All About Section 80C deduction of Income tax

Section 80C of income tax act:- In order to encourage savings, the government gives tax breaks on certain financial products under Section 80C of the Income Tax Act. Investments made under such schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000. The various investment options under this section include: 

Provident Fund & Voluntary Provident Fund 

Provident Fund is deducted directly from your salary by your employer. The deducted amount goes into a retirement account along with your employer’s contribution. While employer’s contribution is exempt from tax, your contribution (i.e., employee’s contribution) is counted towards section 80C investments. You can also contribute additional amount through voluntary contributions (VPF). The current rate of interest is 8.5% per annum and interest earned is tax-free. 

Public Provident Fund 

An account can be opened with a nationalized bank or Post office. The current rate of interest is 8%, which is tax-free and the maturity period is 15 years. The minimum amount of contribution is Rs 500 and the maximum is Rs 70,000. 

National Savings Certificate 

These are 6-year small-savings instrument, where the rate of interest is 8% and is compounded half-yearly. The interest accrued every year is liable to tax but the interest is also deemed to be reinvested and thus eligible for section 80C deduction. 

Equity-Linked Savings Scheme 

Mutual funds offer you specially-created tax saving funds called ELSS. These schemes invest your money in equities and hence, return is not guaranteed. Money invested here is locked for a period of three years. 

Life Insurance Premiums 

Any amount that you pay towards life insurance premium for yourself, your spouse or your children can be included in section 80C deduction. If you are paying premium for more than one insurance policy, all the premiums can be included. Besides this, investments in unit-linked insurance plans (ULIPs) that offer life insurance with benefits of equity investments are also eligible for deduction under Section 80C. 

Home Loan Principal Repayment 

Your EMI consists of two components, namely principal and interest. The principal component of the EMI qualifies for deduction under Section 80C. 

Stamp Duty and Registration Charges For Home 

The amount you pay as stamp duty when you buy a house, and the amount you pay for the registration of the documents of the house can be claimed as deduction under section 80C. However, this can be done only in the year in the year of purchase of the house. 

Five-Year Bank fixed deposits 

Tax-saving fixed deposits (FDs) of scheduled banks with a tenure of five years are also entitled for section 80C deduction. 


Apart from the above, things like children’s education expenses that can be claimed as deductions under Section 80C. However, you need receipts to claim the same
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  1. Section 80C provides individuals beneficial and finances for minimizing their taxes. These funds reduce the required tax on the individual’s monthly income. A person can maintain their tax by investing in several life insurance plans, loans and child insurance plan etc. Some conditions or terms include in tax saving planning like ELSS, PPF, FD etc