Deduction Under Section 80c For F.Y. 2018-19

Deduction under section 80c for F.Y. 2018-19 (A.Y. 2019-20) under Income-tax act, 1961.

In view of F.Y. 2018-19 coming to an end by March 31, 2019, we have given here under an analysis of allowable investments u/s 80C of the income-tax act, 1961. By making savings u/s 80C, not only one benefits by saving tax but also by saving for retirement. An effort is made to simplify section 80C.

 

I. Who is eligible?

• Following categories of assesses are eligible to make investment u/s 80C

              -  Individual (including Non Resident Individual)

              -  HUF

 

II. Maximum Limit of Deduction:

          -  An individual or HUF can get deduction to the extent of Rs. 1,50,000 (One lakh fifty thousand ) from his gross total income during the Financial Year 2018-19.

 

III. Nature and mode of investment:

            -  A number of options have been given under the income tax act, 1961 for making investment in different schemes. They are summarised as below:-

 

       (1) Life insurance premium:

• Premium paid on life of an individual or any member of HUF either to LIC or to any other insurance Company is eligible. However, premium paid shall not exceed 10% of sum assured. Amount received on maturity of policy is not taxable.
• Further, insurance premium paid to keep in force the Policy of spouse or children of the individual shall also be an allowable deduction from the income of such individual.

 

       (2) Public provident fund (15 Years):

• This is perhaps the most preferred mode of investment by people at large.
• This scheme of investment is more popular amongst self-employed people who at the time of their retirement would have good savings.
• The investment (subject to a maximum of Rs. 1,50,000/-) in a PPF account made for self, spouse or children is allowable as a deduction from the taxable income of the individual. Also, investment in PPF account made by HUF for any member of the HUF is an allowable deduction for the HUF from its taxable income.
• The amount standing to the credit of PPF is free from any encumbers, whatsoever.
• The rate of Interest on PPF is at present 8% (subject to variation made by govt. from time to time).
• Interest on PPF is tax free. Also amount received on maturity of PPF is also tax free i.e. exempt.
• A HUF cannot open PPF account. However, a HUF can claim deduction by paying PPF in the name of any of its members. A PPF account can be opened either in any designated nationalised Bank or Post office. Multiple accounts in the same name are not allowed.

 

       (3) National saving Certificate (VIII and IX series):

• In view of other attracting mode of investments, this mode of investment is less preferred. The rate of return compared to other modes of investments, is less and hence investment in NSC is preferred less.

 

       (4) ULIP and Retirement benefit plan of Unit trust of India :

• Apart from security and soundness of investment, this investment also carries attractive rate of return in the long run.
• Maturity amount in both the cases are tax free.
• In our opinion, these are good investment plan for self-employed people.

 

       (5) Specified schemes of Life Insurance Corporation:

• Jivandhara, Jivan-Akshay, ULIP of LIC mutual fund etc. are eligible u/s 80C. 

 

       (6) Notified units of Mutual funds.

 

       (7) Repayment of housing loan or instalment or part payment towards cost of purchase or constructions of residential property are eligible as investment u/s 80C.

 

       (8) Contribution to statutory Provident Fund and recognised Provident Fund.

 

       (9) Education tuition fees paid for any two children of Individual to any university, college and educational institutional in India are also eligible u/s 80C.

 

       (10) Fixed deposit in banks for 5 years:

• Amount deposited in term deposit for 5 years with a scheduled bank is an eligible investment. Such Fixed deposit cannot be encashed prematurely. Also no credit facility can be obtained on these fixed deposits. Interest of fixed deposit is taxable.

 

       (11) Contribution towards senior citizen saving scheme:

• This scheme is applicable for senior citizens only i.e. who have attained an age of 60 years.

 

       (12) Contribution towards 5 year time deposit scheme in post office.

 

IV.  We may remind you that deduction of all or any of the schemes above together cannot exceed Rs. 1,50,000 /- even if the investment is more than Rs. 1,50,000/-.

 

We would shortly be coming with an article on other deductions allowable under chapter VI-A of the income tax act. We welcome your suggestions and comments.

 

-Isha Thakar

-Dharit Mehta, FCA

(E) incometax@sdmca.in