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What are the Deductions Under Sections 80C and 80U?

7 September 2023

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You must pay income tax on the entire amount of money you earn during a fiscal year from all sources, as the law requires. However, you can always lower your taxable income by using certain tax-saving items.
Along with the guidelines for calculating your tax liability, the Indian Income Tax Act of 1961 also contains several income tax deductions and exclusions that you may utilise to lower your taxable income.
People will have the opportunity to lower their tax obligations thanks to tax deductions. People may reduce their tax responsibilities by using several techniques accessible in the country. When it comes to tax-saving options in India, however, many individuals choose the income tax deduction granted by Section 80C of the Income Tax Act, 1961.

How do Tax Deductions Work?

Eligible tax deductions lower your tax obligations, allowing you to avoid paying a significant portion of the tax that would otherwise be based on your income bracket. To take advantage of the advantages outlined in the Income Tax Act of 1961, you must submit tax deduction claims with the necessary documentation to back up your claims.
To encourage residents to engage in such activities actively, the Indian government provides deductions on costs related to the common good. Investing in appropriate programs such as insurance plans, national savings schemes, retirement savings schemes, etc., entitles you to tax deductions and exemptions in addition to your charitable donations, medical expenses, and tuition payments.
Let's examine the tax breaks available to individuals for investments under Sections 80C and 80U of the Income Tax Act of 1961.

Section 80C Tax Deductions

According to this Section, individuals and Hindu Undivided Families are qualified to deduct up to INR 1.5 lakh per year from certain payments. In combination, this specific sum may be deducted by Sections 80C, 80CCC, and 80CCD
Investments in the following categories are eligible for deductions:

Contribution to the Provident Fund or Superannuation
The purchase of life insurance for oneself, one's spouse, or one's children.
Payment for the education of up to two children's tuition expenses
Payment for a fixed deposit with a five-year minimum term
Payment for a residential property's development or acquisition
Additional deductions for mutual fund investments, NABARD bond purchases, Senior Citizen’s Savings Programs, etc.

The following schemes are on the list of qualified investments for tax deductions under Section 80C:

ELSS (Equity Linked Savings Plans)

Plans with Unit-Linked Insurance (ULIP)
Rural NABARD Bonds
Scheme for Sukanya Samriddhi
Certificate of National Savings (NSC)
Older Citizens Savings Programme
Employee Provident Fund (EPF)
Public Provident Fund (PPF)
Voluntary Provident Funds (VPF)
5-Year Post Office Time Deposit
5-Year Tax Saving Bank Fix Deposit

Section 80C's Sub-sections

The broad number of deductions that an individual may claim under Section 80C spurred the development of a subsection for improved taxpayer knowledge and increased clarity of the regulations. The list of subsections and the tax advantages a person may use are provided below.

Section 80CCC

This covers contributions made to pension funds, regardless of the insurer, up to a limit of INR 1.5 lakh in deductions. Only single taxpayers are eligible for this deduction.

Section 80CCD

This section offers tax deductions for contributions made to specific pension plans that the Central Government has approved. This section encourages taxpayers to develop the habit of saving money. Tax deductions made under this provision may be claimed by both individuals and their employers, providing the conclusion is less than 10% of the employee's wage. This subsection has been divided into three categories:

a. Section 80CCD (1): This applies to workers who voluntarily make NPS contributions; the tax deduction ceiling is 10% of one's gross annual pay (Basic + DA).
b. Section 80CCD(1B): An employee who voluntarily contributes to the NPS can claim an extra deduction of up to INR 50,000, subject to a 10% deduction from base pay (Basic + DA). However, if they have previously been granted deductions under 80CCD (1), they will not be qualified for tax deductions under this section.
c. Section 80CCD (2): Employees who work for an employer who contributes the NPS Funds for Employees are covered under Section 80CCD (2). Employees will thus be qualified for a maximum 10% reduction from their gross pay (basic plus DA). Atal Pension Yojana and National Pension Scheme are the programmes considered for deduction under this section.

Section 80CCF

This subsection offers tax discounts for purchasing certain long-term infrastructure bonds by government notification. Hindu Undivided Families and individuals might both claim a deduction of INR 20,000. Benefits under this provision are no longer available as of the 2013–2014 fiscal year.

Section 80CCG

Individuals are entitled to tax deductions of up to 50% of the amount invested in equity savings plans approved by the government under this section, with a maximum deduction of INR 25,000 per year for three consecutive Assessment Years.

Section 80U Tax Deductions

The purpose of this clause is to provide physically challenged people tax deductions. Tax deductions of up to INR 75,000 are available to those with physical disabilities who are also blind or mentally retarded, up from INR 50,000 in FY 2015–16. From FY 2015 to FY2016, the maximum amount for a severe disability deduction increased from INR 1,00,000 to INR 1,25,000. Autism, cerebral palsy, and other physical disorders are profound disabilities.

Conclusion

If you are fully aware of all the tax deductions available to taxpayers under the Income Tax Act, it will be much easier to lower your taxable income. The objective is to plan and start investing as soon as feasible. Using the list above, you can rapidly determine how your money is spent, calculate the amount, and file deductions for everything that fits into the following categories.

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FAQs Deduction Under 80c and 80u

Who is qualified to file deductions under Section 80C?

If you are an individual or fall under the "Hindu Undivided Family" category, you may be able to claim deductions under section 80C.

What expenses fall under Section 80C of the Income Tax Act and qualify me for a tax exemption?

If you invest in any of the following, you may be eligible for tax deductions under Section 80C of the Income Tax Act of 1961:

Contribution to the Provident Fund or Superannuation
The purchase of life insurance for oneself, one's spouse, or one's children.
Payment for the education of up to two children's tuition expenses
Payment for a fixed deposit with a five-year minimum term
Payment for a residential property's development or acquisition
Additional deductions for mutual fund investments, NABARD bond purchases, Senior Citizens Savings Programs, etc.

What is the highest deduction I may make under Section 80C?

Under Section 80C of the Income Tax Act of 1961, an individual may deduct a maximum of INR 1.5 lakh in taxes.

What prerequisites must be met to qualify for Section 80C deductions on my child's tuition costs?

A person can claim tax deductions for up to two children's tuition fees for full-time courses at educational institutions such as schools, colleges, and universities in India under Section 80C of the Income Tax Act, 1961.

What programmes may I invest in to qualify for tax deductions under Section 80C of the Income Tax Act of 1961?

Under Section 80C of the Income Tax Act of 1961, the following programmes are tax deductible:

Employee Provident Fund (EPF)
Public Provident Fund (PPF)
Voluntary Provident Fund (VPF)

Despite having money in his bank account and persistent hearing impairment (more than 60%), can I claim an 80DD tax deduction for my father?

Yes, the taxpayer can get a deduction given that he genuinely spent costs for his father's medical care. The amount of the deduction is ₹75,000 (for those who are 60% disabled); it doesn't seem that having money in a bank account counts.

Is REC bond interest exempt under 80TTB?

Section 80TTB does not exclude interest on REC bonds.

If I have an FD account, am I still eligible for a tax rebate?

All persons with gross annual incomes of Rs. 5,00,000 or less are eligible for a tax refund. It doesn't seem to matter where your money comes from.

Does auto insurance fall under section 80C?

Only life insurance premiums are eligible for the tax break under section 80C; general insurance, such as auto, travel, and other types of insurance, are not included. Although under Section 80D of the Income Tax Act of 1961, benefits for health insurance may be obtained.

What does the 80C stamp duty reduction entail?

Section 80C allows for the reimbursement of stamp duty, registration fees, and other transfer-related costs provided the following conditions are met: