Tax Saving Options in Section 80C for Individual / HUF

In computing the taxable income of the employee, the following
deductions under Chapter VIA of the Act are to be allowed from his gross
total income: 
Deduction in respect of Life insurance premia, deferred
annuity, contributions to 
provident
fund
, subscription to certain equity shares or debentures, etc.
(section 80C)
Limit Under section 80C,80CCC and 80CCD (except 80CCD(2)
A. Section 80C, entitles an employee 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/-:

Insurance Premium for Life
insurance
 
(1) 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. 
(2) 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;
Section 80C(3) &
80C(3A) states that in case of Insurance Policy other than contract for a
deferred annuity the amount of any premium or other payment made is
restricted to:
Policy issued before 1st April
2012
20% of the actual
capital sum assured
Policy issued on or
after 1st April 2012
10% of the actual
capital sum assured
Policy issued on or
after 1st April 2013 * – In cases of
15% of the actual
capital sum assured
persons with
disability or person with severe disability
as per Sec 80 U or
suffering from disease or ailment as
specified in Sec 80DDB
*Introduced by
Finance Act 2013 
Actual capital sum
assured in relation to a life insurance policy means 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 may be received under the policy by any
person.
Deduction in respect of contribution to certain pension funds
(Section 80CCC)
 :Section 80CCC allows an employee deduction of an amount
paid or deposited 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
section 10(23AAB). However, the deduction shall exclude interest or bonus
accrued or credited to the employee’s account, if any and shall not exceed
Rs. 1 lakh.
However, if any amount
is standing to the credit of the employee in the fund referred to above and
deduction has been allowed as stated above and the employee or his nominee
receives this amount together with the interest or bonus accrued or credited
to this account due to the reason of
(i) Surrender of
annuity plan whether in whole or part
(ii) Pension received from the annuity plan then the amount so
received during the Financial Year shall be the income of the employee or his
nominee for that Financial Year and accordingly will be charged to tax.
Where any amount paid
or deposited by the employee has been taken into account for the purposes of
this section, a deduction with reference to such amount shall not be allowed
under section 80C.
Contribution to provident Fund /PPF/SPF
(4) Any contribution made :
(a) by an individual to any Provident
Fund
 to which the Provident Fund Act, 1925 applies;
(b) 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 or advance;
National Saving Certificate
(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 3.11.05and National  Saving
Certificate (IXth Issue) vide Notification . G.S.R. 848 (E), dated the 29th
November, 2011, publishing the National Savings Certificates (IX-Issue)
Rules, 2011 G.S.R. 868 (E), dated the 7th December, 2011, specifying the
National Savings Certificates IX Issue as the class of Savings Certificates F
No1-13/2011-NS-II r/w amendent Notification No.GSR 319(E), dated 25-4-2012]
Unit Linked Insurance Plan
(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
section 10 (23D) 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.]
Notified Annuity Plan 
(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 ]
Equity Linked saving Scheme mutual Funds
(8) Any subscription made to
any units of any Mutual Fund, of section 10(23D)
, 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.
Investment in Mutual fund pension Funds
 
(9) Any contribution made by an
individual to any pension fund set up by any Mutual Fund referred to in
section 10(23D
), or, by the Administrator or the specified company defined
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 the Equity Linked
Saving Scheme, 2005 for this purpose vide Notification S.O. No. 1563(E) dated
3.11.2005]
(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 Governmen
t may, by notification
in the Official Gazette, specify in this behalf;
Deposit schemes Notified by Centeral Govt 
(11) Any subscription made to any such
deposit scheme, as the Central Government ma
y, 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 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, 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.
Fixed Deposit in Bank 
(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]
Bonds of NABARD
(17) Subscription to such bonds
issued by the National Bank for Agriculture and Rural Developmen
t, as
the Central Government may, by such notification in the Official Gazette,
specify in this behalf.
Senior Citizens Savings Scheme Rules, 2004
(18) Any investment in an account under the Senior
Citizens Savings Scheme Rules, 2004.
Post Office Time Deposit
(19) Any investment as five year time
deposit 
in an account under the Post Office Time Deposit
Rules, 1981.
Deduction in respect of contribution to pension scheme of Central
Government (Section 80CCD):
Section 80CCD(1) allows an employee, being an individual
employed by the Central Government or any other employer, on or after the
01.01.2004, a deduction of an amount paid or deposited out of his income
chargeable to tax under a pension scheme as notified vide Notification F. N.
5/7/2003- ECB&PR dated 22.12.2003 or as may be notifed by the Central
Government. However, the deduction shall not exceed an amount equal to 10% of
his salary(includes Dearness Allowance but excludes all other allowance and
perquisites). As per Section 80CCD(2), where an employee receives any
contribution in the said pension scheme from  the Central Government or
any other employer then the employee shall be allowed a deduction from his
total income of the whole amount contributed by the Central Government or any
other employer subject to limit of 10% of his salary of the previous year.
However, if any amount is standing to the credit of the
employee in the pension scheme referred above and deduction has been allowed
as stated above and the employee or his nominee receives this amount together
with the amount accrued thereon, due to the reason of
(i) Closure or opting out of the pension scheme or
(ii) Pension received from the annuity plan purchased and
taken on such closure or opting out then the amount so received during the
FYs shall be the income of the employee or his nominee for that Financial
Year and accordingly will be charged to tax.
Where any amount paid or deposited by the employee has been
taken into account for the purposes of this section, a deduction with
reference to such amount shall not be allowed under section 80C.
Further it has been specified that w.e.f 01.04.09 that any
amount received by the employee 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 is emphasized that as per the section 80CCE the aggregate
amount of deduction under sections 80C, 80CCC and Section 80CCD(1) shall not
exceed Rs.1,00,000/-. However the contribution made by the Central Government
or any other employer to a pension scheme u/s 80CCD(2) shall be excluded from
the limit of Rs.1,00,000/- provided under this Section.

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