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Saving Income Tax Understanding Section 80C Deductions
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The income we earn is subject to income tax by the government. The rate of income tax is different for different income levels, and thus, the income tax that you pay depends on your total earnings in a given year. |
(To know more about the income tax slabs for FY 08-09 and how they put more money in your pocket, please read Income Tax (IT) Slabs / Brackets FY 2008-09 AY 2009-10)
The government encourages certain types of savings mostly, long term savings for your retirement and therefore, offers you tax breaks on such savings.
Sec 80C of the Income Tax Act is the section that deals with these tax breaks. It states that qualifying investments, up to a maximum of Rs. 1 Lakh, are deductible from your income. This means that your income gets reduced by this investment amount (up to Rs. 1 Lakh), and you end up paying no tax on it at all!
(Section 80C investment is just one of the many avenues of saving income tax! Please read "Reached Section 80C limit? You can still save more income tax!" for more)
This benefit is available to everyone, irrespective of their income levels. Thus, if you are in the highest tax bracket of 30%, and you invest the full Rs. 1 Lakh, you save tax of Rs. 30,000. Isnt this great? (Illustrative example and downloadable spreadsheet follow later in the article)
So, lets understand the qualifying investments first.
Qualifying Investments
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Provident Fund (PF): The payments that you make to your PF are counted towards Sec 80C investments. For most of you who are salaried, this amount gets automatically deducted from your salary every month.
Thus, its not just compulsory savings for your future, but also immediate tax savings!
- Voluntary Provident Fund (VPF): If you increase your PF contribution over and above the statutory limit (as deducted compulsorily by your employer), even this amount qualifies for deduction under section 80C.
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Public Provident Fund (PPF): If you have a PPF account, and invest in it, that amount can be included in Sec 80C deduction. The minimum and maximum allowed investments in PPF are Rs. 500 and Rs. 70,000 per year respectively.
To learn more about PPF, please read Public Provident Fund (PPF) Plan Your Retirement and Save Tax.
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Life Insurance Premiums: Any amount that you pay towards life insurance premium for yourself, your spouse or your children can also be included in Section 80C deduction.
Please note that life insurance premium paid by you for your parents (father / mother / both) or your in-laws is not eligible for deduction under section 80C.
If you are paying premium for more than one insurance policy, all the premiums can be included.
It is not necessary to have the insurance policy from Life Insurance Corporation (LIC) even insurance bought from private players can be considered here.
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Equity Linked Savings Scheme (ELSS): There are some mutual fund (MF) schemes specially created for offering you tax savings, and these are called Equity Linked Savings Scheme, or ELSS. The investments that you make in ELSS are eligible for deduction under Sec 80C.
To know the multiple benefits of Equity Linked Savings Scheme (ELSS), please read ELSS is not for someone else.
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Home Loan Principal Repayment: The Equated Monthly Installment (EMI) that you pay every month to repay your home loan consists of two components Principal and Interest.
The principal component of the EMI qualifies for deduction under Sec 80C.
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Click here to download a spreadsheet that can be used to find the principal and interest components of your EMI.(You need to be logged-in to download the spreadsheet. For free registration that takes less than a minute, please click here)
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Even the interest component can save you significant income tax but that would be under Section 24 of the Income Tax Act. Please read Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage, which presents a full analysis of how you can save income tax through a home loan.
- Stamp Duty and Registration Charges for a 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 in the year of purchase of the house.
- National Savings Certificate (NSC): The amount that you invest in National Savings Certificate (NSC) can be included in Sec 80C deductions.
- Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by infrastructure companies, and not the government. The amount that you invest in these bonds can also be included in Sec 80C deductions.
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Pension Funds Section 80CCC: This section Sec 80CCC stipulates that an investment in pension funds is eligible for deduction from your income. Section 80CCC investment limit is clubbed with the limit of Section 80C - it maeans that the total deduction available for 80CCC and 80C is Rs. 1 Lakh.
This also means that your investment in pension funds upto Rs. 1 Lakh can be claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C and 80CCC can not exceed Rs. 1 Lakh.
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Bank Fixed Deposits: This is a newly introduced investment class under Section 80C. Bank fixed deposits (also called term deposits) having a maturity of 5 years or more can be included in your Sec 80C investment.
(Please read "Fixed Deposits (FD) for saving income tax through section 80C" for more on this)
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Senior Citizen Savings Scheme (SCSS): SCSS is a deposit scheme specially meant for elderly citizens.
(Please read "All you wanted to know about Senior Citizen Savings Scheme (SCSS)" for more on this)
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Post Office Time Deposit Account: This is the fixed / term deposits offered by the Department of Posts (Government of India) through the post offices in India.
If the time deposit is opened for a duration of 5 years or more, the amount invested is qualified for deduction under section 80C.
(Please read "Post Office Time Deposit Account (Fixed / Term Deposit)" for more on this)
- Others: Apart form the major avenues listed above, there are some other things, like childrens education expense (for which you need receipts), that can be claimed as deductions under Sec 80C.
Example
(You need to be logged-in to download the spreadsheet. For free registration that takes less than a minute, please click here)
Lets say you are a male with an income of Rs. 2,50,000 for the year.
Your employer has deducted Rs. 24,000 as PF. You have no housing loan, but have purchased NSC worth Rs. 10,000.
Thus, your total qualifying investments under Sec 80C are Rs. 34,000. Since this is less than Rs. 1 Lakh, this is the amount that would get deducted from your income. Thus, you would have to pay tax on Rs. 2,16,000.
The tax on Rs. 2,16,000 would be Rs. 17,200. If there were no investments made under section 80C, the tax on an income of Rs. 2,50,000 would have been Rs. 24,000. Thus, by making these investments, you end up saving Rs. 6,800!
Also, if you would have made the full investment of Rs. 1,00,000, the tax would have further reduced to Rs. 4,000 a saving of Rs. 20,000!
(You need to be logged-in to download the spreadsheet. For free registration that takes less than a minute, please click here)
So, where should you invest?
Like most other things in personal finance, the answer varies from person to person. But the following can be the broad principles:
Provident Fund: This is deducted compulsorily, and there is no running away from it! So, this has to be the first. Also, apart from saving tax now, it builds a long term, tax-free retirement corpus for you.
Home Loan Principal: If you are paying the EMI for a home loan, this one is automatic too! So, it comes as a close second.
Life Insurance Premiums: Every earning person having dependents should have adequate life insurance coverage. (For more on this, please read Life after life - Why you should buy Life Insurance) Therefore, life insurance premium payments are the next.
Voluntary Provident Fund (VPF) / Public Provident Fund (PPF): If you think that the PF being deducted from your salary is not enough, you should invest some more in VPF, or in PPF.
Equity Linked Savings Scheme (ELSS): After the above, if you have not reached the limit of Rs. 1,00,000, then you should invest the remaining amount in Equity Linked Savings Scheme (ELSS).
Equities provide the best, inflation-beating return in the long term, and should be a part of everyones portfolio. After all, what can be better than something that gives great return and helps save tax at the same time?
To read more about Equity Linked Savings Scheme (ELSS), please read ELSS is not for someone else.
When to Invest?
Many of us start looking for investment avenues only in February or March, just before the Financial Year is getting over.
(To understand terms like Financial Year, Assessment Year, and Previous Year better, please read Income Tax (IT) Jargon Financial Year (FY), Assessment Year (AY) and Previous Year (PY))
This is a big mistake! One, you would end up investing your money without putting proper thought to it. And secondly, you would end up losing the interest / appreciation for the whole year!
Instead, decide where you want to make the investments, and start investing right from the beginning of the financial year from April. This way, you would not only make informed decisions, but would also earn the interest for the full year from April to March!
Happy tax planning!
Other articles you might be interested in:
- Dividend Yield - A better alternative to FDs
- Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage
- Initial Public Offering (IPO) Modernization Benefits for small investors
- Real Estate Investment
- Impact of stock market crash on insurance / ULIP holders
- Income Tax (IT) Jargon Financial Year (FY), Assessment Year (AY) and Previous Year (PY)
- What is Direct Market Access (DMA)?
- Don't blow away a windfall - Smart ways to spend your bonus and arrears
- When you aren't around - Succession Planning - Will and Nomination
- Want to own a company? Buy stock
- After e-Stocks, now its time for e-Gold - Gold ETFs
- To float or not to float, that is the question!
Related links from the web (Sponsored):
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Note: Please treat the opinion expressed here as a broad suggestion. Please consult your financial planner / investment advisor before making any investment decision.
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Jul 21, 2008
You can claim deduction u/s 80C for you investments in mutual fund schemes classified as Equity Linked Savings Scheme (ELSS).
SBI Magnum Global Fund is an equity diversified fund. Reliance natural Resources Fund is a sector fund.
None of these funds are ELSS, and therefore, investment in any of these two funds would not qualify for deduction under section 80C.
Jul 22, 2008
Is POMIS interest tax free in hands of investor ?
Is Bank Interest tax free upto Rs.10,000 a year ?
Travel Expenses: If travel expenses you receive are in the form of reimbursements, they are fully tax free. If you get it in the form of a conveyance allowance, it is also fully tax free. If you get it in the form of a transport allowance, it is tax free upto Rs. 800 per month (Rs. 9,600 per year). Any amount over this would be taxable.
PO MIS Interest: It is not tax free in the investors' hands. It should be included under "Income from other sources", and would therefore be a part fo your taxable income.
Bank Interest: It is not tax free in the investors' hands. It should also be included under "Income from other sources", and would therefore be a part fo your taxable income (This used to be tax free upto Rs. 10,000 till some years ago, though)
Pls check the below link which confuses me that POMIS upto Rs.12,000/- is tax free ?
http://www.incometaxindia.gov.in/general/computation.asp
Further they have written that Rs.3000/- additionally can be tax free from Govt Secs.
Secondly, Travel expenses are understood that they are re-imbursed "for a tour"
But aren't conyevance allowance and travel allowance the same thing?
How come the former has no cap at all & latter a cap of Rs.800/- p.m.
In both above cases, I understand that this amount is then treated not as my Income (when seen by 3rd party like Cr Card companies or home loan sanctioners)
so does that imply if i earn 20,000 and i get Rs.9600 / year my salary is actually taxed on the basis of 20,000 - 9,600 ?
Tht also means i ask my employer to make it 20,000 - 5000/- (as a conveyance allowance) without having to invest more money (just to save tax)
Pls correct me if i am understanding it all wrong.
Pls advise.
I am glad that you presented this link - this link is from the department of income tax, and presents THOROUGHLY outdated information. It just shows how the department treats important information like income tax calculation!
The information given there is for FY 2003-04 - and for the ever changing laws of income tax, that's like a whole generation old!
Yes, earlier, interest from banks upto Rs. 12,000 used to be tax free u/s 80L. There was an additional Rs. 3,000 allowed for interest from government securities. But this doesn't apply any more! This has been compensated by increase in the basic exemption limit (which is Rs. 1,10,000 now for men).
As I have mentioned earlier, any expense incurred on travel that is reimbursed by your company is tax free.
Transport allowance is tax free upto Rs. 800 per month (Rs. 9,600 per year), as that is considered to be a reasonable amount a person would spend on transportation to and from his / her workplace.
Conveyance allowance is totally tax free without any limit in the hands of the employee for a reason - it is considered a perk, and your employer pays tax on it! Therefore, you don't have to pay any tax on it.
And that's why you won't be able to ask your employer to increase it to a large amount - although you won't have to pay any tax on it, your employer would have to, and the employer would therefore include it in your CTC package anyway!
There is only so much you can do to save income tax...
Jul 24, 2008
I am very pleased & would definitely promote your site.
Keep up the good work. Cheers.
Aug 24, 2008
Thank you very much for the liberal praise. It is really encouraging.
Sep 22, 2008
I am a professional working in IT sector. Recently I have applied for international CFA program. I paid $ 990 as fees which consisit of examination fee, program enrollment fee and curriculum fee. Am I eligible for any tax benefits?
You would not get any income tax benefit for expenses on higher education.
But many organizations fully or partly reimburse such expenses if they are relevant to your career. You can check with your company.
Sep 23, 2008
I am working in an IT firm. This is my first year as an employee. This year I have to submit My savings before IT deductions. I do aware of MF investments(ELSS),LIC policies,PF,PPF. But I don't have an idea about National Saving Certificate and Infra bonds. Especially I do not know whats mean by Bond?......Please anyone help me in this aspect.
Welcome to the world of investments! And congratulations - you have started learning about investments and taxes from the very start of your career.
NSC: There is no income tax benefit on NSCs. The investment is not considered in section 80C, and the interest is also taxable.
Infrastructure Bonds: Bonds are instruments (or certificates) issued by companies to raise money. The companies pay interest to bond holders. You can compare bonds to fixed deposits offered by banks.
Investment in Infrastructure Bonds is covered under sec 80C. Thus, if you have invested in these bonds, please declare it to your finance department.
In my opinion, Infrastructure Bonds are not good for investment - they have a lock-in of at least 3 years, and give a very low return. If possible, stay away!
Nov 29, 2008
please tell me Recurring deposit is cover for section 80C or not and how much amount is possible for deduction.
vivek
Nov 29, 2008
Nov 29, 2008
Can you please let me know how much tax i need to pay depends on the following ..
Takehome:800000 annual
LIC: 50000 annual
PPF:50000 annual
PF:33000 annual
Homeloan EMI:35000 monthly
More over i am looking to get how the home loan EMI is tax free...
Thanks in advance
Investment in recurring deposits does not enjoy section 80C tax benefits, even if the recurring deposit is for a duration of 5 years or more.
To know more about recurring deposits, please read "An introduction to Recurring Deposit" and "An introduction to Post Office (PO) Recurring Deposit (RD) Account".
The interest payment gets income tax benefits u/s 24.
The 1 Lakh limit is for the principal repayment, and comes under sec 80C.
To understand this better, please read "Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage".
In this case, amounts invested in LIC, PPF and PF would be deductible from your income, subject to the limit of Rs. 1 Lakh.
This reduces your taxable income to Rs. 7 Lakhs.
You won't get any tax benefit for the principal component of the EMI, as you have reached the sec 80C limit.
But you would benefit from the interest payment.
Thus, your taxable income would be roughly Rs. 7 Lakhs - the interest you pay during the year.
As mentioned above, please read "Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage" for more on the IT benefits of a home loan.
Dec 02, 2008
1. Can you suggest appropriate ratios for these investments? for example I can invest upto 1 lakh for tax deduction purposes. Say my PF is 20K. How do I split the remaining 80k? I am thinking of using only PPF and VPF for now. Maybe ELSs. Cannot clam child tuition fees or house loanas they are not applicable.
2. also if I leave current company and am unemlpoyed for 1 year how will I continue to contribute to PPF? Should i take this into consideration?
Same question as above for PPF, VPF and ELSS? are they indpeendent of employment?
Can I withdraw from them as and when needed?
also is ELSS risky since it is mutual funds related? especially in the present shaky financial situation?
Thanks
Dec 02, 2008
Does Medical Expense fall under Section 80C? I spent more than a Lakh on my dad's Operation. Please Advice.
Ravi
Dec 02, 2008
How much you invest in what avenue depends on your risk profile.
Having said that, most of the options you are considering - PF, VPF and PPF - are virtually risk-free as they are backed by the government.
So, you can choose between them based on other characteristics, like investment periods, liquidity, etc.
Please read "Provident Fund (PF) and Voluntary Provident Fund (VPF)" and "Public Provident Fund (PPF) Plan Your Retirement and Save Tax" to learn more about these. These articles also explain when and how you can withdraw from these.
My personal favourite, though, is definitely ELSS. Only equities can give you the best return. But you need to have a long term view of it.
When you invest in PF, you invest for 20-30 years. When you invest in PPF, you invest for 15 years. If you have a similar approach towards your ELSS investment, it is very low risk, and can give phenomenal returns.
But if you are looking at a smaller time horizon (3-5 years), yes, ELSS can be risky.
Please read "ELSS is not for someone else" to learn more about ELSS.
Investment for Section 80C is independent of your job. You can continue to invest in PPF / VPF / ELSS even when you are not employed, and enjoy the benefits of sec 80C deductions.
However, PF is linked to employment (your employer deducts it), and therefore, investments can't be made in PF when you are unemployed / on a sabbatical.
Medical expenses are not tax deductible - you can not claim any income tax benefit for expenditure on medical treatments / hospitalizations / operations.
Premium paid for medical insurance, though, has income tax benefit u/s 80D.
Thanks a lot for pointing this out.
This is a mistake - Investment in NSCs is deductible from your income u/s 80C.
In the article, I have mentioned this, but in the comments, looks like I goofed up.
Again, thanks for pointing this out.
For more on NSCs, you can read "National Savings Certificate (NSC)".
Dec 03, 2008
Thanks a ton raagam. But if I am unemployed will I still be compelled to contribute to VPF or PPF? In the sense, can I suspend my contribution till I get a job or is it mandatory all the time?
I dont want to commit to a large amount to these funds if I HAVE to contribute towards them for 15 years no matter what. If I start a VPF or PF or ELSS now and say if I lose my job in 6 months, then what can be done at that point in time?
Once again thanks for this valuable service.Especially your tip on ELSS
I can understand your concerns.
There was a small slip-off in my answer to your previous query: Just like PF, VPF is also managed by your employer. So, as soon as you quit the job, your contribution stops.
So, no worries about PF and VPF.
As far as ELSS is concerned, it is strictly a one time investment. You invest in it when you want to - there is no repetitive investment.
You can choose to invest in ELSS schemes using a Systematic Investment Plan (SIP), in which case you would need to make a constant monthly payment. but even this can be stopped at any time as per your wish.
(SIP is a great way to invest in MFs - both ELSS and others. To learn more, please read "Systematic Investment Plan (SIP) - A rupee a day, keeps worries away")
Coming to PPF. Yes, it does need that you HAVE TO make an investment every year in order to maintain your account. But again, it is also very flexible.
The minimum amount that you are needed to deposit every year is Rs. 500. Thus, when you don't have a job, you can simply deposit Rs. 500 in your PPF account. Then, you can increase this contribution once you take up another job.
Thus, you are covered for all these! Happy investing...
Dec 04, 2008
I booked a appartment in may and i have paid around 2 lakhs as booking amount, I will get puzation of house in november 2009, my company is saying i can not claim my EMI for section 80C because puzation is not with me. i want to confirm following questions .
Can i avail tax benefit for principal amount paid for house loan under 80C ?
Tax paid on home loan , will come under which section?
Can i get any benefit from booking amount i have done in this year?
Thanks
Amit
Dec 13, 2008
Dec 24, 2008
Can we claim the amount which we invested for stamp duty r& egistration charges for a home.
If yes, lets say my stamp duty & registration charges goes to 1.2 Lakhs then in 80C how i can mention it?
What sort of document will i require to sumbit for claiming it.
Please advice.
Your company is right - you can not claim income tax benefit u/s 80C if the house is not in your possession by the end of the financial year.
To answer your questions:
1. Can i avail tax benefit for principal amount paid for house loan under 80C - No
2. Tax paid on home loan , will come under which section - You do not pay any income tax on home loan. Just that you would not be able to claim any tax exemption due to the home loan till you get the possession of the house.
3. Can i get any benefit from booking amount i have done in this year - No. But if you have paid any stamp duty or registration amount for the house, you can claim it exempt u/s 80C.
There is no income tax benefit available on a recurring deposit - irrespective of its duration.
Also, the interest earned is taxable.
Please read "An introduction to Recurring Deposit" to know more about recurring deposits.
You can claim the amount paid as stamp duty and for registration u/s 80C, subject to the upper limit of Rs. 1 Lakh of section 80C.
Thus, although you have paid Rs. 1.2 Lakhs, you would be able to claim only Rs. 1 Lakh.
A copy of registration receipt and a copy of the stamp papers should be adequate proof to claim this amount.
Dec 28, 2008
i) the second house is kept vacant
ii) the second house is let on rent.
1. The second house is kept vacant
Principal: Upto Rs. 1 Lakh u/s 80C
Interest: Upto Rs. 1.5 Lakhs u/s 24.
This is a combined limit for both houses. This remains same for AY 2008-09 and AY 2009-10.
2. The second house is let on rent
Principal: Upto Rs. 1 Lakh u/s 80C (This is a combined limit for both houses)
Interest: Upto Rs. 1.5 Lakhs u/s 24 for self occupied house. No limit for a house let out on rent (Applicable for AY 2009-10 only)
Jan 02, 2009
Hello,
Does Medical Expense fall under Section 80C? I spent more than a Lakh on my mother Operation. Please Advice.
mahesh
Unfortunately, there is no income tax benefit available for medical expenses.
Although, if you pay a premium for medical insurance, it is deductible from income upto Rs. 15,000 under section 80D.
Jan 03, 2009
also,i understand that bank deduct 10% of interest if the interest amount is greater than 5000. so i have a question here. for eg if i fall into the bracket for which no tax has to be paid, then will i have to claim a refund from IT dept for the 10% deducted by the bank?
also if i fall into the 10% tax bracket and the income tax that i have to pay be Rs 5000 (just an eg). the bank has already deducted say 500 from the interest on fd. then does that mean that i have to pay only 4500 or will i have to pay 5000 and get the 500 back as refund.
it would be great if you could explain this section in your usual estensive fashion
thanks.
Jan 04, 2009
Is there any deduction available for personal education expenses. If yes then which are the notified institutions? Will ICWA education expenses be deductible under 80C
1. The amount that you invest in the FD counts under section 80C. The interest that you earn from any FD is fully taxable.
2. Yes, you would need to claim a refund from the IT department for the 10% TDS done by the bank.
3. You just have to pay the balance - Rs. 4,500 in your example.
Let's take the example given by you.
When you calculate your total tax liability, you would find it to be Rs. 5,000.
Out of this, say your employer has already deducted Rs. 3,000 from your paycheques. Also, your bank has deducted Rs. 500 as TDS.
Thus, the additional tax payable by you would be Rs. 1,500 only.
Unfortunately, there is no income tax benefit available for education expenses.
Taking an education loan does give you tax benefits, though. I would write a separate article on that.
(Update: Here is the article - "Income Tax (IT) benefit of an education / study loan")
Thanks for suggesting a great topic for an article!
Jan 05, 2009
when should one file IT returns in india? (wrt the the time of stay in india) ie if i stay in india only for say 180 days then do i have to file returns in india?
there can be two cases? i might be abroad through out the year but i might still be earning in india (say basic of my salary)? so in this case will i have to pay & file tax in india.
if i stay abroad for 3 months in a year and earn say 5L and come back to india and stay in india for the rest of the FY then how will the tax for this three months treated? will the 5L be added to my income and taxed in india? also if i pay tax for this amount abroad (as per the foreign nation tax act) then do i have to pay tax for this amount in india?
thanks
Jan 10, 2009
Jan 12, 2009
Jan 15, 2009
Jan 15, 2009
Jan 16, 2009
if yes, then whether some deduction is available under the Indian Income tax act.
please tell section and details of benefits which can be claimed
Whether or not to file the IT return in India depends on your residential status. Basically, you need to file your IT return in India if you spent 182 days or more in India in the financial year.
Staying abroad, earning in India:
You have to file a return in India if your income exceeds the minimum threshold of income for taxation based on the prevailing income tax slabs.
Income that you have earned abroad:
Yes, it would be added to your income in India and would be taxed accordingly. If you have paid tax on it in a foreign country, you can show that and you would get credit for that in most cases.
I say most cases, because it depends on the tax treaties between India and the foreign country in question.
Since this is complicated, I would suggest you utilize the services of a good chartered accountant (CA) for your IT return.
There is no upper limit for children's education expenses - the only limit is Rs. 1 Lakh which is the overall limit of Sec 80C.
You can claim children's education expenses u/s 80C, provided:
- The expense should not be for more than 2 children
- It should be for tution fees (and not for any development fees or donation or any other fee of similar nature)
- Should be paid for full-time education
I don't think you would be able to claim the stamp duty u/s 80C in this case.
The ceiling remains at Rs. 1 Lakh for AY 2009-10.
Children's education allowance is exempt upto Rs. 100 per month per child, subject to a maximum of two children.
this limit increases to Rs. 300 per month if the child is studying while staying in a hostel.
This is as per section 10(14)(ii).
Any amount over this limit would be taxable.
Jan 18, 2009
My question is regarding multiple FDs. Can multiple FDs for 5 years and above be submitted for tax exemption under section 80C?
Assuming... I have two FDs of Rs 20000 and 30000 both for a period of 5 years and above. Can I claim Rs 50000 for tax exemption?
Thanks
Thanks - I am glad that I am being of help.
Yes, you can invest in any number of FDs and claim deduction under section 80C as long as that are for a duration of 5 years or more.
Jan 19, 2009
Jan 20, 2009
Jan 20, 2009
I had taken education loan during my education.Now I am repaying that loan.Yearly I am paying around Rs.50,000 .Would u pls tell whether or not this education loan repaying amount is applicable for tax deduction ? .
Jan 20, 2009
I am paying insurence premium of my father's insurence policy.Yearly I am paying Rs.15,000. My father is the 'life assured' in this insurence policy.But I though my income I am paying the premium.My father's occupation is Agriculture .There is no fixed income from that .Would u
pls tell whether or not this premium amount is applicable for tax deduction ?
You have heard it right - the rate of return on the infrastructure bonds is quite less. It is in the range of 5.5% - 5.75%. And just like FDs, the interest is taxable.
The lock-in for these bonds is 3 years, which is their only advantage in my opinion.
For sec 80C investments, the minimum lock-in is 3 years. it is available for infrastructure bonds (which have low returns), and for Equity Linked Savings Schemes (ELSS) of mutual funds (where return is not fixed).
The best option for you would be a 5 year FD, which gives a decent interest rate these days. Also, with interest rate going down steadily, you would be able to beat inflation too with the FD returns.
If you want to claim an investment under section 80C, you have to make the investment in the same financial year.
Since 1 Jan 2009 falls in FY 2008-09, you can definitely claim an investment made on 01-01-2009 u/s 80C for FY 2008-09.
You do get income tax benefit by repaying education loan - I would write a detailed article on that shortly.
(Update: Here is the article - "Income Tax (IT) benefit of an education / study loan")
Thanks for suggesting a great idea for an article!
Life insurance premium paid by you is aligible for deduction u/s 80C provided it is paid fro yourself, your spouse, or your children.
Thus, the premium you pay for your father (or mother - parents in general) is not eligible for deudction under section 80C.
Jan 21, 2009
Jan 22, 2009
1.I have a bank account in my name but i need to invest some amount in FD under my mom's name.But she has no bank account.Should i open a new bank account in her name before investing the amount in FD or my existing account is all that is required?
2.Will i be getting any tax benefits for any FD's paid for my parents?
Thanks,
Venkat
Jan 22, 2009
First of all I would like to thank for ur valuable suggentions regarding my previous questions.I would need one more clarification from u.I have invested in shares few months back ie during may 2008 .Would this investment be taxable ? .
Thanks,
Subramanya
Jan 23, 2009
The benefit of deduction is available to the person making the investment in the case of ELSS.
Therefore, in my opinion, the deduction would be available to the applicant from whose account the money is paid.
1. Many banks allow you to open an FD even when you don't have an account with them. So, please check with your bank if they would allow an FD in your mother's name if she doesn't have an account there.
2. The deduction u/s 80C for investment made in an FD over 5 years in tenure is available only for the person in whose name the FD is.
So, if you invest for your mother, you would not get the tax benefit.
Remember - invsetment is not taxable, income or gains are.
Thus, you would not be taxed just for making investment in shares.
You would be taxed if you have any gain from this investment. If you sell it before holding the shares for 1 year, and you make a profit, you would have to pay a tax of 15% on this short term capital gain.
If you hold the shares for more than a year, and you make a gain, you wouldn't pay anything as tax, as long term capital gain on shares is zero.
Please read "Long Term and Short Term Capital Gain - Income Tax Calculation" for more details on this.
I would shortly write an article about all the avenues of saving income tax.
Thanks for suggesting a good topic!
Jan 29, 2009
If the interest accrued annually from NSC or 5 year bank fixed deposit is less than Rs.12,000/- , is it exempted from tax.
Section 80L is an old scetion that used to exist until a couple of years back.
This section was removed as part of the direct tax rationalization exercise, and is no more in force.
Thus, interest in NSCs is to be included with your "Income from other sources", and would be taxed.
Feb 02, 2009
Feb 02, 2009
SBIs tax gain is an Equity Linked Savings Scheme (ELSS). Therefore, investment made in the fund would be considered for deduction under sec 80C.
Feb 04, 2009
You can claim deduction of upto Rs. 10,000 for investments made in pension funds - this is under section 80CCC.
But this sec 80CCC limit is a part of the overall limit of Rs. 1 Lakh for sec 80C.
Thus, the overall deduction is capped at Rs. 1,00,000 and is not Rs. 1,10,000.
Feb 07, 2009
Feb 09, 2009
You would not be able to get benefit u/s 80C for education expense of your wife.
If you have taken an education loan for your wife, and are repaying it, you can get tax benefit under section 80E.
Please read "Income Tax (IT) benefit of an education / study loan Section 80E" for more.
Unfortunately, the tax benefit of principal repayment is available only after the construction of the house is completed.
Therefore, at this stage, you would not get any tax benefit for principal repayment.
But don't lost heart - with each EMI, at least you are repaying a portion of the loan and reducing your debt!
Feb 10, 2009
I V.Karthik holding a ICICI Prudential Life Stage Pension policy.
It is a lock in period for 3 years each year i need to pay Rs.30000 as premium.
I have paid premium for first year on 09-01-08 for Rs.30000 and second one in 06-02-09 for Rs.30000
Here i would like to know whether i will eligible for Rs.60000 premium amount as Tax deductions under section 80-C
Please advice us.
Amounts paid for pension plans are allowed for deduction from your income upto Rs. 1 Lakh every year. (This is according to section 80CCC that forms a part of the limit for section 80C).
You have paid premiums of Rs. 30,000 each on 09-01-08 (which is in FY 2007-08) and on 06-02-09 (which is in FY 2000-09).
Income tax benefit can be claimed only in the FY in which it is paid.
Thus, you can claim deduction of Rs. 30,000 for FY 2007-08 and a deduction of Rs. 30,000 for FY 2008-09. You can not claim deduction of Rs. 60,000 for FY 2008-09.
Feb 12, 2009
Feb 12, 2009
How about bank's long term fixed deposit (5 or more years) interest-component alone? whether it is taxable or any exemptions allowed?
I will be grateful if you can furnish the entire list of exemptions under various savings scheme.
Yes, there are some other deductions available. Here are some:
- Income Tax (IT) benefit of an education / study loan Section 80E
- Have a disabled dependent? Save income tax using section 80DD
- Make donations, save income tax Section 80G.
I would be writing about more soon - so stay tuned!
Feb 13, 2009
What will be maximum deductions available in sec 80CCC(1).
I have taken Life stage pension policy (ICICI) and they given me a tax certificate for two years 2007-08 and 2008-09 for Rs.60000.00
Whether I can claim tax benefit for whole amount.
Please advice me.
The post office recurring deposit interest is fully taxable.
Please note that section 80L was abolished a few years back, and is no more valid.
Even the interest from tax-saving FDs (FDs of 5 or more years) is fully taxable.
Section 80CCC forms a part of section 80C, and the overall limit is Rs. 1 Lakh per year.
So, any amount upto Rs. 1 Lakh is deductible u/s 80CCC.
However, you mentioned that the amount of Rs. 60,000 is for 2 years: 2007-08 and 2008-09. Please remember that for FY 2008-09, you can claim only the amount you paid in FY 2008-09.
Note: There used to be a limit of Rs. 10,000 for section 80CCC, but now it comes under the overall limit of Rs. 1 Lakh for sec 80C.
Feb 16, 2009
first of all, unrealised losses are just paper losses. You would know that unrealised profits are not taxed - similarly, unrealised losses too do not have any income tax consequenses.
Thus, only the Rs. 15,000 would matter in your case.
Now, no rebate in income tax is available for losses made in shares. However, you can set off these losses against some other gains, or, you can carry forward the losses to the next financial year.
To know more, please read "Set Off and Carry Forward of Losses Capital Gains and House Property".
This is kishore. Good informative article about section 80c. you said life insurance premiums paid for parents donot come under sec 80c deduction. My friend said if we were unmarried we can show the premium paid for the parents under section 80c deduction. Please clarify...
Feb 18, 2009
Please correct me if I am wrong.
Feb 18, 2009
I'm sorry, but I have not heard of any such exception.
That is correct.
Yes, you can claim tution fees paid for your first two children. This is claimed under section 80C, and the overall upper limit of Rs. 1 Lakh of section 80C applies. There is no individual cap for education expenses.
Feb 18, 2009
I am a pensioner (not a senior citizen) and I have invested my money in PO MIS deposits PO RDs, BanK FDs and RDs. I am also engaged in dealing with shares (some are long term and most of it for short term purposes) through a recognized stock exchange wherein I pay my STT for every transaction.
I wanted to know from you that if I need to pay advance tax i.e before october of the financial year itself. If so, supposing I encounter heavy loss in short term where do I account it. The vice versa also holds if I make a huge profit. How do I deal with this situation?
Which form should I use for filing tax returns? I will be very grateful if you can advise me in this regard.
Venkatesan
May be this is not the right place for posting my question.I want to know these things.
1. My employer is deducting some amount under gratituity. What exactly this gratituity is?
2. Similarly superannuation.
3. People usually ask, What is your CTC? What are the things include in this CTC?
Advance tax needs to be paid as and when, and in proportion to, the taxable income.
Thus, if you make a huge profit say in July, you should pay corresponding advance tax by the due date in September.
Later, if you incur a loss and thus, your overall tax liability decreases, you would need to claim a refund when you file your income tax return.
In your case, you can use ITR2.
Gratuity and superannuation are long term benefits, ideally meant to create a large sum for your retirement.
Different organizations can have different rules regarding these - for example, a company can state that if you resign before completing 5 years in the job, you would not get your gratuity and superannuation funds.
Also, all companies may not offer both gratuity and superannuation.
CTC is your total cost to your company - that is, all the money that the company would spend on you to keep you employed. This would include your salary, bonuses, proportionate cost of any guest house facilities that are available to you, any allowances, etc.
A side note: Many companies have a target CTC in mind when they hire a new employee, and they allow the employee to structure the salary components in such a way that he pays the least possible tax.
For example, if you are staying in a rented house, you would take some amount as HRA. whereas if you stay in your own house, HRA would not save you any tax! You can opt for, say, a higher LTA in this case!
Feb 24, 2009
Whether interest of this scheme is exempt or taxable ?
The ineterest earned in the Senior Citizens Savings Scheme (SCSS) is taxable.
For more details on SCSS, please read "All you wanted to know about Senior Citizen Savings Scheme (SCSS)".
Mar 02, 2009
Any employer defines the pay structure for the employees. For government employees, the employer is the government. So, the government defines the pay structure.
The 6th pay commission defines your pay structure. It is different from tax rules.
Let's see the income tax rules regarding this.
- The amount received as reimbursement of tution expenses is not tax-free just because it is a reimbursement.
- Any fee you pay towards the tution of your children is deductible from your income under section 80C. The upper limit of Rs. 1 Lakh for section 80C applies.
This is available to you irrespective of whether you receive tution fee reimbursement or not.
Thus, in your case, you should be able to claim the actual tution fee paid as deductible from your income subject to the limit of section 80C.
- If you receive Children Education Allowance, it is exempt upto Rs. 100 per month per child, for upto two children.
Mar 10, 2009
Yes, tution fees paid your your kids' education is deductible from your income upto Rs. 1 Lakh under section 80C.
Mar 14, 2009
I pay my room fare, I want to use it for deduction in Income Tax. so please suggest me for use it as deduction in Income Tax.
Mar 14, 2009
I have completed my savings under 80C for this FY(2008-09). I am in process of buying a house and had planned it in next FY. But the broker is insisting on doing the same asap, due to some registration complications. In such a case, I will be unable to claim the registration amount and stamp duty as I have already made investments of 100000 under 80C. Is there any other way of claiming benefit?
Regards,
Vinayak Bhat
If you are salaried and are getting a House Rent Allowance (HRA), you can claim deduction of HRA subject to certain rules. Please read "Income Tax (IT) treatment of House Rent Allowance (HRA)" for more.
If you are not salaried, or are salaried but do not get an HRA, you can still claim deduction for rent paid under section 80GG. Please read "Deduction for rent paid Section 80GG" for more.
You would be able to claim this benefit only in the year in which the registration happens.
So, if you have exhausted the 80C limit this year, please try to convince the broker to do the registration on or after 1st April 2009.
Mar 16, 2009
I have exhausted all the deductions availble for me under section 80 C, how much additional tax i can save under other sections.
my father is senior citizen & physically handicapped dependent on me. i am salaried employee in the tax net of 33.66 %. i dont have certificate of disability.
guide me to exhaust all the deductions.
Nimesh
To get any deduction related to your dependent disabled father, you would need a certificate of disability. Please try to obtain one.
You can save income tax if you pay for your father's medical insurance.
Please check out the article Reached Section 80C limit? You can still save more income tax! - it lists all the available avenues of saving income tax other than section 80C.
Mar 24, 2009
I want to know about my Income Tax Rebate. I am a government servant. I have a flat in Dwarka in my wife name rpt my wife name. She is housewife and I took a loan from bank in both name. Can I claim for Income Tax rebate.
Since the flat is only in your wife's name, only she can claim income tax benefit for any home loan for it.
For all the details about the tax benefits of a home loan, please read "Income Tax (IT) Benefits of a Home Loan / Housing Loan / Mortgage".
Apr 05, 2009
The amount that you get when an insurance policy matures (including LIC policies) is completely tax free.
Apr 07, 2009
Your payments for annuity plans (also called pension plans) are eligible for deduction upto Rs. 1,00,000 under section 80C.
The payout / pension that you get from these plans is taxable as per the applicable income tax slabs.
Apr 13, 2009
Apr 14, 2009
I am not sure if I understand your question right. Can you please rephrase it?
If you are asking about where to include the interest income, it comes under the head "other income" in your income tax return.
Apr 22, 2009
Can I claim that amount in my current tax returns?
Pl advise
Thanks in Advance
Sridhar
You can claim 80C deduction only in the year in which you make an investment. Therefore, you would not be able to claim it this year.
You can, however, file a revised income tax return for the applicable year and claim a refund.
May 11, 2009
booked loss in stock can be availed as deduction for salaried person from advance tax paid from monthaly salary. if so, then from which section this can be availed.
kindly revert
regards,
tushar rana
09902017462
Booked loss in stocks can not be deducted from salary.
It can, however, be set-off against some other incomes. Please read "Set Off and Carry Forward of Losses" for more on this.
May 19, 2009
May 27, 2009
I am investing in IDFC Premier.
Can i claim it as deduction U/S 80c ELSS?
Jun 01, 2009
Please see my answer to the same question asked in comments under the article "All you wanted to know about Senior Citizen Savings Scheme (SCSS)".
IDFC Premier is not an ELSS scheme, and so, no income tax benefit would be available to you u/s 80C.
For more on ELSS schemes, please read "ELSS is not for someone else".
Jun 19, 2009
Can the losses from Equity MF (STT is paid on them) can be carried forward.
If not does it not make sense to sell them in 11months and 28 dasy if they are down and book short term losses which can be carried forward.
Regards,
Sunil
Since there is no tax on LTCG from shares, a long term loss from equities can not be carried forward.
Although what you are suggesting is theoratically right, I personally do not favour such financial engineering.
Jul 12, 2009
My total income is 11.5 lakhs per annum. Kindly let me know wheather I can get benifit of exumption of 1.0lakh under chapter VI or not? Some people r saying that if income is more than 10.0 lakhs, above exumption is not applicable.
There is no such restriction for availing chapter VI deductions. You can claim these deductions.
Jul 12, 2009
YOUR SITE HAS A LOT USEFUL AND DETAILED INFORMATION REGARDING INCOME TAX & FINACIAL PLANNING.
CAN YOU PLEASE ANSWER MY BELOW QUERY
I HAD PURCHASED A UNDERCONSTRUCTION FLAT IN 2005 AND I HAD PAID THE STAMP DUTY & REGISTRATION CHARGES IN 05-06. AS THE POSSESION WAS NOT TAKEN I HAD NOT CLAIMED THE IT REBATE IN 05-06. I HAD TAKEN POSSETION IN LAST YEAR 2008 (08-09)
CAN I AVAIL THE IT REBATE FOR DUTY I PAID IN 2006 IN CURRENT YEAR I.E. 08-09?
AWAITING FOR UR VALUABLE FEEDBACK
Thanks for the kind words...
You can claim stamp duty and registration only in the year of its payment, not in any subsequent years. Therefore, you would not be able to claim them now.
Jul 23, 2009
Only the tuition fee paid for your children can be claimed u/s 80C. So, the fee paid for your brother can not be claimed.
Dec 07, 2009
I Am A Private Secor Employee My Annual inCome is : 175000
At The Same Time I am Doing Correspondance Course In INGNOU I pay Fee Per Year 24000 So It is Exempted Or Not
same Time I Am Doing One Soft Ware Course In One Institute So Its also Exempted I think That Private Institution Also Register Company In india So Kindly Send A mail To My ID :
Dec 23, 2009
I am working as an ASE in a IT company in Pune. My annual income is 2.5Lac, If i invest 20k in LIC per year, what will be the tax benefit?
KINDLY GUIDE AS TO WHERE SHOUD I INVEST SO THAT NOW ALSO GET TAX BENEFIT AND EARNINGS OF THAT INVESTMENT ARE ASO TAX FREE.
Dec 28, 2009
I would like to know whether amount yield through redemption of ELSS (Tax Saver Funds) is taxable.
If it is not taxable then should I redeem the ELSS and reinvest in the same or any other ELSS to get the Tax Benefit?
Thank you.
Rajesh.
Dec 31, 2009
my query is ...
in 2004 i purchased a flat taking homeloan from bank.in year
2008 my mother paid the remaining amount of bank i.e close the loan as i was unable to pay the emi.in this city we have two home one my name and other my mother name.i am married with 2 kids .for convieniance we are using both the home .(3/4 days in one home and 4/3 days in other). now i want hra exemption for it purpose.what can i do for claim hra exemption.
regds/ramesh
Feb 02, 2010
My brother is doing B.Pharmacy from Private institrution and paying his fee as he is dependable on me.Can get tax rebate on this or not.If yes underwhich section and what are the documents to be submitted.
Thanks in anticipation.
Feb 04, 2010
I came to know from the article that Stamp Duty and Registration charges paid are eligible for tax benefit u/s 80C, I have two queries in this regard,
1) Is the self contribution paid to the builder for purchase of a flat also eligible for tax benefit?
2) If the year of booking/ purchase/payment of stamp duty and registration fees is different than the year of possession then in which year can one get the benefit? e.g. if the booking and payment is done in year 2009-10 however the possession is in FY 2010-11 in which year will one get tax benefit for payment of stamp duty, registration fees?
Feb 19, 2010
Feb 25, 2010
Mar 03, 2010
Can a person who is filling his return, invest in PPF which is opened in his sons name but still can claim a deduction u/s 80C.
Regards
Ram
Mar 04, 2010
Mar 10, 2010
Mar 18, 2010
Mar 19, 2010
Mar 20, 2010
How Can I take a Tax Benifit U/S 80C when I take a Home Loan and construct a House at Dehradun Location
Mar 24, 2010
Mar 25, 2010
Mar 26, 2010
regards
Apr 10, 2010
i am santosh prajapati and my brother doing B.TECH.from private institute affiliated to UPTU (Uttar Pradesh Technical University).Ii paid tuition fees of my brother every year .He is totally depend on me for education.Is the amount paid by me be eligible for deduction under taxable income,? If yes then what document is required?
If anybody have information about please inform me at prasad.iet@gmail.com.
thank for kind information.
Apr 10, 2010
i am santosh prajapati and my brother doing B.TECH.from private institute affiliated to UPTU (Uttar Pradesh Technical University).Ii paid tuition fees of my brother every year .He is totally depend on me for education.Is the amount paid by me be eligible for deduction under taxable income,? If yes then what document is required?
If anybody have information about please inform me at prasad.iet@gmail.com.
thank for kind information.
Apr 14, 2010
1. I had taken a Single premiums Life Insurance policy in 2009, I am not sure whether I would be able to claim benefits each year as the policy is an open ended policy. Please clarify.
2. I have 2 home loans, for one of them I have started paying the Principal and Interest component since 2006 and for the othe one I am still paying a PRE EMI as I would be getting the possession in couple of months time. The first loan is paid from my own savings account, however the PRE EMI is paid from my joint account shared with my wife. Would I be able to claim benefits for both loans alone. Another thing, both the loans are on joint names, I am the first owner on the first loan and my wife is the first owner on the second loan.
3. I have already completed 3 yrs at the current residential address which is said to be the first home with a loan, so in case if I plan to sell this property, would I be entitled for a LTCG tax. I came to know that if 3 years are over for the same property then in case of a sale, I would be totally exempted from the LTCG i.e from the profits earned. Please clarify.
A quick reply would be appreciated. Thanks.
Need some tips on:
1. Since, the stamp duty for registration comes to Rs.3.6 lacs, can I & my wife CLAIM INDIVIDUALLY each Rs.1 lac u/s 80C?
2. The EMI is approx. Rs.50000 and the annual interest portion will be substantially more than Rs. 4 lacs for the year. Now, can each of us CLAIM INDIVIDUALLY Rs.1.5 lacs deduction u/s 24 towards interest?
May 26, 2010
Should I invest in life insurance now or later?
Im currently looking at 3 options
Post Office Recurring Deposit
Mutual Fund
PPF
Which ones would you recommend and how much should I invest in each (or any) ideally?
Jun 04, 2010
Jul 20, 2010
I am really impressed by ur site. My son is doing B.Tech and I have sought Education Loan for this. I am paying 25% in this and rest 75% is by bank. Can I claim deduction for my share?
Jul 20, 2010
In my previous comment. I would like to mention that the draft I get for fees from the bank consists of 25% of my share. Can I claim this as deduction for tuition fee.
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