TAX Savings Options under Section 80C

TAX Savings Options under Section 80C

This is that time of the financial year when most of the individuals (considering the salaried individuals have to submit their income tax investment proofs) look for Tax Saving investment options. Generally, most of the employers accept investment proofs from their employees during November to February.


Many of us are aware of different types of tax saving instruments and also the list of income tax deductions which can be claimed under different Sections of the Income Tax Act.


Tax Saving investment options under Section 80C : In whose name can they be invested?

The maximum tax deduction limit under Section 80C is Rs 1.5 Lakh. The various investment avenues that can be considered for tax benefits under section 80C are as below. This deduction is allowed to an Individual or a Hindu Undivided Family.


(Public Provident Fund) :

You can invest in Public Provident Fund in your name. You can open only one Public Provident Fund account in your name. You can also open Public Provident Fund accounts in name of your spouse or children. However, kindly note that parents (father/mother) cannot open two separate Public Provident Fund accounts in the name of same child.You can invest a maximum of Rs.1,50,000 in your name and minor kid’s name. You can also invest maximum of Rs 1.5 Lakh in your spouse’s name but do remember that you can claim Rs 1.5 Lakh only as tax deduction. If you invest in name of your spouse, due to clubbing of income your need to add the interest earned on spouse’s Public Provident Fund account to your income. You can also invest in your Major child’s name. For example : You can invest up to Rs 3 Lakh in two Public Provident Fund accounts (self Rs 1.5 Lakh + major child Public Provident Fund A/c Rs 1.5 lakh). You can claim tax deduction of Rs 1.5 Lakh. If the major child has taxable income, he/she can treat the other Rs 1.5 lakh as gift and can claim tax deduction on his income. Public Provident Fund account cannot be jointly held.


Life Insurance Policies :

The premium amount paid by a policyholder towards life insurance premium for self, spouse or his/her children can be claimed as tax deduction. If you pay life insurance premium on policies which are in name of parents, brothers, sisters or In-laws then such amounts are not eligible to claim u/s 80C. Kindly note that section 80c deduction is available on Life insurance premium paid for adult children or married daughter too. If you are paying premium for more than one life insurance policy, you can club all the premiums and claim the total amount u/s 80c.

Contributions to Employees Provident Fund or Voluntary Provident Fund in your name alone can be claimed.

NSC (National Savings Certificate) investments which are in your name can be claimed.

Equity Linked Savings Scheme Tax saving mutual fund Schemes :

Investments in Equity Linked Savings Scheme funds which are in your name alone can be claimed as tax deduction. Equity Linked Savings Scheme funds can be held in joint-names, but only first-applicant (primary holder) who is a tax- assesses can claim the tax deduction.

Tax Saving Fixed Deposits: Same as in case of Equity Linked Savings Scheme investments.

Sukanya Samriddhi Account Deposit Scheme : The contributions have to be made by parent / guardian of a girl child. Girl child is the beneficiary under Sukanya Samriddhi Account Scheme.

The contributor (parent) can claim the tax deduction on the contributions made to Sukanya Samriddhi Account account.A depositor can open and operate only one account in the name of same girl child under this scheme.The depositor (or) guardian can open only two Sukanya Samriddhi Account accounts.

Senior Citizen Savings Scheme (Sr C S S) :

This account can be opened by an individual who is 60 years and above. (But, if the retirement is due to superannuation or VRS, you can open Senior Citizen Savings Scheme account after the age of 55 years. There is no age limit for the retired defense personnel.)The investments have to be in your name for claiming tax deduction. Joint account can also be opened. But it has to be only with the spouse. There is no age limit for the second applicant.

In case of joint accounts, the primary account holder is deemed to be the investor. So, only the first applicant can claim the tax deductions. You can open multiple Senior Citizen Savings Scheme accounts, either individually or with a joint investor (must be the spouse of the primary investor).

National Pension System – only the subscriber can claim tax benefits. If you invest in National Pension System which is in your spouse’s name then you cannot claim tax deduction.

Post Office Time Deposit:

Just like fixed deposits, time deposits held at post office also are eligible for tax benefits under this section. These deposits come with an option of a 5 year time deposit where investments become eligible for benefits. These deposits also offer attractive interest rates in excess of 8% per annul however it can change at any time.

Education Expenses:

School fee is not cheap these days and for that reason, when you do pay it you can claim tax benefits on the amount that you have paid. The conditions that apply in this investment are that it is available only for two children, the school cannot be outside India and the tuition fee is the only payment that is eligible.

Home Loan Payments:

When you pay a home loan Equated monthly installment, there are two major components to it; the principal and the interest. Under section 80C you can claim tax benefits on the principal paid. You can also claim benefits under section 24.

Stamp Duty and Registration Charges for House:

When you buy a house, one of the expenses you incur will be payments for the stamp duty and the registration of the property. Whatever is spent on these expenses is eligible for benefits under section 80C.

Life Insurance:

All life insurance premium payments, include those paid for unit linked insurance plans, are also eligible for tax benefits under section 80C.

Mutual Fund Investments (Equity Linked Savings Scheme):

When you invest in a mutual fund, particularly an equity linked savings scheme or a tax saving mutual fund, the amount invested is eligible for tax exemption under this section. These mutual funds come with a lock in period of 3 years.


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