No deduction is available in respect of premium paid in respect of policy taken in the name of any person other than those aforementioned.
Individuals, both resident and non-resident, can claim tax deductions under this section. However, many might not be aware of the fact that there is a cap on the deduction of insurance premiums depending on the time when the policy was purchased, which is summarised as under:
(Provided the policy is taken in the name of any person suffering from a disability or severe disability referred to in section 80U or suffering from disease or ailment as given in section 80DDB of the IT Act)
2. Public Provident Fund (PPF)
PPF is one of the most sought after options for tax deduction as it falls under the (Exempt- Exempt-Exempt) ‘EEE’ category, i.e. investment in PPF is available as a tax deduction, whereas the interest and the maturity amount are both tax-exempt.
It is pertinent to note that Non-resident Indians (NRIs) are not eligible to invest in PPF. However, suppose a resident individual holding a PPF account becomes a non-resident individual. In that case, he could continue to hold such a PPF account until maturity, which he opened when he was a resident, though he won’t be eligible to make any fresh investment as a non-resident. However, PPF investments are subject to a lock-in period of 15 years. Investments in PPF can yield a return of approximately 7% to 7.5% p.a.
3. Tuition Fees
The provisions state that an individual who pays tuition fees to any university, college, school or other educational institution situated within India or for the purpose of full-time education of spouse or children in India can claim such fees as a deduction u/s 80C.
However, such benefit can be availed by an individual for maximum 2 children. Moreover, payment towards any development fees or donation or payment of similar nature is not considered in the nature of tuition fees and does not enjoy a tax deduction.
4. Equity Linked Savings Scheme (ELSS)
Investment in ELSS is also an option for individuals and HUFs to claim deductions u/s 80C. Investors, after proper analysis, can opt to invest in ELSS either through Systematic Investment Plan (SIP) mode or lump sum mode. ELSS has a lock-in period of 3 years, and depending on the market conditions, the returns depend on the performance of the scheme and can generally range between 11% to 16% p.a. In case any taxpayer makes an investment in ELSS, he would be eligible for tax deduction u/s 80C of the IT Act.
5. Term Deposits/ Fixed Deposits
If an individual invests in –
a. term deposit account, opened with a scheduled bank; or
b. time deposit account opened under the Post Office Time Deposit Rules, 1981 for a fixed period of at least 5 years, then such investments are also eligible for deduction u/s 80C of the IT Act.
As far as returns of these term deposits are considered, they might not be as attractive as other equity-oriented investment options such as ELSS, as it generally ranges from 4% to 8% p.a, depending on the lock-in period.
6. Sukanya Samriddhi Yojana
Sukanya Samriddhi Yojana was initiated by the Prime Minister of India in 2015 with an objective to encourage parents to save and collect a certain sum of money for their girl child’s future education and other needs.
Such account can be opened any time after the birth of the girl child until she turns 10 years old, with a minimum annual deposit of Rs. 250, but the investment cannot exceed Rs. 1,50,000 in a particular financial year. This scheme has a lock-in period of 21 years and stands matured thereafter.
Further, the benefit of this scheme can only be availed by a resident individual. Investments in these schemes are tax-deductible u/s 80C of the IT Act. The present rate of interest is appx. 7.6% p.a.
7. National Savings Certificate (NSC)
NSC is a savings scheme initiated by the Central Government of India to imbibe savings habits amongst people eligible for deduction u/s 80C. Investment in an NSC can be started with a minimum of Rs. 1,000, whereas there is no limit on the upside investment and has a maturity of 5 years. As notified by the government, the present interest rate for the financial year 2022-23 is currently 6.8% p.a.
Section 80C provides deduction in respect of various items like life insurance premium, investment in Public Provident Fund (PPF), investment in NSC, repayment of principal component of housing loan, investment in Bank or Post Office Time Deposit Scheme, Senior Citizens Saving Scheme, Sukanya Samriddhi Yojana, etc.