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Deduction for Certain Payments – 80C

Under the Income Tax Act Deduction is Allowed for Certain Payments, these deductions are covered under Section 80C to Section 80GGC of Income Tax Act. Here we will Discuss all the payments eligible for 80C deduction. These Deductions are applicable for A.Y 2019-20/ F.Y 2018-19.

Who is eligible to take Section 80C Deduction

Deduction under section 80C can be claimed only by Individual/HUF, deduction cannot be claimed by any person other than Individual/HUF i.e Assessee like Companies, Trusts, Societies, Firms, Assocation of Persons (AOP), etc. cannot claim deduction u/s 80C.

Payments eligible for Deduction

Life insurance premium for policy :

 –    in case of individual, on life of assessee, assessee’s spouse and any child of assessee.

 –    in case of HUF, on life of any member of the HUF. (Click Here)

Sum paid under a contract for a deferred annuity :

 –    in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)

 –     in case of HUF, on life of any member of the HUF

Employees’ Provident Fund

 –     Contributions by an individual made under Employees’ Provident Fund Scheme

Public Provident Fund

Contribution to Public Provident Fund Account in the name of:

 –    in case of individual, such individual or his spouse or any child of such individual

 –    in case of HUF, any member of HUF

Recognised provident fund

–    Contribution by an employee to a recognised provident fund

Superannuation fund

–    Contribution by an employee to an approved superannuation fund

Sukanya Samriddhi Account Scheme

–    Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction.

–    Amount can be deposited by an individual or in the name of girl child of an individual or in the name of the girl child for whom such an individual is the legal guardian.

National Savings Certificates

–    Subscription to notified savings certificates [National Savings Certificates (VIII Issue)]

Unit-Linked Insurance Plan of UTI

Contribution for participation in unit-linked Insurance Plan of UTI :

 –    in case of an individual, in the name of the individual, his spouse or any child of such individual

 –    in case of a HUF, in the name of any member thereof  (Click Here)

Unit-Linked Insurance Plan of LIC Mutual Fund

Contribution to notified unit-linked insurance plan of LIC Mutual Fund [Dhanaraksha 1989]

 –    in the case of an individual, in the name of the individual, his spouse or any child of such individual

 –    in the case of a HUF, in the name of any member thereof (Click Here)

Notified Deposit Scheme or Notified Pension Fund

–    Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]

Tuition fees

–    Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children

Purchase/construction of residential house property

–    Certain payments for purchase/construction of residential house property

–   Where, in any previous year, an assessee transfers the house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause then 

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

 

Annuity Plan of LIC

–    Sum paid towards notified annuity plan of LIC (New Jeevan Dhara/New Jeevan Dhara-I/New Jeevan Akshay/New Jeevan Akshay-I/New Jeevan Akshay-II/Jeewan Akshay-III plan of LIC) or other insurer.

Mutual Fund or UTI

–    Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005)

UTI Retirement Benefit Pension Fund

–    Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D) or by the UTI (UTI Retirement Benefit Pension Fund).

Subscription to any units of any approved mutual fund

–    Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above.

Bonds issued by the NABARD

–    Subscription to notified bonds issued by the NABARD.

Term deposits/ Fixed deposits

–    Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme framed and notified.

Senior Citizen Savings Scheme

–    Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)

–    If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit under Senior Citizen Saving Scheme, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.

Post Office Time Deposit

–    5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)

–    If any amount, including interest accrued thereon, is withdrawn by the assessee from his deposit under Post Office Time Deposit, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn shall be deemed to be the income of the assessee of the previous year in which the amount is withdrawn and shall be liable to tax in the assessment year relevant to such previous year.

Limits on Deduction u/s 80C

Deduction is limited to whole of the amount paid or deposited subject to a maximum of Rs. 1,50,000. This maximum limit of Rs. 1,50,000 is the aggregate of the deduction that may be claimed under sections 80C, 80CCC and 80CCD.

Other Important Points

Limit on Life Insurance Premium

  • Life Insurance premium is part of gross qualifying amount for the purpose of deduction under section 80C.
  • Payment of premium which is in excess of
    • 10 per cent if policy is issued on or after 1-4-2013
    • 15% in case of insurance on life of person with disability referred to in section 80U or suffering from disease or ailment specified in section 80DDB/rule 11DD

of actual capital sum assured shall not be included in gross qualifying amount.

  • The value of any premiums agreed to be returned or of any benefit by way of bonus or otherwise, over and above the sum actually assured, which is to be or may be received under the policy by any person, shall not be taken into account for the purpose of calculating the actual capital sum assured.
  • The limit of 10 per cent will be applicable only in the case of policies issued on or after 1-4-2012. In respect of policies issued prior to 1-4-2012, the old limit of 20 per cent of actual sum assured will be applicable.
  • With effect from 1-4-2013, ‘actual capital 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 the policy, not taking into account—
    • the value of any premium agreed to be returned
    • any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person

Termination of Contract of Insurance

Where, in any previous year, an assessee terminates his contract of insurance, by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium, by not reviving contract of insurance,—

(a) in case of any single premium policy, within two years after the date of commencement of insurance; or

(b) in any other case, before premiums have been paid for two years; 

then,—

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

Termination of participation in any unit-linked insurance plan

Where, in any previous year, an assessee terminates his participation in any unit-linked insurance plan (ULIP), by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years then –

(a) no deduction shall be allowed to the assessee with reference to any of such sums, paid in such previous year; and

(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years preceding such previous year, shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

Transfers/ Sale of equity shares or debentures

–   If any equity shares or debentures, with reference to the cost of which a deduction is allowed, are sold or otherwise transferred by the assessee to any person at any time within a period of three years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

–   A person shall be treated as having acquired any shares or debentures on the date on which his name is entered in relation to those shares or debentures in the register of members or of debenture-holders, as the case may be, of the public company.

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