For individuals, certain tax deductions and exemptions are allowed while calculating taxable income. These deductions are specified in different sections of IT act and are available based on the type of investments and expenses that you incur in the financial year.
Out of all these sections, section 80C is the most important section. Today in this article, we will let you know those eligible investments which are listed in section 80C of IT act to get tax deductions.
An individual can invest up to a maximum of Rs.100000 in all of these eligible investments put together or in one investment to get eligible for the entire amount as tax deduction under section 80C. On July 10th 2014, our union budget has proposed to enhance the limit of Rs. 100000 to Rs. 150000. If the union budget is passed then we will have a new limit of Rs. 150000 for section 80C.
List of Investment to get tax deduction under section 80C
Life insurance premium paid during the financial year is eligible for tax deduction under section 80C of IT act. Even ULIPs are eligible under this section.
However, if your yearly premium amount exceeds 10% of the sum assured on your policy then eligible tax deduction for life insurance under section 80C will be restricted to 10% of sum assured.
Contributions to retirement benefit plan offered by mutual funds are eligible for tax deduction under section 80C.
Another best investment plan allowed under section 80C is public provident fund scheme. Your entire amount invested in PPF account up to the ceiling limit of section 80C will be allowed as tax deduction.
Recent budget 2014 has proposed the maximum investment limit as Rs. 150000 which is Rs. 50000 more compare to the last limit of Rs. 100000. If the budget 2014 passed in parliament then we can invest up to Rs. 150000 in PPF account.
If you are investing the maximum allowed investments of Rs.150000 in PPF then the entire amount will be tax deductible assuming that you do not have any other investments in other listed products of section 80C. Otherwise, together the limit of deduction will be restricted to Rs. 100000 (as discussed above budget 2014 proposed a new limit of Rs.150000).
Contribution to employee provident fund as an employee is also an eligible deduction under section 80C. If your employer deducts and invest in superannuation fund then that amount will also be allowed as deduction under section 80C.
NSC from a post office and Bank fixed deposit with lock in period of 5 years are best investment options to get tax deductions under section 80C of IT act.
Apart from all these investments there are also certain expenses like tuition fee and principal repayment on your home loan, on payment of which you also get tax deduction under section 80C.
Please remember that the total allowed tax deduction under section 80C is Rs. 100000 i.e. taking together the amount you have invested in eligible investments and expenses that you incurred in eligible expenses listed in section 80C. We hope that the new limit of Rs.150000 will be passed very soon in parliament to have a higher tax deduction limit.