Insurance, PPF, Repayment of Loan and other Deductions – Section 80C

Eligible Assessee – Individual and HUF

Maximum amount of Deduction – A maximum of Rs. 1,50,000 is allowed as deduction under sections 80C, 80CCC, 80CCD(1) aggregately.

Deduction is allowed whether the payment is made out of income chargeable to tax or not.

Deductions allowed –

1. Life insurance premium
2. Contribution by an employee to approved superannuation fund or recognized provident fund
3. Contribution towards Public provident fund (PPF)
4. National saving certificate (VIII issue)
5. Unit Linked Insurance Plan (ULIP) of Unit Trust of India or LIC Mutual Fund
6. Notified units of Mutual fund or UTI
7. Notified pension fund of Mutual fund or UTI
8. Purchase of units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board
9. Tuition fees(not including any payment towards development fees/donation/payment of similar nature) whether at the time of admission or otherwise to any university/college/educational institution in India for full time education of any two children of an individual
10. Repayment of housing loan and related expenses
11. Amount deposited in a Fixed Deposit (FD) for 5 years or more with a scheduled bank.
12. Sukanya Samriddhi Yojna
13. As subscription to any such security of the Central Government or any such deposit scheme as that Government may, by notification in the Official Gazette, specify in this behalf
14. Annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette specify.
15. Contribution by an individual to any pension fund set up by any Mutual Fund referred to in clause (23D) of section 10
16. Subscription to such bonds issued by the National Bank for Agriculture and Rural development, as the Central Government may, by notification in the Official Gazette
17. Deposit in an account specify in this behalf under the Senior Citizens Savings Scheme Rules, 2004
18. Deposits as five year time deposit in an account under the Post Office Time Deposit Rules, 1981

Life Insurance Premium (LIP)
In case of an individual – Policy should be taken on own life, or life of spouse or any child (Dependent or Independent, married or unmarried)

In case of HUF – Policy should be taken on life of any member of such HUF

Limit on deduction – Maximum deduction allowed for Life insurance premium is 10% of the actual sum assured. For policies issued on or before 31^st March, 2012 maximum deduction allowed is 20% of the actual sum assured.

Provided that where the policy, issued on or after the 1st day of April, 2013, is for insurance on life of any person, who is—

(a) a person with disability or a person with severe disability as referred to in section 80U, or

(b) suffering from disease or ailment as specified in the rules made under section 80DDB,

maximum deduction allowed for insurance premium is 15% of actual sum assured.

Actual sum assured is the minimum amount assured under the policy on happening of the insured event. The value of any premium agreed to be returned or any benefit by way of bonus or otherwise over and above the sum actually assured which is to be or may be received under the policy by any person is not to be taken into account while calculating actual sum assured.

If the assessee terminates the contract or contract ceases to be in force by reason of failure to pay any premium

1. in case of any single premium policy, within two years after the date of commencement of insurance; or
2. in any other case, before premiums have been paid for two years

then no deduction is allowed for any premium paid in that financial year. The premium for such insurance policy which was allowed as deduction in earlier years is taxable in year in which insurance policy is terminated or ceases to be in force.

Repayment of Housing loan and related expenses

Deduction is allowed for payment made for the purpose of purchase or construction of a residential house property which is covered under head House Property if payment is made by way of

1. any instalment or part payment of the amount due under any self-financing or other scheme of any development authority, housing board or other authority engaged in the construction and sale of house property on ownership basis
2. any instalment or part payment of the amount due to any company or co-operative society of which the assessee is a shareholder or member towards the cost of the house property allotted to him
3. repayment of the amount borrowed by the assessee from—
   1. the Central Government or any State Government
   2. any bank, including a co-operative bank
   3. the Life Insurance Corporation
   4. the National Housing Bank
   5. 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 clause (viii) of sub-section (1) of section 36
   6. any company in which the public are substantially interested or any co-operative society, where such company or co-operative society is engaged in the business of financing the construction of houses, or
   7. 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
   8. the assessee’s employer where such employer is a public company or a public sector company or a university established by law or a college affiliated to such university or a local authority or a co-operative society
4. stamp duty, registration fee and other expenses for the purpose of purchase of such house property by the assessee, but shall not include any payment towards or by way of
   1. the admission fee, cost of share and initial deposit which a shareholder of a company or a member of a co-operative society has to pay for becoming such shareholder or member
   2. the cost of any addition or alteration to, or renovation or repair of, the house property which is carried out after the issue of the completion certificate in respect of the house property by the authority competent to issue such certificate or after the house property or any part thereof has either been occupied by the assessee or any other person on his behalf or been let out
   3. any expenditure in respect of which deduction is allowable under the provisions of section 24

If the assessee transfers such house property before the expiry of five years from the end of the financial year in which possession of such property is obtained by him, or receives back, whether by way of refund or otherwise, any sum specified in that clause then no deduction is allowed for any sum paid in that financial year. The amount which was allowed as deduction in earlier years is taxable in the year of transfer, refund or otherwise.

Unit Linked Insurance Plan (ULIP) of Unit Trust of India or LIC Mutual Fund

If the assessee terminates the participation or participation ceases to be in force by reason of failure to pay any contribution before contributions have been paid for five years then no deduction is allowed for any contribution paid in that financial year. The contribution which was allowed as deduction in earlier years is also added to the taxable income in year of termination.