Deduction under Sec 80C Deduction in respect of LIP, contributions to PF, etc

Conditions:

  1. Eligible Assessee –  Individual and HUF
  2. Investment or application of funds during the previous year
  3. Maximum deduction Rs.1,50,000 in a previous year
  4. Special Provision – Withdrawal of deductions for certain premature exit from certain investment or application of funds

It is applicable to Individual and HUF and if the assessee has invested, contributed or expended in any one or more of listed items during the previous year. The deduction is available to the maximum extent of Rs.1,50,000.

DEDUCTIONS FROM GROSS TOTAL INCOME
(a) Deduction in respect of certain investments, contributions, subscriptions etc.
Insertion of deduction under section 80C replacing rebates u/s 88, 88B, 88C, 88D deductions u/s 80CCC and u/s 80CCD
With effect from the 1st day of April, 2006, a new deduction u/s 80C has been introduced.
Rate of deduction [Section 80C(1)]
This deduction shall be admissible only to an assessee, being an individual or a Hindu undivided family. The amount of deduction shall be actual amount paid or deposited during the previous year in prescribed saving schemes [ to be calculated as qualifying amount for deduction u/s 80c or Rs. 1,50,000 which ever is less.

Qualifying Amount For Deduction u/s 80C
(i) to effect or to keep in force an insurance on the life of persons specified in sub-section (4);

(ii) to effect or to keep in force a contract for a deferred annuity, not being an annuity plan referred to in clause (xii), on the life of persons specified in sub-section (4):

Provided that such contract does not contain a provision for the exercise by the insured of an option to receive a cash payment in lieu of the payment of the annuity;

(iii) by way of deduction from the salary payable by or on behalf of the Government to any individual being a sum deducted in accordance with the conditions of his service, for the purpose of securing to him a deferred annuity or making provision for his spouse or children, in so far as the sum so deducted does not exceed one-fifth of the salary;

(iv) as a contribution by an individual to any provident fund to which the Provident Funds Act, 1925 (19 of 1925) applies;

(v) as a contribution to any provident fund set up by the Central Government and notified
by it in this behalf in the Official Gazette, where such contribution is to an account standing in the name of any person specified in sub-section (4);

(vi) as a contribution by an employee to a recognised provident fund;

(vii) as a contribution by an employee to an approved superannuation fund;

(viii) 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;

(ix) as subscription to any such savings certificate as defined in clause (c) of section 2
of the Government Savings Certificates Act, 1959 (46 of 1959), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(x) as a contribution, in the name of any person specified in sub-section (4), for participation in the Unit-linked Insurance Plan, 1971 (hereafter in this section referred to as the Unit-linked Insurance Plan) specified in Schedule II of the Unit Trust of India (Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);

(xi) as a contribution in the name of any person specified in sub-section (4) for participation in any such unit-linked insurance plan of the LIC Mutual Fund [referred to in] clause (23D) of section 10, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xii) to effect or to keep in force a contract for such annuity plan of the Life Insurance Corporation or any other insurer as the Central Government may, by notification in the Official Gazette, specify;

(xiii) as subscription to any units of any Mutual Fund [referred to in] clause (23D) of section 10 or from the Administrator or the specified company under any plan formulated in accordance with such scheme as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xiv) as a contribution by an individual to any pension fund set up by any Mutual Fund [referred to in] clause (23D) of section 10 or by the Administrator or the specified company, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xv) as subscription to any such deposit scheme of, or as a contribution to any such pension fund set up by, the National Housing Bank established under section 3 of the National Housing Bank Act, 1987 (53 of 1987) (hereafter in this section referred to as the National Housing Bank), as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xvi) as subscription to any such deposit scheme of—
(a) a public sector company which is engaged in providing long-term finance for construction or purchase of houses in India for residential purposes; or
(b) any authority constituted in India by or under any law enacted either for the purpose of dealing with and satisfying the need for housing accommodation or for the purpose of planning, development or improvement of cities, towns and villages, or for both, as the Central Government may, by notification in the Official Gazette, specify in this behalf;

(xvii) as tuition fees (excluding any payment towards any development fees or donation or payment of similar nature), whether at the time of admission or thereafter,—
(a) to any university, college, school or other educational institution situated within India;
(b) for the purpose of full-time education of any of the persons specified in sub-section (4);

(xviii) for the purposes of purchase or construction of a residential house property the income from which is chargeable to tax under the head “Income from house property” (or which would, if it had not been used for the assessee’s own residence, have been chargeable to tax under that head), where such payments are made towards or by way of—
(a) 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; or
(b) 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; or
(c) repayment of the amount borrowed by the assessee from—
(1) the Central Government or any State Government, or
(2) any bank, including a co-operative bank, or
(3) the Life Insurance Corporation, or
(4) the National Housing Bank, or
(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 or
(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; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,

Taxability of Amount Received
1. In following cases the assessee shall have to pay tax on any amount received on:
(i) Termination of his contract of insurance referred to at point I above by notice to that effect or where the contract ceases to be in force by reason of failure to pay any premium , by not reviving contract of insurance :
(a) in case of any single premium policy, within two years after the date of commencement of insurance; or
(b) in any other case, before premiums have been paid for two years; or
(ii) termination of his participation in any unit-linked insurance plan referred to above in point 10 and 11 by notice to that effect or where he ceases to participate by reason of failure to pay any contribution, by not reviving his participation, before contributions in respect of such participation have been paid for five years; or
(iii) transfer of the house property before the expiry of five years from the end of financial years 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 :
(a) no deduction shall be allowed to the assessee under 80C(I) with reference to any of the sums
referred to in point 1, 10, 11 and 18, paid in such previous year; and
(b) the aggregate amount of the deductions of income so allowed in respect of the previous year or years shall be deemed to be the income of the assessee of such previous year and shall be liable to tax in the assessment year relevant to such previous year.

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