Guide to .. Tax Management ,Tax Planning and Tax Saving
 

Deduction in respect of Life Insurance Premium, Deferred Annuity, Contribution to PF, Subscription fo certain Equity Shares or Debentures etc. [Section 80C]

  1. Assessees which are Allowed Deduction under Section 80C for computing Total Income

  2. Qualifying Investment/Savings to avail Deduction under Section 80C from Gross Total Income

  3. Salient Features of Section 80C

Section 80C provides deduction in respect of specified qualifying amounts paid or deposited by the assessee in the previous year.

1. Assessees which are Allowed Deduction under Section 80C for computing Total Income

This deduction is allowed only to the following assessees from their gross total income computed as per provisions of the Act:

  1. an Individual; or

  2. a Hindu Undivided Family (HUF)

2. Qualifying Investment/Savings to avail Deduction under Section 80C from Gross Total Income

The above assessees shall be entitled to a deduction of whole of the amount paid or deposited in the previous year, being the aggregate of sum referred to below as does not exceed Rs.1,50,000 :

  1. Life insurance premium (including payment made by Government employees to the Central Government Employees’ insurance scheme and payment made by a person under children’s deferred endowment assurance policy)

    • In the case of an individual, policy should be taken on his own life, life of the spouse or any child (child may be dependent/ independent, male/female, minor/major or married/unmarried). In the case of a Hindu undivided family, policy may be taken on the life of any member of the family.
  2. Payment in respect of non-commutable deferred annuity. Annuity plan should be taken in the name of the individual, his wife/her husband or any child of such individual.

  3. Any sum deducted from salary payable to a Government employee for the purpose of securing him a deferred annuity (subject to a maximum of 20% of salary). It should be for the benefit of the individual, his wife or children.

  4. Contribution (not being repayment of loan) towards statutory provident fund and recognized provident fund

  5. Contribution (not being repayment of loan) towards 15-year public provident fund

    1. According to the Public Provident Fund Scheme, an individual can open public provident fund account in his own name or in the name of minor of whom he is guardian. However, according to the Income-tax Act, to get the benefit of the deduction under section 80C, amount deposited by an individual in his own account or in the account of his/her spouse or in the account of any child (in the case of HUF in the account of any member of the family) is eligible for deduction.

    2. There is no maximum ceiling under the Income-tax Act. However, under the public provident fund scheme, the maximum contribution is Rs. 1,50,000.

    3. Date of encashment of cheque/draft is taken as date of deposit in the case of public provident fund and Senior Citizens Savings Scheme.

  6. Contribution towards an approved superannuation fund

  7. Subscription to National Savings Certificates, VIII Issue or IX Issue and deposit in Sukanya Samriddhi Account

    • Accrued interest (which is deemed as reinvested) is also qualified for deduction (applicable for all years except last year).

    • In the case of an individual, deposit in Sukanya Samriddhi Account can be made in the name of individual, or any girl child of that individual or any girl child for whom such person is the legal guardian, if the scheme so specifies.

  8. Contribution for participating in the unit-linked insurance plan (ULIP) of Unit Trust of India

    • In the case of an individual, ULIP should be taken on his own life, life of the spouse or any child (child may be dependent/ independent, male/female, minor/major or married/unmarried). In the case of a Hindu undivided family, ULIP may be taken on the life of any member of the family.
  9. Contribution for participating in the unit-linked insurance plan (ULIP) of LIC Mutual Fund (i.e., formally known as Dhanraksha plan of LIC Mutual Fund)

    • In the case of an individual, ULIP should be taken on his own life, life of the spouse or any child (child may be dependent/ independent, male/female, minor/major or married/unmarried). In the case of a Hindu undivided family, ULIP may be taken on the life of any member of the family.
  10. Payment for notified annuity plan of LIC (i.e., Jeevan Dhara, Jeevan Akshay) or any other insurer (i.e., Immediate Annuity Plan of ICICI Prudential Life Insurance Co. Ltd., Tata AIG Easy Retire Annuity Plan)

  11. Subscription towards notified units of Mutual Fund or UTI

  12. Contribution to notified pension fund set up by Mutual Fund or UTI

  13. Any sum paid (including accrued interest) as subscription to notified Home Loan Account Scheme of the National Housing Bank or contribution to any notified pension fund set up by the National Housing Bank

  14. Any sum paid as subscription to any scheme of—

    1. public sector company engaged in providing long-term finance for purchase/construction of residential houses in India (i.e., public deposit scheme of HUDCO)

    2. housing board constituted in India for the purpose of planning, development or improvement of cities/towns

  15. Any sum paid as tuition fees (not including any payment towards development fees/donation/payment of similar nature) whether at the time of admission or otherwise to any university/college/educational institution in India for full time education of any two children of an individual .

    • Full-time education includes any educational course offered by any university, college, school or other educational institution to a student who is enrolled full-time for the said course. Full-time education includes even play-school activities, pre-nursery and nursery classes. The amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature —
  16. Any instalment or part payment towards the cost of purchase/construction of a residential property to a housing board or co-operative society (or repayment of housing loan taken from Government, bank, cooperative bank, LIC, National Housing Bank, assessee’s employer where such employer is public company/public sector company/ university/co-operative society)

  17. Amount invested in approved debentures of, and equity shares in, a public company engaged in infrastructure including power sector or units of a mutual fund proceeds of which are utilised for the developing, maintaining, etc., of a new infrastructure facility

  18. Amount deposited as term deposit for a period of 5 years or more in accordance with a scheme framed by the Government

  19. Subscription to any notified bonds of National Bank for Agriculture and Rural Development (NABARD)

  20. Amount deposited under Senior Citizens Saving Scheme.

    • Date of encashment of cheque/draft is taken as date of deposit in the case of public provident fund and Senior Citizens Savings Scheme.
  21. Amount deposited in five year time deposit scheme in post office.

3. Salient Features of Section 80C

  1. Who can claim deduction under section 80C -

  2. Deduction under section 80C is available only to an individual or a Hindu undivided family.

  3. What is the qualifying investment to avail deduction -

  4. Deduction is available on the basis of specified qualifying investments / contributions / deposits / payments made by the taxpayer during the previous year. Such investment, deposit, etc., can be made out of taxable income or otherwise. The complete list of such investment is given above.

  5. What is the basis of deduction -

  6. Deduction is available on actual payment basis. For instance, if insurance premium becomes due on March 24, 2019 and actually paid on April 1, 2019, such premium is qualified for deduction under section 80C for the previous year 2019-20.

  7. How much deduction available under section 80C -

  8. The maximum amount deductible under section 80C is Rs. 1,50,000.

  9. Is there any combined maximum ceiling -

  10. The aggregate amount of deduction under sections 80C, 80CCC and 80CCD(1) [i.e., contribution by an employee (or any other individual) towards National Pension Scheme (NPS)] cannot exceed Rs. 1,50,000. However, employer’s contribution towards NPS (up to 10 per cent of salary) shall not be considered for the ceiling of Rs. 1,50,000 (for illustration, refer to para 41.4).

  11. Is there any deduction in respect of accrued interest of National Saving Certificates -

  12. Amount invested in National Saving Certificates VIII Issue or IX Issue (NSC) is eligible for deduction under section 80C within the overall limit given above. This investment is for 5 years or 10 years and the amount invested along with interest is paid back to the investor at the time of maturity. However, interest is taxable annually on accrual basis. The accrued interest for any year (except for last year) is deemed as reinvestment and the same is entitled for deduction under section 80C. This provision is explained in problem 138-P2.

  13. Is there any minimum period of holding -

    In respect of the investments / deposits / contributions eligible for tax deduction under section 80C in some cases, the law provides a minimum period of holding. Such cases are given below—

    Nature of Investment / Deposits Minimum period of Holding

    Unit-linked insurance plan (ULIP)

    5 Years
    Life Insurance Premium 2 Years
    Cost of Purchase / Construction of Residential House Property including Repayment of Loan 5 Years
    Deposit under Senior Citizen Scheme 5 Years
    Time Deposit in Post Office 5 Years

     

    ULIP terminated before 5 years - Where a member participating in Unit-linked insurance plan, terminates his participation before making contribution for 5 years, then the following consequences should be noted—

    Other cases - A similar rule is applicable in respect of termination of life insurance policy before 2 years and transfer of residential house property before 5 years.

    In the case of withdrawal before 5 years by the depositor during his lifetime from amount deposited under Senior Citizen Saving Scheme or time deposit in Post Office, the amount withdrawn (excluding interest which has already been taxed in earlier years) will be taxable in the year of withdrawal.

Deductions to be made in Computing Total Income [Sections 80A to 80U (Chapter VIA)]

Related Topics...Deductions from Gross Total Income

  1. DEDUCTIONS UNDER 'CHAPTER VI-A' IN RESPECT OF "PAYMENT & INVESTMENT" ARE ALLOWED FROM SECTION 80C TO 80GGC

    Section 80C Section 80CCC Section 80CCD
    Section 80CCG Section 80D Section 80DD
    Section 80DDB Section 80E Section 80EE
    Section 80G Section 80GG Section 80GGA
  2. DEDUCTIONS UNDER 'CHAPTER VI-A' IN RESPECT OF "INCOMES" ARE ALLOWED FROM SECTION 80-IA TO 80U

    Section 80-IA Section 80-IAB Section 80-IAC
    Section 80-IB Section 80-IBA Section 80-IC
    Section 80-ID Section 80-IE Section 80-JJA
    Section 80-JJAA Section 80-LA Section 80-P
    Section 80-PA Section 80-QQB Section 80-RRB
    Section 80-TTA Section 80-TTB Section 80-U
 

 

 
 
 
 
Get.. Tally.ERP9 Book + GST Practical Assignment @ Rs.550 Tally.ERP9 Book Online Order Tally.ERP9 Book Content
 
© 2019 : IncomeTaxManagement.Com