Section 80C is the most important
way of saving taxes. It allows taxpayers to reduce their taxable income by
making investments and some expenses and thus save on taxes they pay. Section 80C of the Act allows
deductions from total income for payments of life insurance premium,
contributions to provident fund and various other schemes. This section was
introduced for the first time by the Finance (No. 2) Act, 1967, with effect
from 1st April, 1968 and the same same was replaced by section 88 with effect
from 01.04.1991. Section 80C was again reintroduced in place of section 88 with
effect from 01.04.2006.
Eligible Assessee:
This deduction is allowed only to the
following assessees from their gross total income computed as per provisions of
the Act:
(a) an
Individual; or
(b) a
Hindu Undivided Family (HUF)
Quantum of Deduction:
Maximum Rs.
1,50,000/- (with effect from assessment year 2015-16).
|
Assessment year |
Maximum deduction |
|
2015-16 to 2021-22 |
1,50,000 |
|
2006-07 to 2014-15 |
1,00,000 |
Essential Conditions:
Deduction is available on the basis of specified
qualifying investments/ contributions/deposits/payments made by the taxpayer
during the previous year.
(i) The aggregate amount of deduction
under sections 80C, 80CCC and 80CCD [i.e. contribution by an employee (or any
other individual) towards Notified Pension Scheme (NPS)] cannot exceed Rs. 1,50,000/-
(Rs. 1,00,000/- from assessment years
2012-13 to 2015-16).
(ii) From the assessment year
2012-13, employer’s contribution towards Notified Pension Scheme (NPS) is
outside the monetary ceiling of Rs. 1,50,000/- (Rs. 1,00,000/- upto assessment
year 2015- 16).
(iii) Deduction under section 80C
is not available from long-term capital gains and short-term capital gain
covered under section 111A.
(iv) The deduction under section 80C
is allowed only when the specified amount has been actually paid or deposited
during the previous year. Amount due but not paid during the previous year
shall not be eligible for deduction under section 80C. For instance, if insurance premium becomes due on March 25, 2020 and
actually paid on April 1, 2020, such premium is qualified for deduction under section
80C for the previous year 2020-21.
(v) Deduction is
available on the basis of specified qualifying investments / contributions /
deposits / payments made by the taxpayer during the previous year. Such
investment, deposit, etc., can be made out of taxable income or
otherwise.
Eligible Payments
(Modes of Investment)
(i)
Life Insurance Premium for insurance on
the life of self, spouse & children (including “CGEIS”) [Section 80C(2)(i)]
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.
CONDITIONS:
(1) If an assessee has discontinued (surrendered)
a life insurance policy before paying premium for a period of atleast 2 years
of commencement, no deduction will be allowed in respect of the premium paid in
the year of termination.
(2) The deduction allowed in the earlier years
shall be considered to be income of the assessee of the previous year in which
the insurance policy is terminated.
(3) As per section 10(10D), any sum received
under a life insurance policy including the sum allocated by way of bonus on
such policy other than following shall be exempt from income-tax:—
(a) Any sum received under
section 80DD(3) or 80DDA(3); or
(b) Any sum received under a
Keyman insurance policy; or
(c) Any sum received under an
insurance policy issued on or after the 1st April, 2012 in respect of which the
premium payable for any of the years during the term of the policy exceeds 10%
of the actual capital sum assured.
INSURANCE PREMIUM CANNOT EXCEED THE
MAXIMUM CEILING GIVEN BELOW : [Section
80C(3A)]
|
If policy is issued |
Policy on the life of a person
with disability or severe disability or on the life of a person suffering
from disease or ailment as given in section 80DDB |
Policy on the life of any other
person |
|
Before 01.04.2012 |
20% of sum assured |
20% of sum assured |
|
During 2012-13 |
10% of sum assured |
10% of sum assured |
|
Issued on or after 01.04.2013 |
15% of sum assured |
10% of sum assured |
(ii)
Payment in respect of non-commutable
deferred annuity [Section 80C(2)(ii)]
(a) Sum paid under contract for deferred
annuity not being an annuity plan referred to in section 80C(2)(xii).
(b)
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.
(c)
For
individual, on life of self, spouse or any child.
(iii)
Payment in respect of non-commutable
deferred annuity [Section 80C(2)(iii)]
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.
(iv)
Contribution to any provident fund to which the Provident Funds Act, 1925 applies
[Section 80C(2)(iv)]
As a contribution by an
individual to any provident fund to which the Provident Funds Act, 1925 (19 of
1925) applies.
(v)
Contribution to any provident fund set
up by the Central Government and notified [Section
80C(2)(iv)]
As a contribution 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 03.11.2005.
CONTRIBUTION (NOT BEING REPAYMENT
OF LOAN) TOWARDS 15-YEAR PUBLIC PROVIDENT FUND (PPF)
(a) Deposit in ‘Public Provident Fund’ account
and the account can be opened in the name of self, spouse or children.
(b)
HUF
can open the account in the name of any of its members.
ONLY
THE PERSON ACTUALLY DEPOSITING THE AMOUNT GETS SECTION 80C BENEFIT
This means if your spouse
deposits any amount into your PPF account, you will not be able to claim the
deduction benefits under section 80C. Infect, your spouse will be able to (rightfully)
claim section 80C deductions on his/her income.
COURT
DECREE
A PPF account cannot be attached
by a person or entity to pay off any debt or liability. Further, even a court
order or decree cannot make a person liable to pay off his debts using money
from his PPF account.
NOMINATION
Nomination facility is available.
A person can nominate a minor in his/ her account. However, no nomination is
allowed in respect of an account opened on behalf of the minor.
TRANSFER
A person has the option to
transfer his/her post office PPF account from post office to banks (authorised
by the government) or vice versa. Similarly, you can transfer your PPF
account from one bank branch to another or to other banks as well.
PPF TAX
CONCESSIONS
Annual contributions qualify for
tax deduction under section 80C of Income-tax Act. The tax benefit is capped at
Rs. 1,50,000 per financial year. Contributions to PPF accounts of the spouse
and children are also eligible for tax deduction.
PPF falls under EEE (Exempt,
Exempt, Exempt) tax basket. Contribution to PPF account is eligible for tax
benefit under Section 80C of the Income Tax Act. Interest earned is exempt from
income-tax and maturity proceeds are also exempt from tax.
NRIs
ARE NOT ELIGIBLE
If a resident who opened an
account under this scheme, subsequently becomes a non-resident during the
currency of the maturity period, the account shall be deemed to be closed with
effect from the day he becomes a non-resident and interest with effect from
that date shall be paid at the rate applicable to the Post Office Saving
Account up to the last day of the month preceding the month in which the
account is actually closed.” In other words, if a PPF account holder turns NRI,
the account will be deemed closed even if it has not matured and will earn
interest at the much lower rate applicable to Post Office savings account.
(vi)
Contribution by an Employee to a Recognized Provident Fund [Section 80C(2)(vi)]
As a contribution by an employee to a
recognised provident fund. It should not be a repayment of loan.
(vii) Contribution by an employee to an approved
Superannuation Fund [Section 80C(2)(vii)]
As a contribution
by an employee to an approved superannuation fund. It should not be a repayment
of loan.
(viii) Investment made in Sukanya Samriddhi
Account Scheme [Section 80C(2)(viii)]
With
effect from assessment year 2015-16, as modified vide Notification No. G.S.R. 914(E) Sukanya
Samriddhi Account Scheme, 2019 with effect from 12.12.2019, the investment made by parent or
legal guardian of the girl child in the Scheme will be eligible for deduction under
section 80C. The interest accruing on deposits in such account will be exempt
from income-tax under section 10(11A). The withdrawal from the said scheme in
accordance with the rules of the said scheme will be exempt from tax.
OPENING OF
SUKANYA SAMRIDDHI ACCOUNT
The account
may be opened by the natural or legal guardian in the name of a girl
child from the birth of the girl child
till she attains the age of 10 years. The Application for opening of
account is in Form-1
A Depositor (such guardian) may open only one account in the name of
a girl child under these rules. Birth Certificate of such girl child & Identity
and residence proof of the depositor shall be submitted. Such guardian shall
be allowed
to open the account for two girl children only (except in cases when twin/three girl
child is born together). It can be opened with Post-Offices and Notified banks
as well.
DEPOSITS
IN SUKANYA SAMRIDDHI ACCOUNT
The account may be opened with an
initial deposit of Rs. 250 and thereafter any amount in multiple of Fifty
rupees may be deposited but the total amount deposited during the
entire year shall not be less than Rs. 250 and shall not exceeds Rs. 1,50,000
as well. The deposit in the account may be made through Cash, Cheque, or Demand
Drafts.
Deposits can be made up to a maximum period of 15 years from
the date of opening the account. After this period the account will only earn
interest as per applicable rates.
WITHDRAWAL
FROM SUKANYA SAMRIDDHI ACCOUNT
For the higher education and marriage of such girl child, withdrawal up to 50% of the
account balance at the end of preceding financial year shall be allowed. But,
the withdrawal shall be allowed only when the account holder girl child attains
the age of 18 years or has passed tenth standard. The application for
withdrawal will be made in Form No 3
PREMATURE
CLOSURE OF SUKANYA SAMRIDDHI ACCOUNT
In the event of Death of the account
holder (i.e. the girl child), the account shall be closed immediately on the
production of the Death Certificate and the balance remaining in the account
shall be paid to the guardian with interest. Apart from this, Where the Central
Govt. is satisfied that operation or continuation of the account is causing
undue hardship to the account holder, the govt. may allow pre-mature closure of
the account only in the case of extreme compassionate grounds such as medical
support in life-threatening diseases, death etc. The application for premature
closure will be made in Form No 2.
CLOSURE /
MATURITY OF SUKANYA SAMRIDDHI ACCOUNT
The account shall mature on when the
Girl child completes her 21 years but if her marriage takes place before being
21 years then it shall be deemed as mature. But the girl child has to furnish a
declaration that she is not less than 18 years on the date of Closing the
account. The application for closure will be made in Form No 4. No such closure shall be allowed before one month from the date of the
intended marriage or after three
months from the date of marriage.
DEDUCTION SHALL BE ALLOWED ONLY IF THE AMOUNT ACTUALLY
PAID
Deduction shall be allowed only if the amount has
been actually paid by the assessee i.e. if the amount is due but not paid
deduction is not allowed.
FOR EXAMPLE:
Premium of Rs. 50,000/- was due on 27.03.2020, but
it was paid on 10.04.2020, in this case no deduction is allowed in the previous
year 2019-20, rather deduction shall be allowed in the previous year 2020-21.
INTEREST
ON SUKANYA SAMRIDDHI ACCOUNT DEPOSITS
Interest
at the rate, notified by the Central Government in the Official Gazette from
time to time
Interest shall be eligible for a
calendar month on the lowest balance at the credit of an account between the
close of the fifth day and the end of the month. Interest shall be credited to
the account at the end of each financial year.
RATE OF INTEREST : SUKANYA SAMRIDDHI ACCOUNT
SCHEME
|
PERIOD |
Rate of Interest |
|
|
From |
To |
|
|
01.04.2020 |
31.12.2020 |
7.60% |
|
01.07.2019 |
31.03.2020 |
8.40% |
|
01.10.2018 |
30.06.2019 |
8.50% |
|
01.01.2018 |
30.09.2018 |
8.10% |
|
01.07.2017 |
31.12.2017 |
8.30% |
|
01.04.2017 |
30.06.2017 |
8.40% |
|
01.10.2016 |
31.03.2017 |
8.50% |
|
01.04.2016 |
30.09.2016 |
8.60% |
|
01.04.2015 |
31.03.2016 |
9.20% |
(ix) Subscription to National Savings
Certificates (VIII & IX Issues) [Section 80C(2)(ix)]
(a) Subscription to National
Savings Certificates (NSCs) issued under Government Savings Certificates Act,
1959 shall qualify for deduction under section 80C.
(b)
The
Central Government has notified the National Savings Certificates (VIII Issue)
issued under the Government Savings Certificates Act, 1959 as savings
certificate for the purpose of Section 80C(2)(ix). - [Notification No. SO
270(E), dated 29.03.1990]
(c)
Amount
can be invested in the name of self, spouse or minor children and HUF can
invest the amount in the name of its members.
(d)
Accrued
interest in respect of investment in National Saving Certificate-VIII issue
which is deemed as reinvested is also qualified for deduction applicable for
all years except last year).
(e)
Principal
amount received on maturity shall be exempt.
TYPES OF NSC ISSUES
The NSC had two types of certificates – NSC VIII
Issue and NSC IX Issue.
The NSC IX Issue was discontinued in December 2015.
Currently, only the NSC VIII Issue is open for subscription. There is no
maximum limit on the purchase of these certificates. You can get them from most
post offices/Banks in India.
DISCONTINUATION OF
PHYSICAL CERTIFICATE
The existing system of physical pre-printed
certificates for NSC shall stand discontinued w.e.f. 1.4.2016 and shall be
replaced by ‘National Savings Certificate’ on electronic mode (e-mode). Till
the CBS system transits to that e-mode, banks and post offices may choose to
issue a physical certificate recorded on a passbook.
MINIMUM AND MAXIMUM AMOUNT
TO BE INVESTED IN NSC
The Minimum Amount to be invested in National
Savings Certificate is Rs. 100 and there is no maximum limit on the amount to
be invested in the NSC. A person can invest any amount in National Savings
Certificate. However, tax deduction under section 80C can only be claimed for a
maximum of Rs. 1,50,000.
NOMINATION FACILITY
The purchaser of the National Savings Certificate
(NSC) may nominate any person as a nominee at the time of purchasing the
National Savings Certificate in Form 1 or before the maturity of the NSC in
Form 2. The person so nominated shall be entitled to claim the maturity
proceeds in case of death of the Original Holder. In the event of death of the
holder of certificate, the nominee(s) shall be entitled at any time before or
after the maturity of the certificate to—Encash the Certificate Sub-divide the
NSC Certificate in appropriate denominations in favour of individual nominees. However,
the rights of the nominee would only come in force in the event of death of the
original holder of the National Savings Certificate (NSC). The nominees would
also be required to make an application to the Postmaster/Bank intimating him
about the death of the original holder. This application should also be
accompanied with the Death Certificate.
PREMATURE ENCASHMENT OF
NATIONAL SAVINGS CERTIFICATE
NSC cannot be redeemed before the maturity of the
National Savings Certificate except under following circumstances:—
1.
On
the death of the Holder or the Holders in case of Joint Holders.
2.
On
forfeiture by a pledgee being a Gazetted Government Officer when the pledge is
in conformity with these rules.
3.
When
ordered by a Court of law.
If the National Savings Certificate is encashed
within 1 year from the date of issue, the encashment shall be done at the face
value without any interest. However, if the encashment is done after 1 year
interest shall be payable in such cases but the encashment shall be done at a
discount.
NRIs ARE NOT ELIGIBLE TO
PURCHASE NATIONAL SAVINGS CERTIFICATE (NSC)
However, if the National Savings Certificate holder
becomes an NRI, the certificate will be deemed to be encashed on the day he or
she becomes a non-resident (NRI) and the interest will be paid at the rate
applicable to the Post Office savings account till it is encashed.
TAX IMPLICATIONS
The sum invested in the NSC is eligible for tax
deduction under section 80C up to Rs. 1,50,000 limit stipulated in a financial
year, including the accrued interest on the existing certificates. Since the
interest earned on the NSC is automatically reinvested, it can be claimed as a
deduction under section 80C. But if the accrued interest is not added to Rs.
1,50,000 deduction under section 80C, then the entire income is taxable on
maturity.
|
PERIOD |
Rate of Interest |
|
|
From |
To |
|
|
01.04.2020 |
31.12.2020 |
6.80% |
|
01.09.2019 |
31.03.2020 |
7.90% |
|
01.10.2018 |
30.06.2019 |
8.00% |
|
01.01.2018 |
30.09.2018 |
7.60% |
|
01.07.2017 |
31.12.2017 |
7.80% |
|
01.04.2017 |
30.06.2017 |
7.90% |
|
01.10.2016 |
31.03.2017 |
8.00% |
|
01.04.2016 |
30.09.2016 |
8.10% |
(x) Contribution
for participating in the Unit-Linked Insurance Plan (ULIP) of Unit Trust of India [Section
80C(2)(x)]
As a contribution for
participating in the Unit-Linked Insurance Plan (ULIP), 1971 of Unit Trust of
India specified in Schedule II of the Unit Trust of India (Transfer of
Undertaking and Repeal) Act, 2002 (58 of 2002) in the name of self, spouse and
children :
(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© dated 03.11.2005.]
(c) In
the case of an individual, ULIP should be taken on his own life, life of the
spouse or any child (child may be dependent/ independent, male/female,
minor/major or married/unmarried). In the case of a Hindu undivided family,
ULIP may be taken on the life of any member of the family.
(xi) Contribution
to ULIP of UTI [SECTION 80C(2)(xi)]
Contribution to Unit-linked
Insurance Plan, 1971 specified in the Schedule-II of the UTI Act, 2002 by an
Individual (in the name of self, spouse and children) or an HUF is eligible for
deduction under section 80C.
1.
Premium
paid for ULIP is eligible for deduction under section 80C.
(b)
Maximum
premium eligible is restricted to 20% of sum assured.
(c)
If
policy is surrendered within 5 years of commencement, no deduction in respect
of the premium is allowed. Moreover, the aggregate amount of the deductions
allowed in respect of such policy in the preceding years is added to the income
of the year in which policy is surrendered.
(d)
The
maturity proceeds are tax-free.
(xii) Contributions in respect of annuity plans of
LIC or any other insurer [Section 80C(2)(xii)]
(a) Any subscription made to
effect or to keep in force a contract for such annuity plan of Life
Insurance Corporation (LIC)
or any other insurer as the Central Government may specify by notification in
the Official Gazette for
deduction under section 80C.
(b) Any
other insurer (i.e., Immediate Annuity Plan of ICICI Prudential Life Insurance
Company, Tata AIG Easy Retire Annuity Plan of Tata AIG Life Insurance Company).
[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© dated 03.11.2005 and Jeevan Akshay-III vide Notification S.O.
No. 847© dated 01.06.2006]
(xiii) Subscription to Units of Mutual Fund referred
to in section 10(23D) [Section 80C(2)(xiii)]
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© 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.
Subscription to units of mutual
fund referred to in section 10(23D) and approved by the Board on an application
made by such mutual fund in the prescribed Form No. 59A (Rule 20A).
a)
Contribution
to Mutual Fund Schemes notified under section 10(23D) of the Income Tax Act (normally referred to as Equity Linked Savings
Scheme (ELSS) Mutual Fund Schemes of Tax
b)
Saving
Mutual Fund Schemes) is eligible for deduction.
c)
Investment
in ELSS has a lock-in-period of 3 years.
d)
Pre-mature
withdrawals is not allowed under any circumstance.
(xiv)
Contribution to pension fund set up by
Mutual Fund or UTI [Section 80C(2)(xiv)]
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 notified the following fund for the purpose of section
80C(2)(xiv):—
[The Central Government has since
notified the Equity Linked Saving Scheme, 2005 for this purpose vide
Notification S.O. No. 1563© dated 03.11.2005]
(xv)
Subscription to notified deposit schemes of national housing bank [Section
80C(2)(xv)]
Any sum paid (including accrued
interest) as subscription to Home Loan Account Scheme of National Housing Bank
or contribution to any notified deposit scheme pension fund set up by the
National Housing Bank will be eligible for deduction under section 80C.
v
Accrued
interest shall qualify for deduction under section 80C.
KEY NOTE
Notified scheme for this purpose
is the National Housing Bank (Tax Saving) Term Deposit Scheme, 2008. (vide
Notification No. 3/2009
[S.O. 21(E)], Dated 05.01.2009).
(xvi)
Subscription to any such deposit scheme providing long-term finance for
construction or purchase of houses in India [Section
80C(2)(xvi)]
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©,
dated 11.01.2007, for the purposes of Section 80C(2)(xvi)(a)]
(xvii) Tuition Fees [Section 80C(2)(xvii)]
The
principle requirement for qualifying for deduction under this provision would
be that the fee paid should be in the nature of tuition fee. 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.
CONDITIONS TO QUALIFY FOR
DEDUCTION:
The expenses should fulfill the
following conditions to qualify for deduction:
(i)
Payment
of tuition fees to regular educational institutions like School, College,
University or any other Educational Institution in India provided the fees has
been paid in connection with the children of the assessee and further for
maximum two children.
(ii)
The deduction is available for Full
Time courses only
(iii)
Tuition
fees excluding any payment towards development fees/donation/payment of similar
nature whether at the time of admission or otherwise to any University,
College/School or other Educational Institution situated in India for the
purpose of full time education of any two children of an individual.
(iv)
Only
children’s education is eligible.
Children shall include
even adopted and step children also.
(v)
Deduction
can be claimed whether the child attended the class or not.
(vi)
Payment
of tuition fees to play schools or day care is allowed as deduction.
(vii)
This deduction can be availed of on
the basis of actual payment made, irrespective of the period to which the fee
may pertain.
NOT
ALLOWED UNDER TUITION FEES
The
following are the deductions not allowed under tuition fees:
(i)
Any
fees paid to private tutor, coaching center.
(ii)
University,
College, School or other educational institution must be situated in India. It
can be affiliated to any foreign university.
(iii)
A
late fee is not eligible for deduction.
(iv)
For part time or distance learning
courses
(v)
Fees
like, Building fund, Development
fees,
uniform fees or donation or any other fees do not qualify for deduction.
(vi)
Payment
of fees for overseas education is not allowed.
(vii)
Fees
for admission are excluded from amounts eligible for deduction.
(viii)
Transport
charges, hostel charges, mess charges, library fees charges incurred for
education are not allowed.
(ix)
Spouse’s
tuition fees is not allowed for deduction.
KEY NOTE
Above list is not exhaustive.
(xviii)
Principal repayments for loans borrowed for construction or purchase
(acquisition) of a residential house [section 80C(2)(xviii)]
Any installment or part payment
towards the cost of purchase/ construction of a residential property to a
housing board or cooperative society (or repayment of housing loan taken from
Government Bank, Co-operative Bank, Life Insurance Corporation of India,
National Housing Bank, assessee’s employer where such employer is public
company/public sector company/university/co-operative society).
CONDITIONS:
(1)
Repayment
of the amount borrowed by the assessee for the purposes of purchase or
construction of a residential house property, the income from which is
chargeable to tax under the head “income from house property”.
(2)
The
amount borrowed by the assessee from:
a)
Central
Government or State Government, or
b)
Any
bank, including a co-operative bank, or
c)
Life
Insurance Corporation of India, or
d)
National
Housing Bank, or
e)
Any
public company formed and registered in India, with the main object of carrying
on the business of providing long-term finance for construction or purchase of
houses in India for residential purposes which is eligible for deduction under
section 36(1)(viii), or
f)
any
company in which the public are substantially interested or any co-operative
society, where such
g)
company
or co-operative society is engaged in the business of financing the construction
of house, or
h)
the
assessee’s employer where such employer is an authority or a board or a
corporation or any other body established or constituted under a Central or
State Act, or
i)
the
assessee’s employer where such employer is a public company or public sector
company or a university established by law or a college affiliated to such
university or a local authority or a co- perative society.
KEY NOTE
Stamp
duty, registration fee and other expenses for the purpose of transfer of such
house property to the assessee.
(3) It will not include any payment towards
interest or payment towards loan taken for addition, alteration, or repairs
etc. of the house property.
(4) Repayment of principal during construction
period is not eligible for deduction under section 80C as under construction
residential property is not capable of generating any income.
(5) Only in the year in which construction is
over and income from property is chargeable to tax can principal repayment be
considered for deduction under section 80C.
(6) Rs. 1,50,000/- per year on principal
repayments for loans borrowed for construction/acquisition of house. But it is subject
to the condition that the property is held for minimum five years from the end
of the year in which possession is obtained.
(7) In
order to claim tax benefit on home loan, you should either be an owner or a
joint owner of the property.
SELLING
OF HOUSE WITHIN 5 YEARS—NO DEDUCTION AND TAX BENEFIT ON HOME LOAN
In
the case the assessee transfers the house property on which he has claimed
deduction under section 80C before the expiry of 5 years from the end of the
financial year in which the possession has been obtained by him, then no
deduction and tax benefit on Home Loan shall be allowed under section 80C, and The
aggregate amount of tax deduction already claimed in respect of previous years
shall be deemed to be the income of the assessee of such year in which the
property has been sold and the assessee shall be liable to pay tax on such
income. [Section 80©(5)]
In other words, if the assessee has transferred the
house property before the expiry of 5 years from the end of the financial year
in which possession of such properties was taken by him, no deduction shall be
allowable in the previous year in which the house property has been
transferred.
v
The
deduction allowed in the past years shall be considered to be income of the
assessee of the previous year in which the house property is transferred.
REPAYMENT OF LOAN IS NOT
ALLOWABLE UNDER SECTION 80C(2)(XVIII) WHERE PROPERTY WAS PURCHASED PRIOR TO
OBTAINING OF LOAN
Assessee, an individual, filed return of income
claiming deduction for repayment of loan under section 80C(2)(xviii) of the
Act. The Assessing Officer denied the deduction on the ground that the property
was purchased in November 2005 and loan was taken only in December 2005. The
CIT(A) and Tribunal upheld the order of the Assessing Officer. On appeal, the
High Court held that deduction under section 80C(2)(xviii) is available only if
loan was utilized for acquisition of the property therefore, assessee was not entitled
to claim the deduction under section 80C. (Related Assessment year : 2007-08)—[Vijay
Aggarwal v. CIT & Anr. (2016) 286 CTR 452 : 236 Taxman 542 (P&H)]
(xix)
Subscription
to equity shares or debentures forming part of any eligible issue
[Section 80C(2)(xix)]
As subscription to equity shares or
debentures forming part of any eligible issue of capital approved by the Board
on an application made by a public company or as subscription to any eligible
issue of capital by any public financial institution in the prescribed form
Explanation. –
For the purposes of this clause,—
“eligible
issue of capital” means an issue made by a public company formed and registered
in India or a public financial institution and the entire proceeds of the issue
are ealizat wholly and exclusively for the purposes of any business referred to
in sub-section (4) of section 80-IA;
(ii) “public
company” shall have the meaning assigned to it in section 3 of the
Companies Act, 1956 (1 of 1956);
(iii) “public
financial institution” shall have the meaning assigned to it in section
4A of the Companies Act, 1956 (1 of 1956).
(xx)
Subscription to Units of Mutual Fund
where proceeds to be utilized for providing specified facilities [section 80C(2)(xx)]
Subscription to any units of any
mutual fund specified under section 10(23D) qualifies for deduction, provided
such units are approved by the Board.
Section 10(23D)
specifies:
(i) a Mutual Fund registered under the Securities
and Exchange Board of India Act, 1992 (15 of 1992) or regulations made
thereunder;
(ii) such other
Mutual Fund set up by a public sector bank or a public financial institution or
authorised by the Reserve Bank of India and subject to such conditions as the
Central Government may, by notification in the Official Gazette, specify in
this behalf.
ELSS or Equity Linked Savings Scheme is a type
of mutual fund investment. Investments made in ELSS funds during the financial
year are eligible for deduction under Section 80C. These funds have a 3-year
lock in period. You can continue to invest in this scheme even after the
completion of the lock-in period of three years. The
returns on Equity-Linked Savings Schemes are tax-exempt whether it is dividend
income or capital appreciation.
(xxi)
Investment in Fixed Deposit for a period
of 5 years or more with scheduled banks (Term Deposit) [Section 80C(2)(xxi)]
Amount
deposited in a fixed deposit for 5 years or more with a scheduled bank in
accordance with a scheme framed and notified by the Central Government (Bank
Term Deposit Scheme, 2006) (applicable from the assessment year 2007-08) (it
shall be a minimum of 100 or multiples thereof).
(b)
Depositor
can be individual or Hindu Undivided Family.
(c)
Interest
income shall be taxable on accrual basis and it will not qualify for deduction
under sections 80C and 80TTA.
(d)
Principal
amount received on maturity shall be exempt.
(xxii) Subscription
to bonds issued by NABARD [Section 80C (2)(xxii)]
With effect from assessment year
2008-09, section 80C(2)(xxii) provides that deposits made in bonds issued by
the National Bank for Agriculture and Rural Development (NABARD) as the Central
Government may, by notification in the official Gazette, specify in this
behalf, shall be eligible for deduction under section 80C(2)(xxii).
There are two types of Bonds
issued by NABARD i.e. National Bank for Agriculture and Rural Development Rural
Bonds and Bhavishya Nirman Bonds. Out of
these two, only NABARD Rural Bonds qualify under section 80C.
(xxiii) Amount
deposited under Senior Citizens Savings Scheme Rules, 2004 [Section
80C(2)(xxiii)]
With effect from assessment year
2008-09, amount deposited in an account under Senior Citizens Savings Scheme
Rules, 2004 will be eligible for deduction under section 80C.
WHO CAN
INVEST IN SENIOR CITIZEN SAVINGS SCHEME (SCSS)
1.
As
the name suggests, this scheme is available to an individual who has attained
age of 60 years or above on the date of opening of the account.
2.
Who
has attained the age of 55 years or more but less than 60 years and has retired
under a Voluntary Retirement Scheme (VRS) or a Special Voluntary Retirement
Scheme on the date of opening of the account within three months from the date
of retirement is also eligible.
3.
There
is no age limit for the retired personnel of Defence Services provided they
fulfill other specified conditions.
ELIGIBILITY CRITERIA OF
JOINT SENIOR CITIZEN SAVING ACCOUNT
The joint account can be opened
only with the spouse. While opening a joint Senior Citizens Savings Scheme account, the age of first depositor is supposed to be
above 60 years. However, there is no age limit for the second applicant.
HOW MUCH CAN ONE INVEST
An individual, singly or jointly, can open an SCSS
account by investing up to Rs. 15 lakh (in multiples of Rs. 1,000) only. The
amount invested in the scheme also cannot exceed the money one receives on
retirement. Therefore, one can invest either Rs. 15 lakh or the amount received
as a retirement benefit, whichever is lower.
The account can be opened by cash for amounts below
Rs. 1,00,000 and by cheque only for Rs. 1,00,000 and above, as per the senior
citizen scheme rules. The investment date in the scheme is taken as the date on
which the cheque is realize in the government’s account.
INVEST IN THIS SCHEME AT ANY
HEAD POST OFFICE OR GENERAL POST OFFICE OR AT SELECT BRANCHES
A senior citizen can invest in this scheme by
opening either an individual or a joint (along with the spouse) account at any
head post office or general post office or at select branches of the several
designated nationalized banks.
MODE OF DEPOSIT
(1) The deposit under these rules may be made:
(a) in cash, if the amount of
deposit is less than rupees one lakh.
(b) by cheque or demand draft
drawn in favour of the depositor and endorsed in favour of the deposit office,
or in favour of the deposit office.
(2) Where a deposit is made by cheque or demand
draft, the date of deposit under these rules shall be the date of encashment of
the cheque or demand draft.
(3) Where a deposit is made by means of an
outstation cheque or demand draft, collection charges at the prescribed rate
shall be payable alongwith the deposit and the date of ealization of the cheque
or demand draft shall be the date of deposit.
TENURE OF THIS SCHEME
The tenure of the scheme is five years, which can be
further extended for three more years. Premature withdrawals are allowed, but
only after one year and with premature withdrawal charges.
NUMBER OF ACCOUNTS
There is no limit on the number of accounts that can
be opened, but the total amount in all the accounts must not breach the maximum
investment limit.
NOMINATION FACILITY
Nomination facility is also available for account
holders. A depositor can also appoint a minor as his nominee. He just needs to
provide the guardian’s details, along with the minor’s date of birth.
PREMATURE CLOSURE OF
ACCOUNT
On an application in FORM-E, in this regard, the
depositor may be permitted to withdraw the deposit and close the account at any
time after the expiry of one year from the date of opening of the account
subject to the following conditions, namely:—
(a) In case the account is closed after the expiry
of one year but before the expiry of two years from the date of opening of the
account, an amount equal to one and a half per cent of the deposit shall be deducted
and the balance paid to the depositor.
(b) In case the account is closed on or after the
expiry of two years from the date of opening of the account, an amount equal to
one per cent of the deposit shall be deducted and the balance paid to the
depositor.
(c) No deduction, as specified under rule 9, shall
be made in case of premature closure of an account at any time due to death of
a depositor.
(d) The depositor availing the facility of extension
of account under sub-rule (3) of rule 4, may be permitted to withdraw the
deposit and close the account at any time after the expiry of one year from the
date of extension of the account without any deduction.
CLOSURE OF SENIOR
CITIZENS SAVINGS SCHEME ACCOUNT
BEFORE MATURITY IN THE EVENT OF DEATH OF THE
PRIMARY ACCOUNT HOLDER
In
the event of death of the primary account holder before actual maturity of the
account, the account will be closed and all the maturity proceeds will be
transferred to the legal heir/nominee. For deceased claims, the nominee or the
legal heir will have to fill out a written application in prescribed format
along with Death Certificate to facilitate the closure of the account.
TRANSFER OF ACCOUNT FROM
ONE DEPOSIT OFFICE TO ANOTHER
A depositor may apply on FORM-G, enclosing the pass
book thereto, for transfer of his account from one deposit office to another in
case of change of residence:
PROVIDED that where the deposit is rupees one lakh
or above, a transfer fee of rupees five per lakh of deposit shall be payable.
NON-RESIDENT INDIANs (NRIs),
PERSON OF INDIAN ORIGIN (PIOs) AND HINDU UNDIVIDED FAMILIES (HUFs)
ARE NOT ENTITLED TO OPEN A SENIOR CITIZENS SAVINGS SCHEME ACCOUNT.
The Non-Resident Indians are not eligible to open an
account under these rules.
Provided that if a depositor who subsequently
becomes a Non-Resident Indian during the currency of the account under these
rules, the account may continue till its maturity on a non-repatriation basis
and the account shall be marked as a Non- Resident account. Provided Further
that the account continued under the above proviso, shall not be extended for
any further period as provided under sub-rule (3) of rule 4.
Hindu Undivided Family is also not eligible to open
an account under these rules.
TAX DEDUCTED AT SOURCE (TDS)
Interest on Senior Citizens Savings Scheme is fully taxable. In case the interest amount earned
is more than Rs. 50,000 for a fiscal, Tax Deducted at Source (TDS) is
applicable to the interest earned.
RATE OF INTEREST : SENIOR CITIZEN SAVINGS
SCHEME
|
PERIOD |
Rate of Interest Quarterly |
|
|
From |
To |
|
|
01.04.2020 |
31.12.2020 |
7.40% |
|
01.07.2019 |
31.03.2020 |
8.60% |
|
01.10.2018 |
30.06.2019 |
8.70% |
|
01.07.2017 |
30.09.2018 |
8.30% |
|
01.04.2017 |
30.06.2017 |
8.40% |
|
01.10.2016 |
31.03.2017 |
8.50% |
|
01.04.2016 |
30.09.2016 |
8.60% |
|
01.04.2015 |
31.03.2016 |
9.30% |
|
01.04.2014 |
31.03.2015 |
9.20% |
(xxiv) 5-year Time Deposits in post office [SECTION
80C(2)(xxiv)]
With effect from assessment year
2008-09 and subsequent years, 5-year time deposit in an account under Post
Office Time Deposit Rules, 1981 also qualifies for deduction under section 80C
in computing total income.
PRE-MATURE WITHDRAWAL IS DEEMED
TO BE THE INCOME OF THE ASSESSEE
Where any amount is withdrawn by
the assessee from such account (including accrued interest on deposit) before the
expiry of 5 years from the date of its deposits, the amount so withdrawn is
deemed to be the income of the assessee of the previous year in which the amount
is withdrawn. [Section 80C(6A)]
However, where the nominee or
legal heir of the assessee gets any amount excluding accrued interest on such
deposit, refund of such deposit is not taxable. Thus any accrued interest on
the deposit is taxable.
SALIENT FEATURES OF 5-YEAR TIME
DEPOSITS IN POST OFFICE
(a) Any number of accounts can be opened in any
Post Office.
(b) Joint accounts can be opened by two adults.
(c) An individual can convert the time deposit
account from single to joint and vice-versa.
(d)
The minimum amount that can be deposited is 200/-, there is no limit on the
maximum amount.
(e) Investments made are eligible for deduction
under section 80C.
(f) NRIs cannot invest in the time deposit
schemes offered by the Post Office.
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