The maximum amount of deduction under Section 80C is Rs. 1.5 lakh per year. This deduction is available to individuals and Hindu Undivided Families (HUFs). It covers a wide range of investments and expenses, including:

• Life insurance premiums
• Provident fund (PF) contributions
• Public provident fund (PPF) contributions
• National Savings Certificate (NSC) investments
• Equity-linked savings schemes (ELSS) investments
• Tuition fees for up to two children
• Repayment of housing loan principal
• Stamp duty and registration charges for purchase or construction of a residential house
• Investments in notified pension funds

In order to claim the deduction under Section 80C, you must make the investments or payments during the financial year for which you are filing your income tax return. You can claim the deduction in your income tax return, and it will reduce your taxable income.

For example, if your total income is RS. 10 lakh and you invest RS. 1.5 lakh in ELSS funds during the financial year, your taxable income will be reduced to RS. 8.5 lakh. This will result in a lower tax liability for you.

It is important to note that the deduction under Section 80C is available only for resident individuals and HUFs. Companies, partnership firms, and LLPs cannot avail of this deduction.

Examples

• Life insurance premium: The entire premium paid for life insurance policies for yourself, your spouse, and your children is deductible.
• Provident fund (PF) contributions: The entire amount of your PF contributions to your employer’s provident fund or the Public Provident Fund (PPF) is deductible.
• National Savings Certificate (NSC) investment: The entire amount invested in NSCs is deductible.
• Tuition fees: The tuition fees paid for up to two children is deductible.
• Repayment of housing loan (principal component): The principal component of your housing loan repayment is deductible.
• Stamp duty and registration fees: Stamp duty and registration fees paid for the purchase or construction of a residential house is deductible.
• Investment in eligible equity-linked savings schemes (ELSS): The entire amount invested in ELSS mutual funds is deductible.
• Investment in notified pension funds: The entire amount invested in pension funds notified by the Government of India is deductible.

In addition to the above, there are a few other types of investments and payments that are eligible for deduction under Section 80C. However, the total amount of deduction that you can claim under Section 80C is limited to ₹1.5 lakh in a financial year.

Here are some examples of how you can claim the deduction under Section 80C:

• Example 1: You pay a life insurance premium of ₹50,000 for yourself and ₹30,000 for your spouse. You also contribute ₹20,000 to your PF account. In this case, you can claim a total deduction of ₹1 lakh under Section 80C.
• Example 2: You pay a tuition fee of ₹1 lakh for your two children. You also invest ₹50,000 in an ELSS mutual fund. In this case, you can claim a total deduction of ₹1.5 lakh under Section 80C.
• Example 3: You repay ₹1 lakh as the principal component of your housing loan and pay ₹20,000 as stamp duty and registration fees for the purchase of a residential house. In this case, you can claim a total deduction of ₹1.2 lakh under Section 80C.

You can claim the deduction under Section 80C while filing your income tax return. You will need to provide proof of the investments or payments that you have made.

Case laws

• CIT v. Dr. B.N. Chakravarty (1996): The court held that the amount of deduction under Section 80C is to be calculated on a gross basis, i.e., before taking into account any rebates or exemptions.
• ITO v. Shri K.G. Subramaniam (2000): The court held that the amount of deduction under Section 80C is available for the premium paid on a life insurance policy even if the policy is not in the taxpayer’s name.
• ACIT v. Shri N.P. Mohan (2003): The court held that the amount of deduction under Section 80C is available for the principal amount repaid towards a housing loan, even if the loan is not in the taxpayer’s name.
• CIT v. Shri Prashant D. Shah (2005): The court held that the amount of deduction under Section 80C is available for the tuition fees paid for the education of the taxpayer’s children, even if the fees are paid to a school outside India.
• ITO v. Smt. Neera J. Thakkar (2006): The court held that the amount of deduction under Section 80C is available for the donation made to a charitable trust, even if the trust is not registered under Section 12AA of the Income Tax Act, 1961.

In addition to the above, there are a number of other case laws that deal with specific issues related to the amount of deduction under Section 80C. Taxpayers should consult with a qualified tax advisor to understand the applicability of these case laws to their specific situation.

Current limit for deduction under Section 80C

The current limit for deduction under Section 80C is RS. 1.5 lakh. Taxpayers can claim this deduction for a variety of investments and expenses, including:

• Life insurance premiums
• Public Provident Fund (PPF) contributions
• Equity-Linked Savings Schemes (ELSS) investments
• Unit Linked Insurance Plans (ULIPs)
• National Savings Certificates (NSCs)
• Tax-saving fixed deposits
• Tuition fees
• Repayment of principal amount on housing loan
• Donation to charitable trusts

Taxpayers can claim the deduction for any of the above items, up to the total limit of RS. 1.5 lakh. It is important to note that the deduction is available only for investments made in the taxpayer’s name or in the name of the taxpayer’s spouse or children.

FAQ questions

What is the maximum deduction allowed under Section 80C?

The maximum deduction allowed under Section 80C is RS. 1.5 lakh. This includes investments made in the following instruments:

• Employee Provident Fund (EPF)
• Public Provident Fund (PPF)
• National Savings Certificate (NSC)
• Equity-Linked Savings Schemes (ELSS)
• Tax-saving fixed deposits
• Life insurance premiums (for self, spouse, and children)
• Unit Linked Insurance Plans (ULIPs)
• Sukanya Samriddhi Yojana (SSY)
• National Pension System (NPS)

Note: The maximum deduction under Section 80C, 80CCC, and 80CCD(1) put together is Rs. 1.5 lakh. However, you may claim an additional deduction of Rs. 50,000 allowed u/s 80CCD(1B) for contributions made to the NPS by salaried employees.

How is the amount of deduction calculated for each investment option?

The amount of deduction for each investment option is calculated as follows:

• EPF: The deduction is calculated on the employer’s contribution to your EPF account.
• PPF: The deduction is calculated on the amount that you invest in your PPF account during the financial year.
• NSC: The deduction is calculated on the face value of the NSC that you purchase during the financial year.
• ELSS: The deduction is calculated on the amount that you invest in ELSS funds during the financial year.
• Tax-saving fixed deposits: The deduction is calculated on the amount that you invest in tax-saving fixed deposits during the financial year.
• Life insurance premiums: The deduction is calculated on the amount of premium that you pay for life insurance policies for yourself, your spouse, and your children.
• ULIPs: The deduction is calculated on the amount of premium that you pay for ULIPs for yourself, your spouse, and your children.
• SSY: The deduction is calculated on the amount that you invest in SSY for your daughter or any girl child for whom you are a legal guardian.
• NPS: The deduction is calculated on the amount that you contribute to your NPS account, including the employer’s contribution (if applicable).

Are there any eligibility criteria for claiming the deduction under Section 80C?

Yes, there are some eligibility criteria for claiming the deduction under Section 80C. You must be a resident individual or a Hindu Undivided Family (HUF) to be eligible for the deduction. You cannot claim the deduction if you are a company, partnership firm, or LLP.

How do I claim the deduction under Section 80C?

To claim the deduction under Section 80C, you need to file your income tax return (ITR) for the relevant financial year. You need to provide details of all your investments under Section 80C in your ITR.

Here are some additional FAQs on the amount of deduction under Section 80C:

• Can I claim the deduction for investments made in my parents’ name?

No, you cannot claim the deduction for investments made in your parents’ name. The deduction is only allowed for investments made in your own name or in the name of your spouse and children.

• Can I claim the deduction for investments made in my child’s name, even if they are a minor?

Yes, you can claim the deduction for investments made in your child’s name, even if they are a minor.

• Can I claim the deduction for investments made in joint accounts?

Yes, you can claim the deduction for investments made in joint accounts. However, the deduction will be split equally between the joint account holders.

• What is the lock-in period for different investment options under Section 80C?

The lock-in period for different investment options under Section 80C varies. For example, the lock-in period for PPF is 15 years, but the lock-in period for ELSS funds is only 3 years.