Friday, February 8, 2013

DEDUCTION UNDER SECTION 80C ALL ABOUT 80C


on Friday, February 8, 2013

In computing the taxable income of the individual, the following deductions under section-80C, 80CCC, 80CCD , 80CCE of the Act are to be allowed from his gross total income:

80C deduction can be divided in to two parts ,
  1. Investment part and other is 
  2. expenditure part.
  1. Under investment Part govt has declared /Notified few scheme under which person can invest amount and can claim deduction like investment in PPF/NSC ,Life insurance etc.Further there are specified time limit for which you have to hold the investment otherwise benefit availed u/s 80C have to be revered.
  2. Under Expense part ,few type of expenses are eligible for deduction.Like payment of tuition fees  
We have discussed all the scheme here under in brief and provided a link for detail on that topic,generally person has some confusion about on who's name saving under section 80C can be done and whether 80C benefit can be availed where investment is being done in the name of children or wife/Husband name or Joint name . We have consolidated the rules which resolve the issue . After reading this post if any doubt left then ask queries in comment section .




Scheme particulars
Available to 
Can be for
amount cap
Holding period
HUF
Member of family
10% 20% of Sum Assured
Two year
INDIVIDUAL
spouse,own,children (major or minor,dependent or indepdent)
do
Non -Commutable deferred annuity
INDIVIDUAL 
spouse,own,children (major or minor,dependent or indepdent)
Nil
Nil
Deferred Annuity deducted by GovtINDIVIDUAL 
spouse,own,children (major or minor,dependent or independent)
20 % of salary
nil
Statutory provident and recognised Provident fund
INDIVIDUAL 
Individual only on his own name
nil
In case of Rpf 5years
INDIVIDUAL 
spouse,own,children (major or minor,dependent or independent)
100000
6years
National Saving Certificate
INDIVIDUAL
HUF
own name
nil
nil
Ulip of UTI and LIC mutual fund(Dhanraksha)
HUF
Member of family
nil
5 years
-DO-INDIVIDUAL 
spouse,own,children (major or minor,dependent or independent)
do
do
specified tax saving mutual fund
INDIVIDUAL
HUF
own name
nil
3 year
INDIVIDUAL
HUF
own name
nil
5 year
tuition fees
INDIVIDUAL 
any two children
nil
nil
specified fixed deposit with scheduled bank
INDIVIDUAL
HUF
own/joint name first name must be assessee
nil
5 year

    A. As per section 80C, an employee will be entitled to deductions for the whole of amounts paid or deposited in the current financial year in the following schemes, subject to a limit of Rs.1,00,000/-

  1. Payment of Insurance Premium :Payment of insurance premium to effect or to keep in force an insurance on the life of the individual, the spouse or any child of the individual.
    • It may be clarified that the amount of premium or other payment made on an insurance policy [other than a contract for deferred annuity mentioned in sub-para (2)] shall be eligible for deduction only to the extent of 10 (20 upto 01.04.2012)percent of the actual capital sum assured. 
      • In calculating any such actual capital sum, the following shall not be taken into account: the value of any premiums agreed to be returned, or
      •  any benefit by way of bonus or otherwise over and above the sum actually assured which may be received under the policy.
  2. Payment of Defered annuinty Any payment made to effect or to keep in force a contract for a deferred annuity, not being an annuity plan as is referred to in item (7) herein below on the life of the individual, the spouse or any child of the individual, provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;
  3. Any sum deducted from the salary payable by, or, on behalf of the Government to any individual, being a sum deducted in accordance with the conditions of his service for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum deducted does not exceed 1/5th of the salary;
  4. Any contribution made :
    • (a) Public Provident Fund :by an individual to any Provident Fund to which the Provident Fund Act, 1925 applies;
    • (b) Provident Fund :to any provident fund set up by the Central Government, and notified by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of an individual, or spouse or children ;[The Central Government has since notified Public Provident Fund vide Notification S.O. No. 1559(E) dated 3.11.05.
    • (c) by an employee to a Recognized Provident Fund;
    • (d) by an employee to an approved superannuation fund;It may be noted that "contribution" to any Fund shall not include any sums in repayment of loan;
  5. (5) Any subscription :-(a) to any such security of the Central Government or any such deposit scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf;(b) to any such saving certificates as defined under section 2(c) of the Government Saving Certificate Act, 1959 as the Government may, by notification in the Official Gazette, specify in this behalf.[The Central Government has since notified National Saving Certificate (VIIIth Issue) vide Notification S.O. No. 1560(E) dated 3.11.05.]
  6. Any sum paid as contribution in the case of an individual, for himself, spouse or any child,a. for participation in the Unit Linked Insurance Plan, 1971 of the Unit Trust of India;b. for participation in any unit-linked insurance plan of the LIC Mutual Fund referred to in clause (23D) of section 10 and as notified by the Central Government.[The Central Government has since notified Unit Linked Insurance Plan (formerly known as Dhanraksha, 1989) of LIC Mutual Fund vide Notification S.O. No. 1561(E) dated 3.11.05.]
  7. Any subscription made to effect or keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify;[The Central Government has since notified New Jeevan Dhara, New Jeevan Dhara-I, New Jeevan Akshay, New Jeevan Akshay-I and New Jeevan Akshay-II vide Notification S.O. No. 1562(E) dated 3.11.05 and Jeevan Akshay-III vide Notification S.O. No. 847(E) dated 1.6.2006 ]
  8. Any subscription made to any units of any Mutual Fund, referred to in clause(23D) of section 10, or from the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002 under any plan formulated in accordance with any scheme as the Central Government, may, by notification in the Official Gazette, specify in this behalf;[The Central Government has since notified the Equity Linked Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated 3.11.2005]The investments made after 1.4.2006 in plans formulated in accordance with Equity Linked Saving Scheme, 1992 or Equity Linked Saving Scheme, 1998 shall also qualify for deduction under section 80C.
  9. Any contribution made by an individual to any pension fund set up by any Mutual Fund referred to in clause (23D) of section 10, or, by the Administrator or the specified company referred to in Unit Trust of India (Transfer of Undertaking & Repeal) Act, 2002, as the Central Government may, by notification in the Official Gazette, specify in this behalf;[The Central Government has since notified UTI-Retirement Benefit Pension Fund vide Notification S.O. No. 1564(E) dated 3.11.05.]
  10. Any subscription made to any such deposit scheme of, or, any contribution made to any such pension fund set up by, the National Housing Bank, as the Central Government may, by notification in the Official Gazette, specify in this behalf;
  11. Any subscription made to any such deposit scheme, as the Central Government may, by notification in the Official Gazette, specify for the purpose of being floated by 
    • (a) public sector companies engaged in providing long-term finance for construction or purchase of houses in India for residential purposes, or, 
    • (b) any authority constituted in India by, or, under any law, enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both.[The Central Government has since notified the Public Deposit Scheme of HUDCO vide Notification S.O. No.37(E), dated 11.01.2007, for the purposes of Section 80C(2)(xvi)(a)].
  12. Any sums paid by an assessee for the purpose of purchase or construction of a residential house property, the income from which is chargeable to tax under the head "Income from house property" (or which would, if it has not been used for assessee's own residence, have been chargeable to tax under that head) 
    • where such payments are made towards or by way of any instalment or part payment of the amount due under any self-financing or other scheme of any Development Authority, Housing Board etc.The deduction will also be allowable in respect of re-payment of loans borrowed by an assessee from the Government, or any bank or Life Insurance Corporation, or National Housing Bank, or certain other categories of institutions engaged in the business of providing long term finance for construction or purchase of houses in India. Any repayment of loan borrowed from the employer will also be covered, if the employer happens to be a public company, or a public sector company, or a university established by law, or a college affiliated to such university, or a local authority, or a cooperative society, or an authority, or a board, or a corporation, or any other body established under a Central or State Act.
    • The stamp duty, registration fee and other expenses incurred for the purpose of transfer shall also be covered. 
    • Payment towards the cost of house property, however, will not include, admission fee or cost of share or initial deposit or 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 by competent authority, or after the occupation of the house by the assessee or after it has been let out. 
    • Payments towards any expenditure in respect of which the deduction is allowable under the provisions of section 24 of the Income-tax Act will also not be included in payments towards the cost of purchase or construction of a house property.
    • Where the house property in respect of which deduction has been allowed under these provisions is transferred by the tax-payer at any time before the expiry of five years from the end of the financial year in which possession of such property is obtained by him or he receives back, by way of refund or otherwise, any sum specified in section 80C(2)(xviii), no deduction under these provisions shall be allowed in respect of such sums paid in such previous year in which the transfer is made and the aggregate amount of deductions of income so allowed in the earlier years shall be added to the total income of the assessee of such previous year and shall be liable to tax accordingly.
  13. Tuition fees,(read Frequently asked question about deduction of tuition fees u/s 80C) whether at the time of admission or thereafter, paid to any university, college, school or other educational institution situated in India, for the purpose of full-time education of any two children of the employee.
    • Full-time education includes any educational course offered by any university, college, school or other educational institution to a student who is enrolled full-time for the said course. 
    • It is also clarified that full-time education includes play-school activities, pre-nursery and nursery classes.
    • It is clarified that the amount allowable as tuition fees shall include any payment of fee to any university, college, school or other educational institution in India except the amount representing payment in the nature of development fees or donation or capitation fees or payment of similar nature.
  14. Subscription to equity shares or debentures forming part of any eligible issue of capital made by a public company, which is approved by the Board or by any public finance institution.
  15.  Subscription to any units of any mutual fund referred to in clause (23D) of Section 10 and approved by the Board, if the amount of subscription to such units is subscribed only in eligible issue of capital of any company.
  16. Investment as a term deposit for a fixed period of not less than five years with a scheduled bank, which is in accordance with a scheme framed and notified by the Central Government, in the Official Gazette for these purposes.[The Central Government has since notified the Bank Term Deposit Scheme, 2006 for this purpose vide Notification S.O. No. 1220(E) dated 28.7.2006]
  17. Subscription to such bonds issued by the National Bank for Agriculture and Rural Development, as the Central Government may, by such notification in the Official Gazette, specify in this behalf.
  18. Any investment in an account under the Senior Citizens Savings Scheme Rules, 2004.
  19. Any investment as five year time deposit in an account under the Post Office Time Deposit Rules, 1981.

B. As per section 80CCC, where an assessee being an individual has in the previous year paid or deposited any amount out of his income chargeable to tax to effect or keep in force a contract for any annuity plan of Life Insurance Corporation of India or any other insurer for receiving pension from the Fund referred to in clause (23AAB) of section 10, he shall, in accordance with, and subject to the provisions of this section, be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited (excluding interest or bonus accrued or credited to the assessee's account, if any) as does not exceed the amount of one lakh rupees in the previous year.

Where any amount paid or deposited by the assessee has been taken into account for the purposes of this section, a rebate/ deduction with reference to such amount shall not be allowed under section 88 up to assessment year 2005-06 and under section 80C from assessment year 2006-07 onwards.

C. As per the provisions of section 80CCD, where an assessee, being an individual employed by the Central Government on or after the 1st day of January, 2004, has in the previous year paid or deposited any amount in his account under a pension scheme as notified vide Notification No. F.N. 5/7/2003- ECB&PR dated 22.12.2003, he shall be allowed a deduction in the computation of his total income, of the whole of the amount so paid or deposited as does not exceed ten per cent of his salary in the previous year.

The benefit of new pension scheme has been extended to any other employees (also self employed person) w.r.e.f 1/04/09 and deduction is allowed to employees upto 10% of salary in the previous year and in other cases upto 10% of his gross total income in the previous year. Further it has been specified that w.r.e.f 1/04/09 any amount received by the assessee from the new pension scheme shall be deemed not to have received in the previous year if such amount is used for purchasing an annuity plan in the previous year.

It may be noted that the contribution made by the Central Government or any other employer, towards a pension scheme notified for section 80 CCD, shall be allowed as deduction in the computation of total income of the employee to the extent that it does not exceed ten percent of employee's salary. W.e.f. 01.04.2011 (FY 2011-12), the amount of deduction so allowed shall be outside the overall limit of Rs one lakh under section 80CCE of the Income Tax Act, 1961. It is therefore, clarified that contribution made by an employee alone will be eligible to deduction limit of upto Rs.one lakh. The contribution made by the Central Government or any other employee to a pension scheme u/s 80CCD(2) shall be excluded from the limit of one lakh rupees provided under Section 80CCE.

Where any amount standing to the credit of the assessee in his account under such pension scheme, in respect of which a deduction has been allowed as per the provisions discussed above, together with the amount accrued thereon, if any, is received by the assessee or his nominee, in whole or in part, in any financial year,—
(a) on account of closure or his opting out of such pension scheme; or
(b) as pension received from the annuity plan purchased or taken on such closure or opting out,
the whole of the amount referred to in clause (a) or clause (b) above shall be deemed to be the income of the assessee or his nominee, as the case may be, in the financial year in which such amount is received, and shall accordingly be charged to tax as income of that financial year.

For the purposes of deduction under section 80CCD, "salary" includes dearness allowance, if the terms of employment so provide, but excludes all other allowances and perquisites.

The aggregate amount of deduction under sections 80C, 80CCC and sub section (1) of Section 80CCD shall not exceed Rs.1,00,000/- (Section 80CCE)

Sl.No.
I.T. Sec.
Nature of Deduction
Amount of deduction
1.
a.




b.
c.
80 CCE
80 C




80 CCC
Limit on Deduction u/s.80C, 80CCC & 80CCD 

Life Insurance Premia, PF, PPF, NSC, ELSS, Units of Mutual Fund referred to u/s.10(23D), Tuition Fees(max. 2 Children), Repayment of Principal of Housing loan, Bank Fixed Deposit of 5 yrs period, notified Bonds of NABARD, Deposit in an account under Senior Citizens Savings Scheme rules, 5 year time deposit in an account under Post Office Time Deposit Rules, 1981 etc.
Premium paid towards approved Pension Fund (like LIC’s Jeevan Suraksha) max. 1 lakh.
Contribution to Central Government Pension Schemes. Upto 10% of salary with matching contribution from Government.                                                 
Maximum overall
Deductions
allowed u/s. 80C,
80CCC & sub-
section (1) of
sec.80CCD

 
2.
Deduction in respect of investment made under an equity savings scheme(only for Resident Individual) (subject to conditions)
50% of the amount invested subject to a maximum of Rs.25,000
3.
(a) Health Insurance Premium paid by an individual/HUF by any mode of payment other than cash to effect or keep in force an insurance on the health of the assessee(self) or his family(spouse & dependent children) for policies taken from General Insurance Corporation /other approved Insurance Regulatory and Development Authority or any contribution made to the Central Government Health Scheme or any payment made on account of preventive health check-up subject to a maximum of Rs.5,000.
(b) Medical Insurance Premium paid by an individual/HUF by any mode of payment other than cash to effect or keep in force an insurance on the health of his/her parent or parents for policies taken from General Insurance Corporation /other approved Insurance Regulatory and Development Authority or any contribution made to the Central Government Health Scheme or any payment made on account of preventive health check-up subject to a maximum of Rs.5,000.
(c) For Senior Citizens in respect of (a) & (b) above
(d) preventive health check up
Upto Rs.15,000





Upto Rs.15,000




Upto Rs.20,000







5000/-(include in above limit)
4.
(a) Any expenditure for Medical, Nursing & Rehabilitation incurred on dependant suffering from permanent disability including blindness, mental retardation, autism, cerebral palsy or multiple disabilities

(b) Deposits under LIC, UTI’s Scheme & other IRDA approved insurers for the benefit of physically handicapped dependent
Rs.50,000 (Rs.1,00,000 if the disability is severe exceeding 80%)
5.
(a) Actual expenditure incurred on Medical treatment of Self or dependant or a member of HUF suffering from terminal diseases like Cancer, AIDS, Renal failure etc.
(b) For Senior Citizens(self or dependent on whom expenditure on medical treatment is taken)
Upto Rs.40,000


Upto Rs.60,000
6.
Interest on loan taken from Financial/Charitable Institutions for Self/Spouse/Children for pursuing Higher Education (for a max. period of 8 yrs)
Actual Interest repaid

7.
(a) Donations made to National Defence Fund, Prime Minister’s Relief Fund, approved Funds of reputed Educational Institutions, National Trust for Welfare of persons with Autism, Cerebral Palsy etc.
(b) Donations made to Jawaharlal Memorial Fund, PM’s Drought Relief fund, Any approved Charitable Institution/Trust, Religious Institutions, a corporation established by the Government for promoting interest of the members of a Minority Community
100% of Donation



50% of Donation restricted to 10% of Adjusted Gross Total Income  
8.
Deduction in respect of rents paid, provided the assessee is not in receipt of HRA and no house is owned by self, spouse, minor child or HUF in the place of work subject to filing of declaration in Form No.10BA
25% of income
or rent paid in excess of 10% of income
or ceiling of Rs.24,000 p.a whichever is less
9.
Deduction in respect in interest on deposits(not being time deposits) in a savings account with a banking company, a co-operative society and a post office
Rs.10,000
10.
80 U
Persons certified by the medical authority to be a person with disability
Rs.50,000 (Rs.1,00,000 in case of severe disability)


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