It explains the inclusions of this Section in detail, however if you want to know the tax benefits of 80C, 80D and 80CCC specifically with respect to Life Insurance and Pensions, you could also read the article 80C, 80D & 80CCC – Save Tax with Life Insurance, Health Insurance and Pension plans.
Tax Benefits under Section 80C
Section 80C was introduced by the Finance Act 2005.
It provides deduction from total income in respect of various investments/expenditure/payments explained below. The total deduction under this section (along with section 80CCC and 80CCD) is limited to Rs. 1.50 lakhs maximum.
Instruments that can give you Section 80C benefits are as follows.
- Life Insurance Premium
- for an individual, policy must be in self or spouse’s or any child’s name.
- For HUF, it may be on life of any member of HUF
- Sum paid under contract for Deferred Annuity/Pension Plan
- for an individual, on life of self, spouse or any child
- Sum deducted from salary payable to Govt. Servant for securing deferred annuity
- for self or spouse or child
- payment is limited to 20% of salary
- Employee’s Provident Fund Scheme contribution
- PPF Contribution
- Contribution by employee to a Recognized Provident Fund.
- Sum deposited in 10 year/15 year account of Post Office Saving Bank
- Subscription to any Notified Securities/Notified Deposits scheme. e.g. NSS
- Subscription to any Notified Savings Certificate, Unit Linked Savings Certificates e.g. NSC VIII issue.
- Contribution to Unit Linked Insurance Plan of LIC Mutual Fund e.g. Dhanrakhsa 1989
- Contribution to notified deposit scheme/Pension fund set up by the National Housing Scheme.
- Certain payment made by way of installment or part payment of loan taken for purchase/construction of residential house property.
- Condition has been laid that in case the property is transferred before the expiry of 5 years from the end of the financial year in which possession of such property is obtained by him, the aggregate amount of deduction of income so allowed for various years shall be liable to tax in that year.
- Contribution to Notified Annuity Plan of LIC (e.g. Jeevan Dhara) or Units of UTI or a Notified Mutual Fund.
- Subscription to units of a Mutual Fund notified u/s 10(23D).
- Subscription to Deposit Scheme of a PSU engaged in providing Housing Finance.
- Subscription to Equity Shares/Debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions.
- Tuition fees paid at the time of admission or otherwise to any school, college, university or other educational institution situated within India for the purpose of full time education of any two children.
- available in respect of any two children maximum
To avail of 80C benefit, do note that
- Investment should be in your, your spouse’s or children’s name and you should be the owner (also called proposer) of the policy to get tax benefits for yourself.
- Renewal premium for life insurance paid for a policy bought in an earlier year can also get the same tax benefit.
- In the case of Pensions & Annuities, if deduction under section 80CCC has been availed of, then rebate under section 80C would not be allowable.
- You should be present in India when you apply for the life insurance policy.
- Any such life insurance policy should have been payable as well as paid in the said period. i.e. you cannot pay next year’s due premium this year, or last year’s overdue premium this year to claim the benefit.
- Ensure that the Life Insurance cover (Sum Assured) of the policy is at least 10 times that of your Annual Premium in the year of premium payment.
The best way to avail of this benefit is to compare and buy life insurance online.
Tax Benefits under Section 80CCC
This tax benefit is available for premium payments made towards a pension/deferred annuity plan. The benefit under this section, along with all other investments of 80C, is limited to the 80C limit of Rs. 1.50 lakhs per annum.
Tax Benefits under Section 80D
This tax benefit is available for premium payments made to cover a medical/health insurance policy including individual, family floater, critical illness, etc. which are non-investment products. Unlike 80CCC above, the 80D limit is exclusive, i.e. over and above the Rs. 1.50 lakhs limit of Section 80C. You can claim both of them.
- Deduction under Section 80D is now available up to Rs. 15,000 in a financial year for insurance of self, spouse and dependent children. For senior citizens the limit is Rs, 20,000.
- In addition to that, a deduction for insurance of parents (either father or mother, or even both) is available to the extent of Rs. 20,000 in a financial year if parents are senior citizens and Rs. 15,000 in other cases.
Therefore, the maximum deduction available under this section is to the extent of Rs. 40,000 in a financial year.
- From FY 2012-2013 (i.e. AY 2013-14) within the existing limit a deduction of up to Rs. 5,000 for preventive health check-up is available.
- Both individuals and HUF are allowed to claim this benefit.
- Premiums cannot be paid in cash.
- In case you are buying the health insurance policy for a period of more than one year, the renewal premiums you pay will also be eligible for the tax benefit.
The best way to avail of this benefit is to compare and buy health insurance online.