Schemes under section 80C

Here are a few lesser-known investment schemes under section 80C: -

• Sukanya Samridhhi Account:

To harmonize with ‘Beti Bachao Beti Padhao’ campaign of Government, a new scheme has been introduced known as “Sukanya Samridhhi Account” which is a deposit scheme for a girl child. The Taxpayer can invest in this account, the minimum amount of Rs. 1,000 to the maximum amount of Rs. 1,50,000 every year can be deposited in this account. This account currently gets a yearly interest of 9.1%.

• ULIP:

ULIP stands for “Unit Linked Insurance Plan” which covers dual benefit of Life Insurance with Equity Investment. This can be a good investment opportunity, as it gives good returns too.

One of the conditions of the policy is that it should be taken on own life, life of spouse or dependent child.

• ELSS:

ELSS is also known as Equity Linked Saving Scheme”. This is an investment in a mutual fund, once you opt for this scheme you cannot redeem (sale) the investment within three years of the date of investments. There are 2 options available and they are: -

1. Investors who want to maximize their wealth can go for Growth Option
2. Investors who want stable income may have Dividend option.

Mutual Fund companies invest the funds in equity shares of listed companies, hence the potential returns from ELSS better than other available options. Also, profit on sale of ELSS held for more than 12 months and dividend earned from ELSS are exempt from tax. This option most suitable for young taxpayers, as the benefit from an Upward market trend in long-term, which can easily beat inflation.

• NSCs and KVPs at Post office:

National Saving Certificates (NSC) and Kisan Vikas Patra (KVP) is a saving bond that is mainly used for small investments. These bonds are available at Post office and they have 5 or 10 years maturity period.

These bonds can also be mortgaged to banks for availing short term loans. Interest earned which is reinvested is taxable as Income from Other Sources, the same is deductible under section 80C.

• Contribution to deferred annuity plan:

 This is a standard pension plan for which deductions are available under section 80C.

Deferred Annuity has two phases and they are Saving Phase and Income Phase

For the 1st phase, money is invested in the annuity fund.

 In the 2nd phase, payments including benefits are received.

It is important to know that, monthly annuity received under Income phase is taxable as Income from other Sources.

• Investment in Specified Bonds or deposits:

Bonds issued by certain companies are popularly known as ‘tax saving Bonds’. Investment in these bonds is deductible under section 80C. These bonds also get good returns and that’s the reason why this plan may be quite beneficial.

Interest on these bonds and deposits is taxable as Income from other sources.

• Tuition Fees:

Your payment of Tuition fees to school, college or educational institution for any full-time education grade of your children is eligible for deduction under section 80C. However, out of total fees paid, the only portion of tuition fees is eligible for deduction under section.80C and other elements of fees like Library fees, Gymkhana fee, parking fee etc are not eligible for deduction.

• Housing Loan Principal Repayment:

The monthly EMI for Housing loan repayment basically comprises of two parts and they are Interest and Principal.

You must be aware that interest paid on housing loan is deductible under Income from House Property, therefore the payment of principal portion can also be claimed under section 80C.

• Stamp duty & Registration charges on House Property:

Most of the taxpayers are unaware, but the amount paid towards stamp duty, registration fees and other expenses at the time of acquisition of house property can also be claimed under section 80C for deductions.

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