Section 80C of the Income Tax Act.

Premium Payments towards Life Insurance

1. If you have purchased a Life Insurance Policy for yourself, your children or your spouse, the premiums you pay towards it are eligible for deductions under Section 80C of the Income Tax Act.
2. In case you have multiple life insurance policies from different insurance providers, you can club all the premiums and claim deductions up to Rs.1.5 lakh p.a.

Equity Linked Savings Scheme (ELSS)

1. Certain mutual fund schemes have been designed especially for the purpose of tax savings. Equity Linked Savings Schemes, or ELSSs as they are generally called, allow investors to claim tax deductions to the extent of Rs.1.5 lakh under Section 80C of the Income Tax Act.

National Savings Certificate

1. National Savings Certificate or NSC as it is known in its abbreviated form, is one of the most popular tax-saving instruments available to Indian citizens.
2. The maturity period of the scheme is five years and 10 years.
3. The interest in this long-term fixed income scheme is compounded semi-annually.
4. The minimum amount of money that you can invest in this certificate is Rs.100 and there is no maximum limit on the amount of investment you can make in NSC.
5. The amount you invest in National Savings Certificate is eligible for tax deductions under Section 80C of the Income Tax Act, subject to a maximum of Rs.1.5 lakh per financial year.

Sukanya Samriddhi Scheme

1. Individuals can open a Sukanya Samriddhi account for a girl child anytime from the date of her birth to the day she turns 10 years old.
2. The minimum amount that you can invest in the Sukanya Samriddhi scheme is Rs.1,000 and the maximum is limited to Rs.1.5 lakh in a financial year.
3. The interest in this account is calculated on an annual basis and compounded on an annual basis too.
4. The interest you accrue through this scheme is eligible for tax deductions under Section 80C of the Income Tax Act.

Unit Linked Insurance Plans (ULIPs)

1. These insurance plans offer coverage to the policyholder and provide substantial returns in the long term.
2. One of the main reasons why these plans have become so popular in recent times is the fact that they not only help in saving money, but also provide tax benefits under Section 80C of the Income Tax Act.

Repayment of Home Loan Principal Amount

1. The EMI amount that goes towards the repayment of the principal amount on your home loan is also eligible for tax deductions under Section 80C.
2. The repayment of your home loan amount has two components, viz. the principal amount and the interest.
3. While the interest part of the repayment cannot be claimed as deduction under Section 80C of the Income Tax Act.

Registration Charges and Stamp Duty for a Home/Property

In case you purchase a home or a property and pay for stamp duty and registration, these amounts can be claimed as tax deductions under Section 80C of the Income Tax Act.

Infrastructure Bonds

Infra bonds as they are commonly called, Infrastructure bonds are issued not by the government but by infrastructure companies. In case you invest in these bonds, you can claim tax deductions up to Rs.1.5 lakh under Section 80C of the Income Tax Act.

NABARD Rural Bonds

NABARD, or the National Bank for Agriculture and Rural Development, offers two kinds of bonds, viz. Bhavishya Nirman Bonds and NABARD Rural Bonds. However, only the latter qualifies for tax deductions under Section 80C of the Income Tax Act, and the maximum amount that you can claim as deductions is Rs.1.5 lakh.

Senior Citizen Savings Scheme

1. The Senior Citizen Savings Scheme is the best possible long-term debt investment scheme for senior citizens. The returns are relatively lucrative in comparison with other schemes, and the interest is paid on a quarterly basis.
2. Individuals who are above 60 years of age can invest in this scheme and claim tax benefits up to Rs.1.5 lakh under Section 80C of the Income Tax Act.

Five-year Post Office Time Deposit Scheme

1. Post office deposit schemes are a lot like fixed deposits offered by banks.
2. The duration of these long-term debt schemes could range from one year to five years, but only the interest earned on five-year post office time deposit schemes are eligible for tax deductions under Section 80C of the Income Tax Act.

Income Tax Deduction Limits Under Section 80C, 80CCC, 80CCD(1), and 80CCD(2)

Since we have already covered the investments that are eligible for deductions under Section 80C of the Income Tax Act, let's look at the various sub-sections and the investments that can be used for deductions:

Deductions Under Section 80CCC

(Deduction for premiums paid towards annuities under any insurance plan)

This section permits tax deductions on investments made into pension funds. These pension funds may be provided by any insurer, and a maximum deduction of Rs.1.5 lakh can be requested. Individual taxpayers are the only ones eligible to claim this deduction.

Deductions Under 80CCD

(Deduction for contributions to pension accounts)

SECTION 80CCD (1) (Employee)

Tax deductions are available for employee contributions up to 10% of the basic salary and dearness allowance (DA) up to Rs.1.5 lakh.

SECTION 80CCD (1b) (Self)

Under this section, the employer's contribution is deductible up to 10% of basic plus DA. However, since the employer's contribution isn't included in the Rs.1.5 lakh that Section 80C allows, it is a separate deduction.

SECTION 80CCD (2) (Employment)

An extra exemption of up to Rs.50,000 in NPS is eligible for an income tax deduction only under this section. However, note that this additional tax benefit is along with the Rs.1.5 lakh benefit claimed under other investments.

Therefore, the combined tax benefits under Section 80CCD (1) + Section 80CCD (1B) may reach Rs.2 lakh for the applicable fiscal year based on different situations.

Deductions Under Section 80D: Health Insurance Benefits

Under Section 80D, deductions can be availed for individuals and Hindu Undivided Families. Deductions are available for an individual’s health insurance premiums as well as for their spouse, dependent children, and their parents' yearly preventive health exams.

However, these are subject to the limitations and guidelines stated in Section 80D. To put it briefly, the assessee can deduct Rs.25,000 from insurance for themselves, their spouse, and their dependent children under Section 80D. This deduction can be claimed up to a maximum of Rs.50,000 if the assessee is over the age of 60 years.

In addition to the claim as mentioned earlier, the assessee can avail an additional deduction of up to Rs.25,000 for parents' insurance. An additional deduction of Rs.50,000 is available if the assessee and their parent(s) are both 60 years of age and older.

When should I Invest to Claim Deductions under Section 80C of the Income Tax Act?

1. Most people tend to start making investments towards the end of a financial year just to claim tax deductions.
2. Tax experts suggest that investments are best when made at the start of a financial year as doing so would not only mean that you are making informed decisions, but also ensuring that you earn the interest for the whole year from April to March.