Deduction Under Section 80C

Deduction in respect of certain payments

1. Deduction in respect of Life Insurance premium, deffered annuity, contributions to provident fund, subscription to certain equity shares or debentures, fixed deposits, etc [Section 80C]-

Mode of Investments

In computing the total income of an assessee, deduction shall be allowed in respect of sums paid or deposited in the previous year by the assessee-

(i) to effect or to keep in force an insurance on the life of individuals, spouse and children and in case of HUF any member of  (1) 20% of the actual capital sum assured - if policy's issued before 01.04.2012. (2) 10% of the actual capital sum assured - if policy's issued on or after 01.04.2012.

(ii) to effect or to keep in force a contract for a deffered annuity on the life of individual, spouse or children, of such individual and in the case of HUF, any member thereof not being an annuity plan of the Life Insurance Corporation of any oter insurer as the Central Government may specify. However a contract having option of cash payment in lieu of the payment of the annuity shall not be eligible for deduction.

(iii) deduction from the salary payable by or on behalf of the Government as per conditions of his service (not more than one fifth of the salary) for the purpose of securing to him a deffered annuity or making provision for his spouse or children.

(iv) towards contribution to any provident fund to which Provident Funds Act, 1925 applies;

(v) as contribution to any Provident fund set up by the central government to an account in the name of self, spouse and children, subject to a maximum limit of Rs. 1 Lac (Rs. 70000/- prior to 1/12/2011).

(vi) as contribution by an employee to a recognized provident fund;

(vii) as contribution by an employee to an approved superannuation fund;

(viii) as subscription to any security of Central Government or deposit scheme notified by that Government;

(ix) as subscription to National Savings Certificate (VIII Issue) {Accrued interest (which is deemed as reinvested) is also qualified for deduction for first five years.)

(x) as a contribution for participation in the Unit linked insurance plan, 1971 of Unit Trust of India in the name of self, spouse and children.

(xi) as a contribution for participation in any Unit-Linked Insurance Plan of the LIC Mutual Fund referred to in section 10(23D) in the name of self, spouse and children.

(xii) to effect or to keep in force a contract for annuity plan of LIC or any other specify by the Central Government in this behalf;

(xiii) as a subscription to any units of any Mutual Fund notified under section 10(23D) or in accordance with scheme notified by the Central Government.

(xiv) as a contribution by an individual to any pension fund set up by Mutual Fund notified u/s 10(23D) or in accordance with notification of Central Government;

(xv) as subscription to national housing bank (tax saving) term deposit scheme 2008 or contribution to any pension fund set up by the National Housing Bank.

(xvi) as subscription to deposit scheme of public sector company engaged in providing long term finance for construction or purchase of residential houses, or to deposit scheme or prescribed authority constituted for dealing and providing the need for housing accommodation, or planning, development or improvement of cities, towns and villages or for both;

(xvii) towards tution fees (excluding development fees, donation etc.) to university, college, schools or other educational institution in India which should be for full time education of two childrens.

(xviii) towards purchase or contruction of residential house property whose income is taxable under "Income from House Property" where such payments are made towards-

(a) any installment or part payment of the amount due under self-financing or other scheme or any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis; or

(b) any installment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him; or

(c) repayment of the amount borrowed by the assessee from-

     (1) the central government or any state government, or

     (2) any bank, including a co-operative bank, or 

     (3) the Life Insurance Corporation; or

     (4) the National Housing Bank, or

   (5) any public company formed and registered in india with the main object or carrying on the business of providing long-term finance for construction or purchase of house in India for residential purposes which is eligible for deduction of section 36(1)(viii); or

    (6) any company in which the public are substantially interested or any co-operative society where such company or co-operative society is engaged in the business of the financing the construction of houses or,

    (7) the assessee employer where such employer is an authority or a board or a corporation or any other body established or constituted under a Central or State Act, or,

    (8) the assessee employer where such employer is a public company or a public sector company or an university established by law or a college affiliated to such university or a local authority or a co-operative society; or

(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee;

        but shall not include any permanent towards or by way of-

      (A) the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member; or

        (B) the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out; or

       (C) any expenditure in respect of which deduction is allowable under the provision of section 24; i.e. a sum equal to 30% and where the property has been acquired, constructed, repaired, renewed or reconstructed with borrowed capital the amount of any interest payable on such capital.

(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital approved by the board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed Form No. 59 (Rule 20)

(xx) towards subscription to units of mutual fund under section 10(23D) and approved by the board on an application made by such mutual fund in the prescribed Form No. 59A (Rule 20A).

(xxi) as term deposit for a fixed period of not less than five years with a scheduled bank in accordance with scheme framed and notified by the Central Government in the official Gazette.

(xxii) as subscription to such bonds issued by the National Bank for Agriculture and Rural Development as the Central Government may, by notification in the Official Gazette, specify in this behalf.

(xxiii) in an account under the Senior Citizens Saving Scheme Rules, 2004;

(xxiv) as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.

Ø      Deduction to be withdrawn in certain cases:

(a)    Section 80C(3A) – The provisions of sub section (2) shall apply only to so much of any premium or other payment made on an insurance policy, other than a contract for a deferred annuity, issued on or after the 1^st Day of April 2012 as is not in excess of [ten per cent] of the actual capital sum assured.

However, where the policy, issued on or after the 1^st day of April, 2013 is for insurance on life of any person, who is-

(a)    A person with disability or a person with severe disability as referred to in Section 80U, or

(b)   Suffering from disease or ailment as specified in the rules made under section 80DDB [Proviso Inserted by the Finance Bill, 2013, w.e.f. 01.04.2014].

For the purposes of this sub-section, “actual capital sum assured” in relation to a life insurance policy shall mean the minimum amount assured under the policy on happening of the insured event at any time during the term of the policy, not taking into account-

(i)     the value of any premium agreed to be returned; or

(ii)   any benefit by way of bonus or otherwise over and above the sum actually assured, which is to be or may be received under the policy by any person [Inserted by the Finance Act, 2012, w.e.f. 01.04.2013].

(c)    Section 80C(5) – Deduction shall not be allowed to assessee in any previous year for sum referred to in clauses (i), (x), (xi) and (xviii) paid if assessee-

(i)     Terminates his contract of insurance referred to in sub-section(2)(i), by reason of failure to pay any premium, by not reviving contract of insurance;-

(a)    in case of any single premium policy, within 2 years after the date of commencement of insurance; or

(b)   in any other case, before premiums have been paid for 2 years; or

(ii)   terminates his participation in any unit linked insurance plan referred to in sub section (2)(x)(xi), by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for 5 Years; or

(iii) transfers the house property referred to in sub-section(2)(xviii) before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified.

Section 80C(6) – If any equity shares or debentures are sold or otherwise transferred by the assessee  to any person at any time with in a period of 3 years from the date of their acquisition, the aggregate amount of the deductions of income so allowed in respect of such equity shares or debentures in the previous year or years preceding the previous year in which such sale or transfer has taken place shall be deemed to be the Income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

Section 80C (6A) – IF any amount, including interest accrued thereon, is withdrawn by the assessee from his account under the Senior Citizen saving scheme or 5 years time deposits with post office, before the expiry of the period of five years from the date of its deposit, the amount so withdrawn and shall be liable to tax in the assessment year relevant to such previous year;

The amount liable to tax shall not include the following amounts, namely:-

         i.            Any amount of interest, relating to deposits under Senior Citizen Saving Schemes or 5 years term deposit with Post Office, which has been included in the total income of the assessee of the previous year of years preceding such previous year; and

       ii.            Any amount received by the nominee or legal heir of the assessee, on the death of such assessee other than interest, if any, accrued thereon, which was not included in the total income of the assessee for the previous year or preceding year such previous year [w.e.f. 2008-09].

Section 80C(7) – Section 88(2) shall be eligible for deduction under the corresponding provisions of this section-

         i.            The insurance, deferred annuity, provident fund and superannuation fund referred to in clauses (i) to (vii);

       ii.            Unit-linked insurance Plan- (ULIP) and annuity plan referred to in clauses (xii) to (xiiia);

      iii.            Pension fund and subscription to deposit scheme referred to in clauses (xiiic) to (xiva);

     iv.            Amount borrowed for purchase or construction of a residential house referred to in clause (xv).