DEDUCTION UNDER SECTION 80 C F.Y. 2014-15(A.Y. 2015-16)
(AN INVESTMENT LINKED DEDUCTION)
1. LIMIT:
With effect from 01-04-2015 the maximum allowable limit is extended to Rs.150000 from the previous Rs.100000.
2. MAJOR INVESTMENT AREAS:
Following are three major investment heads under which the deduction under section 80C is allowed
· Fixed Income Investment
· Market Linked Investment
· Various Expenditures.
FIXED INOCME INVESTMENT
A. PROVIDENT FUND (EPF/VPF/PPF): This deduction is available for salaried employees for contribution made toward EPF or VPF. Amount equal to the amount contributed is also paid by the employer and taxable for the employee under the head “Income From Salary” in the hand of employee.
B. NATIONAL SAVING CERTIFICATE (NSC): It is a type of Fixed Deposit with post office. Remember the maximum deduction for NSC is limited to Rs.100000.Further Interest received on NSC is not taxable.
C. LONG TERM FDs: Deduction is available for those FDs having maturity on or after 5 years from the date of issue. So there is no Deduction for FDs having maturity less than 5 Years.
D. LONG TERM POST OFFICE TIME DEPOSIT: It is Similar to bank fixed deposits. Only five years Post Office Time Deposit (POTD) is eligible for tax saving. Interest on POTD is Taxable.
E. SENIOR CITIZEN SAVING SCHEME: People with 55 year of age who have retired by VRS can open SCSS after 3 months of retirement. Minimum investment Rs 1,000/- while maximum investment Rs: 15lakhs.
F. SUKANYA SAMRIDDHI YOJNA: Deduction is available to guardian of girl for investment made in SUKANYA SAMRIDDHI YOJNA.
G.FIXED DEPOSITS UNDER N.H.B: Deduction is available for Fixed Deposits having tenure above 5 years under National Housing Board.
MARKET LINKED INVESTMENTS
A. LIFE INSURANCE PREMIUM: The premium paid for life insurance for Self, Spouse and Children can avail tax deduction under section 80C. Only premium equal to 10% of sum assured will be allowed for this. For person categorized under section 80U the maximum deduction is 20% of sum assured.
B. NEW PENSION SCHEME 80CCD(1): Section 80CCD(1) allows an employee, being an individual employed by the Central Government or by any other employer on or after 01.01.2004, or any other assessee being an individual, a deduction of an amount paid or deposited out of his income chargeable to tax under notified pension scheme. However, the deduction shall not exceed an amount equal to 10% of his salary (includes Dearness Allowance but excludes all other allowance and perquisites). The deduction under section 80CCD(1) shall not exceed Rs. 1,00,000.
C. EQUITY LINKED SAVING SCHEMES: These type schemes specially created for tax savings. It is nothing but investment by mutual funds invested in equity instruments for a tenure above 3 years.
D. UNIT LINKED INSURANCE PLAN (ULIP): ULIP, a combination of life insurance and equity investments. ULIP is less preferable investment option by taxpayers.
VARIOUS EXPENDITURES
A. TUITION FEE: Tuition fees paid by parents are eligible for deduction under section 80C. This deduction can be availed for payment of tuition fee for not more than two children. It is for full time education fee, not available for fee paid to private tuition classes. Maximum deduction under this specific head is Rs.100000.
B. STAMP DUTY AND REGISTRATION COST OF THE HOUSE: The Stamp duty and registration fee on purchasing new house up to Rs.100000 is tax deductible u/s 80C. The payment made in the same financial year is considered to deductible and cannot be carried forward to the next year. The house should be in the name of assesse claiming deduction.
C. PRINCIPAL REPAYMENT OF HOME LOANS: It is available for individual assesse for payment made toward principal repayment. EMI is combination of interest and principal. Interest portion is deductible under section 24 of income tax act 1961.
CAclubindia
Thanks