What is Section 80C?
80C is section of Income Tax Act in which government encourages individuals to invest in some financial products and save tax on income. These financial products are necessary & useful for individuals. It will be useful for their dependents, children and their life style after retirement.
Following financial products are included under Section 80C:
PF - Provident Fund is directly deducted from salary by employer. Employer submit this amount in Government provident fund or private provident fund. Employee can contribute additional amount through VPF (Voluntary Provident Fund) which also covered under this section.
PPF - Public Provident Fund. Individual can open PPF account in any nationalized bank / Post Office and deposit some amount in this account every year. There are some limitation on amount (Minimum: 500 & Maximum: 70,000). Individual can withdraw this amount after specific period on some special occasions.
NSC - National Savings Certificate are issued by Post Office. It's maturity period is 6 years & some specific interest rate (declared by Government of India in Finance Budget). Interest earned by NSC is taxable. Its like Fixed Deposit in Post Office. Individual can take loan on NSC.
Life Insurance Premium - Life Insurance premium paid by individual for their life insurance policy. Life insurance premium paid for spouse and children's life insurance policy are also considered. Individual can take multiple life insurance policies for them and spouse and their children.
Income Tax on maturity of insurance policy depends on policy issued by company.
Income Tax on maturity of insurance policy depends on policy issued by company.
FD - Fixed Deposit in scheduled or nationalized banks. These banks has Tax Saving Deposits which has tenure of 5 years and specific interest rates. Interest rates changed based on RBI policies.
ELSS - Equity Linked Saving Scheme / Mutual Fund. Mutual Fund companies design some Tax Saving funds which has some locking periods like 3 years. Individual can invest in these Funds, mutual fund companies invest these money in Equity (Stock / Money market etc). Mutual fund companies has some Fund managers who has knowledge of Stock market.
Individual can also invest in ELSS through SIP (Systematic Investment Plan) - Every month some specific amount (it depends on individual).
Return of ELSS is not guaranteed because its purely based on equity / stock market. Sometimes its good because not all individual has knowledge of stock market.
ULIP - Unit Linked Insurance Policy Premium. Premium paid for ULIP for them, Spouse and their children. ULIP is same as normal life insurance policy but policy amount invested in equity, debt or money market. It's return based on performance of stock market.
Home Loan Principal Repayment - Home Loan EMI consists two parts: Principal & Interest. Principal payment of home loan considered for exemption under this section.
Stamp Duty & Registration Charges of Home - Stamp Duty and Registration charges paid by individual for home can be exempted under this section.
Child Education Expense - School / Tuition fees of children paid by individual can be exempted under this section. Individual can claim only two children's fees under this section.
Limit of Section 80C:
Current limit of section 80C is 1,00,000/-. Individual can take benefit of above financial products (sum of all) up to 1,00,000/- per financial year. If total amount exceeds 1,00,000/- then only 1,00,000/- can be considered under this section.
Note: Government of India will make change in this Section 80C based on current condition of economy in country & world.
