All you need to know about tax deductions under Section 80C

Section 80C of the Income Tax Act, 1961 provides tax benefits to individuals on various monetary schemes. The maximum tax deduction under Section 80C collectively stands at Rs. 1.5 Lakh per annum from all such deposits.

List of financial schemes eligible for tax deductions as per Section 80C:

1. Senior Citizens Savings Scheme (SCSS)

Various commercialised financial institutions offer the Senior Citizens Savings Scheme (SCSS). The scheme is specifically for senior citizens, i.e. citizens with a documented age of 60 years and above. Furthermore, individuals aged between 55 and 60 can also invest under the SCSS scheme only if they have retired on superannuation or similar other reasons.Account holders can earn interest at the rate of 8.60% p.a. They have to deposit in multiples of Rs. 1,000 with a maximum limit of Rs. 15 Lakh. Customers earn interest on a quarterly basis with SCSS.

2. Public Provident Fund

Public Provident Fund facility is provided by the majority of private and public financial institutions. As well as Employee Provident Fund , it is one of the most popular investment schemes. The rate of interest offered with PPF changes as per government policies. Presently, it stands at 8% per annum. PPFs have a lock-in time of 15 years. However, account holders can partially withdraw funds after the 7th financial year.

Customers can open an account with Rs. 500. The maximum limit of a PPF account is Rs. 1.5 Lakh per annum.Account holders can avail loans against the PFF account between the 3rd and 6th financial year. They can also extend the account by 5 years after maturity.

3. Life insurance premiums

Premiums paid towards life insurance policies can be eligible to a tax deduction under Section 80C.
However, there are some conditions to it:
Funds eligible for deduction is 20% of the sum assured for policies made on or before 31st March 2012.
Amount eligible for deduction is 20% of the sum assured for policies made on or after 1st April 2012.
Amount eligible for deduction is 15% of the sum assured if the customer suffers from a disease or disability, and the policy was made on or after 1st April 2012.

4. Tax Saving Fixed Deposits

Tax Saving FDs are eligible for tax deductions under Section 80C . They come with a lock-in period of 5 years. The minimum amount that can be deposited is Rs. 10,000 and the maximum amount exempted from tax liabilities is Rs. 1.5 Lakh in a financial year.

5. National Savings Certificate (NSC)

Post offices provide a National Savings Certificate (NSC) with a lock-in period of 5 years. The minimum amount customers can deposit is Rs. 100. There is no maximum cap for NSCs. The prevalent rate of interest on an NSC is 8% p.a.

6. Home loan principal

Individuals can enjoy tax deduction under Section 80C on the principal payment of a home loan. The construction or purchase of the property needs to be completed to make a claim. Furthermore, a customer should be in possession of the property for at least 5 years to earn the benefit.

7. Tuition fees Tax deductions as per Section 80C can be claimed on tuition fees paid to any school, college, university, or any other educational institution. Each parent can claim tax deductions for a maximum of 2 children. Hence, both parents can claim deductions for up to 4 children.

8. Sukanya Samriddhi Yojana

The Sukanya Samriddhi Yojana, launched by the Government of India, aims to promote the welfare of each girl child.
One can avail this scheme for his/her daughter before she attains the age of 10. Beneficiaries can create accounts for maximum 2 girl child in a family. More than one account can be created in case the family has twin girl children by first or second birth in addition to another girl child.
Other than the above, tax deduction under Section 80C can be achieved with ELSS, ULIPS, NABARD bonds, equity shares/debentures, etc.