DEDUCTION UNDER 80C

DEDUCTION UNDER SECTION 80C           

Section  80C has been inserted from the assessment year 2006-07 onwards. Section 80C provides deduction in respect of specified qualifying amounts paid or deposited by the assessee in the previous year.

The following are the main provisions of the newly inserted section 80C :-

1. Under section 80C, deduction would be available from gross total income.

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

3. Deduction is available on the basis of specified qualifying investments / contributions/ deposits/ payments (hereinafter referred to as “gross  qualifying amount” ) made by the taxpayer during the previous year.

4. The maximum amount deductible under section 80C, 80CC, and 80CCD cannot exceed Rs. 1 lakh.

Computation of deduction under section 80C 

 The deduction is calculated as per the following steps –

Step 1  - Gross qualifying amount

Step 2- Net qualifying amount

Step 3- Amount of deduction

Step 1- GROSS QUALIFYING AMOUNT 

Gross qualifying amount is the aggregate of the following :-

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 subject to a maximum of 20% of sum assured ( sum assured does not include any premium agreed to be returned or any benefit by way of bonus).

2.     Payment in respect of non commutable deferred annuity.

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.

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

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

6.     Contribution towards an approved superannuation fund

7.     Subscription to National Savings Certificates, VIII issue.

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

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.

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 (i.e.f Retirement Benefit, Pension Fund of 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 –

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

b)    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.

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 / cooperative 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 framed by the Government.

20.  Amount deposited under Senior Citizens Saving Scheme.

21.  Amount deposited in five year time deposit in scheme in post office.

Notes
 

1.     In the case of an individual policy should be taken on his own life, life of the spouse of 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.     Annuity plan should be taken in the name of individual ,his wife / her husband or any child of such individual.

3.     It should be for the benefit of the individual his wife or children.

4.     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 of 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.

5.     In the case of an individual, ULIP should be taken on his own life, life to 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.

6.     There is no maximum ceiling under the Income Tax Act. However, under the public provident fund scheme, the maximum contribution is Rs 70,000/-

7.     Accrued interest (which is deemed as reinvested ) is also qualified for deduction for first 5 year.

8.     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 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 as per circular no 1/2010 dated January 11, 2010.

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

 Step 2

NET QUALIFYING AMOUNT :- Gross qualifying amount is the total of all investment specified as above mentioned. However, deduction under section 80C is a available on the basis  of net qualifying amount which is determined as under –

Gross qualifying amount or Rs 1,00,000/-  whichever is lower.

Step 3

AMOUNT OF DEDUCTION :- Net qualifying amount is the figure derived as above. However, amount deduction under section 80C is computed as under –

Net qualifying amount or Rs 1,00,000/- whichever is lower.

The maximum amount deductible under section 80C is Rs 1,00,000. Moreover, the aggregate amount of deduction –

a.     Under sections 80C, 80CCC, 80CCD (1)  i.e. contribution by employee or any other individual towards notified pension scheme and 80CCD (2) i.e. employer’s contribution towards notified pension scheme cannot exceed Rs 1,00,000 applicable for the assessment years 2006-07 to 2022-12  and

b.     Under sections 80C, 80CCC and 80CCD (1) i.e. contribution by employee or any other individual towards notified pension scheme cannot exceed Rs 1,00,000 from the assessment year 2012-13.