Income Tax: Are you aware of the conditions for 80C Tax deductions?

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Section 80C of the Income Tax Act is the favorite and most sought section amongst the taxpayers as it enables to deduce taxable income by tax saving investment options or claiming through eligible expenses.

Repayment of Housing Loan

Section 80C allows claiming a deduction for the principal amount of housing loan in respect of loan taken to acquire a residential property only if it is from specified institutions such as banks and housing finance companies. On the other hand, the deduction allowed under section 24(b) for the interest of loan from anyone such as friends, relatives, etc. and it is also applicable in case of credit taken for maintenance, renovation of any building including commercial property. 

The deduction claimed as per section 80C gets reversed and tax discounts availed in earlier years are added to the income if the house is transferred within 5 years at the close of the financial year in which possession is taken.

Insurance Premium

A life insurance policy is taken for your life and the life of your spouse and children is subject to deduction. But children cannot claim a deduction for life insurance policy taken for the life of their parents even if they are financially dependent. Premium up to 10% of the sum assured is subject to deduction and the benefit is not reversed even if the policy is lapsed or terminated. In such cases, deductions claimed during the prior period are added back in the year in which the policy outdates and there is no deduction for such premium in that particular year.

Contribution to PPF

The contributions to the PPF account as well as the PPF account of your spouse and child are claimable for a tax deduction. The contribution towards your PPF account and your minor children are taken together should not exceed Rs 1.50 lakh as per the PPF scheme 2019 to claim the deduction. The initial term for the PPF account is 15 years and can be extended for a block of 5 years at any number of times.

Education Charges

The tuition fee paid for up to 2 children for full-time education in India can be claimed for a tax deduction. The tax deduction for more than 2 children can be claimed by your spouse if she is a taxpayer.

Tax Saving Fixed Deposit

The tax deduction benefit can be claimed for money deposited in the Senior Citizen Savings Scheme (SCSS) which has a lock-in period of 5 years and is subject to tax if withdrawn earlier.

Equity Linked Savings Scheme

Equity Linked Savings Scheme is subject to a tax deduction and requires only a minimum holding period of 3 years. There is an initial exemption of profit of up to Rs1 lakh made on this scheme along with any long-term capital gain on any equity product on which STT has been paid.

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