Income Tax Deductions Under Section 80C, 80CCC & 80CCD

Introduction

Every taxpayer in India, while filling out ITR, looks for different ways to deduct as much as possible by showing investment and other ways. Unless you use any tax or management software or hire any CA, it is difficult to understand the procedure of tax deduction standards. This way the individual fails to get the tax refund. Fortunately, the Income Tax department offers different sections under which a deduction is possible. Three of the most used deduction sections are- 80C, 80CCC & 80CCD.

The above-mentioned deductions are a type of government assistance that helps people minimize their tax liability for each fiscal year by lowering their taxable income. By encouraging taxpayers to save and invest, they also assist them in creating a stable financial future. Eligibility for deductions is determined by several factors, with different cutoff points set for various objectives. 

Among the three, sections 80C and 80CCC are standard deductions while buying life insurance premiums. There are many such ways how you can get the deduction Under Section 80C, 80CCC & 80CCD. This article presents you with complete insight.

What is Section 80C?

The Income Tax Act of India has set a separate clause called 80C that lists several investments and expenses that are free from income tax. An individual’s total taxable income may be deducted up to Rs 1.5 lakh annually under this scheme.

The 80C investment tax exemption is limited to individual taxpayers and Hindu Undivided Families. Businesses other than corporations or partnership firms are not eligible to receive Section 80C tax exemptions. 

Which are the deductions individuals can seek under Section 80C?

There are different saving options or deductions individuals can claim under section 80C:

Life Insurance Premium

According to the 80C limit, tax benefits are available for premiums paid towards life insurance contracts. You can use these exemptions against policies that you, your spouse, your dependent children, etc., have. Members of Hindu Undivided Families are eligible for the same exemptions.

Currently, this program exempts from taxes up to 10% of the annual premium (the entire sum assured under the insurance policy). Before the revision of this clause on April 1, 2012, premiums up to 20% (of the total guaranteed) might be free from taxes under Section 80C deduction.

Public Provident Fund

Under Section 80C, contributions made to the Public Provident Fund (PPF) may be claimed as tax deductions. With a maximum deposit limit of Rs. 1,50,000, Public Provident Funds enable investors to claim the entire amount invested as an exemption under the Income Tax Act.

Section 80C of the Income Tax Act allows for a tax deduction for any voluntary contributions made by the employee to the designated fund.

Rural Bonds from NABARD

The National Bank for Agriculture and Rural Development is also known as NABARD. The Income Tax Act of India allows for tax exemptions on the Rural Bonds that NABARD offers. Section 80C caps the maximum deductible amount at Rs. 1.5 lakh.

Plans for Unit-Linked Insurance (ULIPs)

Long-term returns on Unit Linked Insurance Plans are higher than those on traditional insurance contracts. The Income Tax Act of 1961’s Section 80C offers tax incentives that have contributed to their recent surge in popularity. Under the terms of the 80C income tax rules, investors are eligible for tax exemptions of up to Rs. 1.5 lakh on the amount invested.

National Savings Certificate

For those who prefer to minimize risk, National Savings Certificates, or NSCs, are among the most widely used tax-saving options. On NSC, interest is compounded every two years, with a maximum maturity time of ten years.

There is no cap on the overall amount of money investors can put in NSC during a fiscal year; however, Section 80C will only exempt up to Rs. 1.5 lakh from taxes each year.

Tax-saving FD

Banks and post offices offer tax-saving FDs, which are fixed deposit plans that qualify for the Section 80C tax reduction. These fixed-rate bonds have a five-year lock-in term and provide up to Rs 1.5 lakh in tax exemption (on the principal amount).

Equity-Linked Saving Scheme

Equity Linked Savings Schemes, or ELSS, are exempt from Section 80C up to the maximum amount of Rs. 1.5 lakh. There is a three-year lock-in period for specific investment plans.

Senior Citizens Savings Plan

Up to the maximum allotted 80C limit, or Rs. 1.5 lakh, all investments made towards the Senior Citizens Saving Scheme (or SCSS) are eligible for tax exemption. Individuals who are above the age of 60 are the beneficiaries of SCSS, which has a minimum lock-in term of 5 years.

Overview of Section 80C, 80CCC, and 80CCD

The below table provides an overview of 80C, 80CCD, and 80CCC of the Income Tax Act

 The right time to Invest to claim Section 80C Deduction of the Income Tax Act

Financial years serve as the foundation for the income tax system in India. Every year on April 1st, the fiscal year starts and finishes on March 30th. In the next fiscal year (FY), you will file your income tax return for the income you have accrued during this time.

Assessment Year (AY) is the fiscal year in which you file your ITR; Previous Year (PY) is the fiscal year for which you file your ITR.

For instance, during FY 2022–2023, you made up to Rs. 3 lakhs in investments and gained Rs. 10 lakhs. When submitting your ITR for FY 2023–2024, you will report your assets and income for FY 2022–2023. As a result, FY 2022–2023 becomes your PY and FY 2023–2024 your AY.

Therefore, you must invest in PY qualifying options to claim 80C deductions in AY while submitting an ITR. Accordingly, in the aforementioned example, you can deduct Rs. 1 lakh under Section 80C if you invested Rs. 1 lakh of the total Rs. 3 lakhs in qualifying instruments.

Also Read : Section 80G deduction – Overview of Donations Eligible under Section 80G, 80G Exemption List

Conclusion

As an investor, you may save your tax costs considerably if you have the right information. By utilising the above deductions, an assessor can, for instance, lower their tax expenses by as much as ₹50,000 to ₹65,000.

Significant tax savings can be obtained by deducting ₹150,000 from the total taxable income, according to the individual’s or HUF’s tax category. Make sensible use of these investing alternatives to lower your tax liability and earn profits.

FAQs

1) Are Section 80C and Section 80CCC the same?

Ans: The Income Tax Act of 1961’s Section 80CCC lays out the requirements for a deduction on contributions made to particular pension schemes. This is not the same as section 80C. However, both parts have been combined for the total deduction cap under section 80CCE. Therefore, even if you can deduct investments made under Sections 80C, 80CCC, or both, your overall cap will stay at Rs 1.5 lakhs.

2) What Investment Exemptions come under 80C?

Ans: Exemptions include life insurance premiums, ELSS investments, PPF contributions, tax-saving FDs, investments in Unit-Linked Insurance Plans (ULIPs), contributions to senior citizens savings schemes, and Sukanya Samriddhi Yojana (SSY).

3) Can I claim both 80C and 80CCC?

Ans: The deduction under 80CCC is part of the overall deduction under section 80C. The deduction under this section is clubbed under the deduction of 80C and 80CCD. Hence a total deduction of Rs 1.5 lakh is available.

4) What is 80C in insurance?

Ans: Section 80C allows for tax deductions for paid life or term insurance premiums. The Income Tax Act of 1961 provides for annual savings of up to 1.5 lakhs. The premiums paid for coverage purchased for a spouse or children are included in these benefits.

5) Is 80CCC PPF?

Ans: The Income Tax Act’s Section 80C includes Section 80CCC. The latter is a longer portion that permits life insurance policies, PPF, and investment funds like EPF/VPF to be excluded from taxes. In this context, investors can receive tax deductions specifically for their contributions to pension funds under Section 80CCC.

6) Which LIC policy comes under 80CCC?

Ans: Under section 80C, clients who pay insurance premiums from their taxable income towards any annuity plan that guarantees them a pension payment in a subsequent year are eligible for a tax exemption under section 80CCC.

7) What is the 80CCD Deduction?

Ans: Employee NPS payments are tax deductible under Section 80CCD(1) up to 10% of their base pay plus DA. But the combined deduction for 80C and 80CCD(1) cannot be more than Rs. 1.50 lakhs from the prior year.

8) What is the difference between 80CCD 1 and 80CCD 1B?

Ans: Under Section 80CCD 1, a deduction of up to ₹1,50,000 is permitted for self-contributions to NPS or APY. In addition to the deduction allowed by Section 80CCD(1), an extra deduction of up to ₹ 50,000 is permitted under Section 80CCD(1B).

9) What is the limit of 80CCD 2 exemption?

Ans: The maximum amount that can be claimed under section 80CCD (2) is ₹2 lakhs. It includes the extra fifty thousand rupees that can be deducted under 80CCD (1B). Section 80C of the Income Tax Act prohibits the reclaiming of tax benefits under Section 80CCD.

10) In which year can I claim a deduction of the stamp duty paid for the purchase of a house property?

Ans: Under Section 80C, you can proceed with claiming stamp duty for the acquisition of a home in the year that the payment is made for stamp duty.