Google PlusFacebook

12 smart Section 80C deductions to save your income tax

By in Tax | 57 comments

Share On GoogleShare On FacebookShare On Twitter

This article explains how the income tax Section 80c deductions of the Income Tax (IT) Act can help reduce your income tax liability in your yearly financial planning.

Though most of us use some of the deductions under Section 80C each year, we might be doing so unknowingly. Read on to understand what are the various options available under Section 80C of the Income Tax (IT) Act to help you better your next years tax savings.

This article is applicable for assessment year 2011-2012 or previous year 2010-2011.

Income tax Section 80C deductions

The income we earn is liable to tax. The government of India prods us to save our hard earned money for our future. It offers tax breaks on the savings that investors do annually.

Section 80C of the Income Tax Act is the section that deals with tax breaks. It states that if investments are done in specific instruments, then one’s income becomes deductible by a maximum of Rs 1,00,000/-.

Investments made under specified schemes are referred to as 80C investments. Under this section, you can invest a maximum of Rs l lakh and if you are in the highest tax bracket of 30%, you save a tax of Rs 30,000.

To state with an example, if your gross total income is Rs 8,00,000/- and if you have invested Rs 1,25,000/- in the qualifying instruments, then your gross total income is reduced by Rs 1,00,000/- to Rs 7,00,000/- and you do not have to pay tax on this Rs 1,00,000/- at all !

Qualifying Investments under Section 80c

Following are the qualifying instruments under Section 80C which investors can use.

1. Life insurance premiums

Any amount of money that you pay as premium for yourself, spouse or your children will qualify for Section 80C. The children may be married/unmarried, dependent or not dependant.

Note that if the premium paid exceeds 20% of the sum assured of the life insurance policy, the amount eligible for deduction under section 80C shall be limited to 20% of the sum assured.

2. Employees Provident Fund (EPF)

You automatically begin saving in your EPF when you begin working. Under the EPF, 12% of your basic salary goes into this fund. Not only this, your employer matches an equal 12% ! From your employers contribution, 8.33% goes towards the Employees Pension Scheme (EPS) and 3.67% into the EPF. Your EPF earns a tax free interest.

3. Public Provident Fund (PPF)

The favorite of the masses among the various Section 80C options, PPF is a risk free tax free investment avenue that investors should mandatorily subscribe to. You can invest a minimum of Rs 500/- and a maximum of Rs 70,000/- in this in a year. With a lock in period of 15 years and a return of 8%, this stands as one of the best Section 80C deduction for saving tax.

Section 80C

4. Home Loan Principal Repayment

Any payment for the purchase or construction of a residential house property will also qualify under Section 80C.

Such payments should have been made towards :

# the principal component of the home loan that was taken.

# stamp duty, registration fee and other expenses for the purpose of transfer of such house property.

5. Bank Fixed Deposits

Any sum deposited in a fixed deposit for a period of not less than 5 years with a scheduled bankĀ  or post office will also qualify for deductions under Section 80C.

6. National Savings Certificate(NSC)

A zero risk investment avenue, NSC will give you a return of 8% for a duration of 6 years. Your Rs 1 lakh will become Rs 1.6 lakh after 6 years.

7. Senior Citizens Savings Scheme (SCSS)

Targeted at retired individuals, you are expected to put in Rs 15 lakh for 5 years in this scheme. You can earn 9% interest a year and get the Section 80C deduction benefit.

8. Equity-linked savings schemes (ELSS)

ELSS are diversified equity mutual funds that allow investors to get tax breaks and target a higher return as well. The lock in period is three years – this means, once you invest in the ELSS fund, you can sell only after 3 years are over. The best part is that there is no long-term capital gains in this. You can invest via lump sum or take the systematic investment planning route. The latter is advised.

9. New Pension System (NPS)

A new kid on the block, NPS is for those who do not have an EPF facility to target long-term retirement needs. NPS is market linked and boats of features like zero front load, minimal annual charges and a decent variety of fund managers to invest with.

10. Tuition fees

School fees for the purpose of full time education of up to two children can also be availed as deductions in Section 80C. The conditions are that the payment cannot be towards donations or development fees and the institution should be situated in India.

11. Unit-linked insurance plans (ULIPs)

ULIPs are hybrid products that bundle insurance and investment together. The premium needs to be paid for a minimum of three years. Since ULIPs have very high front end charges, they work only in the long run of over 9-10 years. Heavily mis sold and abused product, they are every insurance agents hot selling item between January to March each year.


Subscription to bonds issued by NABARD(National Bank for Agriculture and Rural Development) will also qualify for Section 80C deductions.

Here is a small snapshot on the risk return trade off of some of these instruments.



  1. Kiran Shah

    February 19, 2011

    Post a Reply

    My Son is in Senior KG in Muljibhai Mehta International School & his Yearly Fees Approx 15000/- Can u give me the idea for this school fees how i m adjusted U/s.80C.

    • TheWealthWisher

      February 20, 2011

      Post a Reply

      @Kiran Shah, Tuition fees defined under income tax act is : full time education of any two children in any university, college, school or other educational institution, subject max of Rs. 100000 (Section 80C).
      Payment towards any development fees or donation is not allowed.
      So yes, in your case you can claim deduction of Rs 15,000/-.
      Let me know whether you understood or not.

      • Ravi

        July 10, 2013

        Post a Reply

        I am sponsoring my cousins education, Am I eligible for tax exemption for the tuition fees here?

  2. Kamesh Pandian

    January 5, 2012

    Post a Reply

    No body tells for how many years after purchase of apt/house can somebody claim relief for stamp duty/Registration. What is this some kind of secret?? This is total folly!!

    • Praneet Bajpaie

      April 14, 2012

      Post a Reply

      Deduction can only be claimed in the year in which property is purchased. So if you buy the house on say 01-09-2012 then in the year 2012-13, you will get the deduction.

      • Vivek K

        April 15, 2012

        Post a Reply

        Are you 100% sure? I think I heard it can be carried forward to certain years.

        • Vivek K

          April 15, 2012

          Post a Reply

          Ok, did some research and Praneet is right. Tax exemption can be claimed in the same financial year but only after the possession. If you have paid stamp duty in 2011-12 and possession is in 2012-13 then exemption cannot be claimed and you lose it forever. In such scenario it is advisable to delay stamp duty until next financial year or whenever you are getting the possession.

  3. Perpet

    February 10, 2012

    Post a Reply

    The M.Sc. computer science fee receipt break-up shows Tuition fees – Rs. 10,500/- Laboratory fees – Rs. 25,000/- and few more like admission fees, Eligibility fees-M.S., Registration fees for PG, gymnkhana fees, Student activity, journal & stationery chgs..ETC.

    Please advice which of the above expenses defines Tuition Fees under Section 80C

    • Praneet Bajpaie

      April 14, 2012

      Post a Reply

      Only tuition fees and laboratory fees allowed in this case.

      Only available to parents who have children under going education (full time)

  4. narpat charan

    February 15, 2012

    Post a Reply

    Any amount of money that you pay as premium for yourself, spouse or your children will qualify for Section 80C deductions. The children may be married/unmarried, dependent or not dependent.
    sir/madam i want to know whether son/daughter paid premium for his/her father (father is also employed)benefit us 80c received by son/daughter or not ??

    • Radhey Sharma

      February 15, 2012

      Post a Reply

      @narpat charan, Is your question related to claim reg health insurance ? If yes, then yes the benefit is only for the son/daughter as one is allowed to cover parents in a health insurance policy.

      Sorry if I did not understand your question.

  5. narpat charan

    February 16, 2012

    Post a Reply

    sir my question is regarding Life Insurance of father ( father is employed) and Premium paid by son/daughter – Can benefit under sec 80c got by son/daughter??

      • nirmal prajapati

        April 19, 2013

        Post a Reply

        salary is calculated as yearly basis and wages is hourly basis.. as per my opinion…..

    • Praneet Bajpaie

      April 14, 2012

      Post a Reply

      Salary is a fixed periodical payment paid to a person for regular work or services; a wage is usually paid by the day or week for work or services which are of a more irregular nature.

  6. deepak malekar

    February 23, 2012

    Post a Reply

    if i paid Rs.100000 for life inshurance premium and that time i paid my sons tuition fee Rs.25000 which amount is aloud to me deduction under Section 80c between Rs.100000 and Rs.125000.

  7. Rakesh

    March 13, 2012

    Post a Reply


    Here is the information i got from the net. Hope it helps

    Taxpayers are required to pay tax during the year on the basis of their own computation of income. The advance tax is payable on total income of the year from all sources i.e. salary, business, profession etc. (including capital gain, interest, rental income or lottery/prize money).

    The advance tax is payable if it exceeds Rs.10,000 for the year.

    In the case of an individual, advance tax needs to be deposited as below:

    30% of advance tax payable on or before 15th September
    60% of advance tax payable on or before 15th December
    100% of advance tax payable on or before 15th March

    What is the penalty for not depositing advance tax?

    In case of default in payment of advance tax, 1% p. m. interest is paid in addition to the tax payable amount, under section:

    234B – If you have not paid the advance tax i.e. 90% of total tax payable before 31st March.
    234C – If you have not paid the installment in time i.e 30% before 15th Sept, 60% before 15 Dec and balance before 15th March.

    Who need not deposit advance tax?

    If your total tax payable is below Rs 10,000, you are not obliged to deposit advance tax as per income tax laws. Also, if your main source of income is salary and all other income (like interest) has been declared to your employer, there is no need to deposit advance tax. However, salary income needs to be included if salary details under the previous employer are not given to the new company on joining.

    • Vivek K

      March 13, 2012

      Post a Reply

      @Rakesh, I don’t think this article is answering the second part of the question on how to calculate the advance tax?

  8. deepak malekar

    March 18, 2012

    Post a Reply

    i am industrial machine manufacturer,if i sold my car Rs.5,00,000/-which originol price in my balance sheet is Rs.14,000,00/- that time my losss in car sale is Rs.9,00,000/-this loss income tax department aloud to me ,and Rs.5,00,000/- i include my sale a/c.

  9. deepak malekar

    March 20, 2012

    Post a Reply

    am industrial machine manufacturer,if i sold my car Rs.5,00,000/-which originol price in my balance sheet is Rs.14,000,00/- that time my losss in car sale is Rs.9,00,000/-this loss income tax department aloud to me?,and Rs.5,00,000/- i include my sale a/c.?

    • Praneet Bajpaie

      April 14, 2012

      Post a Reply

      You cannot include sale of car in your Sales A/c. Car is an asset, disposal of which will have to be shown in the Fixed Assets Chart. Loss can be shown in the balance sheet though.

    • Praneet Bajpaie

      April 14, 2012

      Post a Reply

      Loss in your case is not Rs.900000. Deprication rate of Motor Car as per Income Tax Act is 15%. You have to give effect to depriciation to calculate the actual amount of profit/loss.

  10. Rakesh

    March 20, 2012

    Post a Reply

    @Deepak Malekar,

    But you would have already claimed depreciation for that vehicle. Did you consider that too? A tax consultant would be in a better position to assist. Please wait to hear from other experts.

  11. ganesan p g

    March 23, 2012

    Post a Reply

    my son is now repaying is educational loan along with interest.
    He is now working and the repayment is from his salary
    His office has allowed him to claim interest part of his educational loan u/s 80E
    They are not allowing him to claim repayment of principal under section 80C.
    Whether he can claim repayment of principal u/s 80C?
    please enlighten me!

  12. Wg Cdr RC Kohli

    April 6, 2012

    Post a Reply

    On whose name should I declare interest on FD’s in joint name with my wife? Can it be 50% in th IT return of each of us?
    RC Kohli

  13. rehan

    January 8, 2013

    Post a Reply

    hi,my annual income is 4.5 lakhs per annum.I pay LIC Premium of Rs.20,000 per year and rent paid by me is Rs.8800 pm in a metro city.My Basic salary is Rs.19,000(app) per month and HRA of Rs.9400 per month.So please suggest me the suitable tools for tax savings as i can invest a maximum of another Rs.40,000 this year for tax savings.My age is 30yrs.

    • TheWealthWisher

      January 9, 2013

      Post a Reply

      You shoudl invest in tax saving mutual funds. Make sure your EPF is also taken into account for Sec 80C. Don’t buy life insurance policies to save tax – I hope you have adequate term insurance.

  14. Sami

    January 16, 2013

    Post a Reply

    Dear Sir,

    I am paying the fees of a child who stays with me but does not hold any relationship with me. Can i claim the same under 80C tuition fees

    • TheWealthWisher

      January 22, 2013

      Post a Reply

      Have you adopted the child ? I think the relationship needs to exist – best you consult a tax consultant for this.

  15. Sachin

    February 5, 2013

    Post a Reply

    I have taken Aegon Religare Term Plan in january 2013 of 70 lacs, i have doubt in my mind is this company good to further continue as its settlement ratio is not so good, i need your opinion

    • TheWealthWisher

      February 6, 2013

      Post a Reply

      I dont think there is any issue as long as you did the due diligence correctly.

  16. Rakesh

    February 5, 2013

    Post a Reply


    As long as you have filled the form correctly you need to worry about the claim-ratio now.
    But do monitor their claim settlement ratio over the next few years and compare it with its peers and decide.

  17. s.k.pahari

    September 9, 2014

    Post a Reply

    I pay tution fees and purchase of books and stationaries and school books and school car , If I claim deduction of all this amount for my income tax statement?

  18. puneet

    January 13, 2015

    Post a Reply

    my son’s and daughter LIC premium can be paid by mother? And that amount is applicable for 80C deduction?

  19. Manoj Dave

    February 6, 2015

    Post a Reply


    i have paid LIC premium for My father and mother. can i get deduction for same in income tax.

  20. lakshmanan.a

    February 12, 2015

    Post a Reply

    i spent expanse of rs.60000 for my wife higher education, how much amount applicable for tax saving under80/c section of income tax rules

  21. Jitendra Thakre

    February 24, 2015

    Post a Reply

    I have paid stamp duty for the purchase of a home. The home is purchase on the name of my wife as first owner and second owner as me (jointly). So the stamp duty paid receipt is on the name of my wife which is paid by me. (Wife is housewife). So Could I get the tax benefit of section 80C against the stamp duty paid by me.

  22. Sukanya

    March 13, 2015

    Post a Reply

    Hi sir, Myself Sukanya. My annual income is about 5,25,000 per year, and I am paying LIC Premium 20,000 per year, so how much tax I have to pay in 2015-2016 under section 80c.

  23. Ashis Mohanty

    April 19, 2015

    Post a Reply

    I have deposited the money receipt of tution fees of my daughter’s school as a proof of deduction under 80C of Income tax. But my employer told me this can not be taken into account ,you bring a written statement from school about your deposit of tution fee. Is this not enough to deposit the money receipt as a proof of deduction under 80C of Income tax ?

  24. Divya

    May 19, 2015

    Post a Reply

    For exemption on Life Insurance premium , the receipts are enough or 80C certificate is necessary? In some receipts the 80C exemption eligibility is printed and in some not. (eg LIC). please advice.

Submit a Comment

Your email address will not be published. Required fields are marked *