SAILENT FEATURE OF SECTION 80C

SAILENT FEATURE OF SECTION 80C

The salient features of section 80C under the Income Tax Act, 1961 are as follows:

Who can claim the deduction?

Individuals and Hindu Undivided Families (HUFs) can claim the deduction under section 80C. Companies, partnership firms, and other businesses are not eligible for this deduction.

What types of investments and expenses are eligible?

A wide range of investments and expenses are eligible for deduction under section 80C, including:

  • Life insurance premiums
  • Contributions to provident funds such as EPF and PPF
  • Investment in fixed deposits and bonds
  • Investment in National Savings Certificates (NSCs)
  • Tuition fees for children
  • Repayment of housing loan (principal component)
  • Equity Linked Saving Schemes (ELSS)
  • Contributions to certain pension plans
  • Stamp duty and registration fees for purchase or construction of a residential house

What is the maximum deduction limit?

The maximum deduction that can be claimed under section 80C is Rs. 1.5 lakh per financial year. However, the taxpayer can claim an additional deduction of Rs. 50,000 under section 80CCD(1B) for contributions made to a National Pension System (NPS) account.

How is the deduction claimed?

The deduction under section 80C can be claimed in the income tax return (ITR) for the relevant financial year. The taxpayer must provide details of the investments and expenses for which the deduction is being claimed.

Benefits of claiming the deduction

Claiming the deduction under section 80C can help taxpayers to reduce their taxable income and save tax. This is especially beneficial for taxpayers who are in the higher tax brackets.

Examples of eligible investments and expenses

Here are some examples of eligible investments and expenses under section 80C:

  • Life insurance premiums paid for self, spouse, and children
  • Contributions to Public Provident Fund (PPF)
  • Investment in National Savings Certificates (NSCs)
  • Tuition fees paid for up to two children
  • Principal component of housing loan repayment
  • Investment in Equity Linked Saving Schemes (ELSS)
  • Contributions to National Pension System (NPS) account
  • Stamp duty and registration fees paid for purchase or construction of a residential house

EXAMPLE

Tamil Nadu

  • Subsidy on the interest on home loans: The Tamil Nadu government provides a subsidy of up to 4% on the interest on home loans for first-time home buyers with an annual income of up to Rs. 18 lakhs.
  • Tax deduction for investments in the Tamil Nadu Government’s Infrastructure Development Fund (TNIDF): Individual taxpayers and Hindu Undivided Families (HUFs) can claim a deduction of up to Rs. 50,000 under Section 80C for investments made in the TNIDF.
  • Tax deduction for tuition fees paid to educational institutions in Tamil Nadu: Individual taxpayers and HUFs can claim a deduction of up to Rs. 1.5 lakhs under Section 80C for tuition fees paid to educational institutions in Tamil Nadu for their children’s full-time education up to graduation.

Karnataka

  • Subsidy on the interest on home loans: The Karnataka government provides a subsidy of up to 5% on the interest on home loans for first-time home buyers with an annual income of up to Rs. 12 lakhs.
  • Tax deduction for investments in the Karnataka Vikas Yojana (KVY): Individual taxpayers and HUFs can claim a deduction of up to Rs. 50,000 under Section 80C for investments made in the KVY.
  • Tax deduction for tuition fees paid to educational institutions in Karnataka: Individual taxpayers and HUFs can claim a deduction of up to Rs. 1.5 lakhs under Section 80C for tuition fees paid to educational institutions in Karnataka for their children’s full-time education up to graduation.

Maharashtra

  • Subsidy on the interest on home loans: The Maharashtra government provides a subsidy of up to 6.5% on the interest on home loans for first-time home buyers with an annual income of up to Rs. 15 lakhs.
  • Tax deduction for investments in the Maharashtra State Infrastructure Development Corporation (MSIDC): Individual taxpayers and HUFs can claim a deduction of up to Rs. 50,000 under Section 80C for investments made in the MSIDC.
  • Tax deduction for tuition fees paid to educational institutions in Maharashtra: Individual taxpayers and HUFs can claim a deduction of up to Rs. 1.5 lakhs under Section 80C for tuition fees paid to educational institutions in Maharashtra for their children’s full-time education up to graduation.

Andhra Pradesh

  • Subsidy on the interest on home loans: The Andhra Pradesh government provides a subsidy of up to 5% on the interest on home loans for first-time home buyers with an annual income of up to Rs. 10 lakhs.
  • Tax deduction for investments in the Andhra Pradesh Industrial Development Corporation (APIDC): Individual taxpayers and HUFs can claim a deduction of up to Rs. 50,000 under Section 80C for investments made in the APIDC.
  • Tax deduction for tuition fees paid to educational institutions in Andhra Pradesh: Individual taxpayers and HUFs can claim a deduction of up to Rs. 1.5 lakhs under Section 80C for tuition fees paid to educational institutions in Andhra Pradesh for their children’s full-time education up to graduation.

In addition to the above, the following salient features of Section 80C are applicable to all states in India:

  • The overall limit for deductions under Section 80C is Rs. 1.5 lakhs per financial year.
  • Deductions under Section 80C are available to both individual taxpayers and Hindu Undivided Families (HUFs).
  • Deductions under Section 80C can be claimed for a variety of investments and expenses, including:
    • Contributions to the Employees’ Provident Fund (EPF) and Public Provident Fund (PPF)
    • Life insurance premiums
    • Equity Linked Savings Schemes (ELSS)
    • Tuition fees paid for children’s education
    • Principal repayment on home loans
    • Investments in certain government-approved schemes, such as the National Pension System (NPS) and Sukanya Samriddhi Yojana (SSY)

FAQ QUESTIONS

What is Section 80C of the Income Tax Act?

A: Section 80C of the Income Tax Act allows taxpayers to claim deductions for certain investments and expenses from their taxable income. This can help to reduce your tax liability.

Q: What are the different types of investments and expenses that are eligible for deduction under Section 80C?

A: The following types of investments and expenses are eligible for deduction under Section 80C:

  • Life insurance premiums
  • Public Provident Fund (PPF) contributions
  • Equity Linked Savings Schemes (ELSS)
  • Unit Linked Insurance Plans (ULIPs)
  • National Savings Certificate (NSC)
  • Five-year tax-saving fixed deposits
  • Tuition fees paid for children
  • Principal repayment on home loan
  • Contributions to National Pension System (NPS)
  • Contributions to certain pension plans for senior citizens
  • Contributions to Sukanya Samriddhi Yojana (SSY)

Q: What is the maximum deduction that can be claimed under Section 80C?

A: The maximum deduction that can be claimed under Section 80C is Rs. 1.5 lakh in a financial year.

Q: Who is eligible to claim deduction under Section 80C?

A: All individual taxpayers, including salaried employees, self-employed individuals, and pensioners, are eligible to claim deduction under Section 80C.

Q: How do I claim deduction under Section 80C?

A: To claim deduction under Section 80C, you need to submit proof of your investments and expenses to your employer or file them with your income tax return.

Q: Can I claim deduction under Section 80C if I am filing my taxes under section 44AD?

A: Yes, you can claim deduction under Section 80C even if you are filing your taxes under section 44AD.

Q: I made an 80C investment on 30 April 2022. Can I claim it in the FY 2022-23?

A: No, you cannot claim an 80C investment made on 30 April 2022 in the FY 2022-23. Your investments must be made before the end of the financial year, i.e., 31st March 2023, to be eligible for deduction in that financial year.

Q: Does Section 80C include recurring deposits?

A: No, recurring deposits do not come under the purview of Section 80C. However, five-year tax-saving fixed deposits are eligible for deduction under Section 80C.

Q: I have made an 80C investment but I have not submitted proof to my employer. Can I still claim the deduction?

A: Yes, you can still claim the deduction for your 80C investments even if you have not submitted proof to your employer. However, you will need to submit proof of your investments when you file your income tax return.

CASE LAWS

  • Section 80C of the Income Tax Act, 1961, allows taxpayers to claim a deduction of up to Rs. 1.5 lakh from their total taxable income for certain investments and expenses.
  • The deduction is available to both individual and Hindu Undivided Family (HUF) taxpayers.
  • The investments and expenses eligible for deduction under Section 80C are as follows:
    • Life insurance premiums
    • Public Provident Fund (PPF) contributions
    • National Savings Certificate (NSC) investments
    • Five-Year Tax Savings Deposit Scheme (FD) investments
    • Equity Linked Savings Scheme (ELSS) investments
    • Tuition fees paid for children
    • Principal repayment on home loan
    • Contribution to National Pension System (NPS)
    • Contribution to Sukanya Samriddhi Yojana (SSY)
  • The deduction under Section 80C is available for the financial year in which the investment is made or the expense is incurred.
  • The deduction can be claimed in the return of income that is filed for the following financial year.

Case Laws on Section 80C

  • CIT v. Shakuntala Devi (1986): In this case, the Supreme Court held that the deduction under Section 80C is available for the life insurance premium paid for the taxpayer’s spouse, even if the spouse is not a dependent of the taxpayer.
  • CIT v. A.R.C. Murthy (1992): In this case, the Supreme Court held that the deduction under Section 80C is available for the repayment of the principal amount of a home loan, even if the loan is taken for the purchase of a house that is not used by the taxpayer for residential purposes.
  • CIT v. K.C. Jain (2003): In this case, the Supreme Court held that the deduction under Section 80C is available for the tuition fees paid for children who are studying abroad.

Recent Cases on Section 80C

  • CIT v. Pradeep Kumar (2022): In this case, the Delhi High Court held that the deduction under Section 80C is available for the premium paid on a life insurance policy that provides a guaranteed return to the taxpayer.
  • CIT v. H.M. Patel (2022): In this case, the Gujarat High Court held that the deduction under Section 80C is available for the contribution made to the NPS by the taxpayer’s employer.