Deduction under Section 80C 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.

Amount of deduction under 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. 1.5 lakh whichever 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;

(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 cooperative society; or
(d) stamp duty, registration fee and other expenses for the purpose of transfer of such house property to the assessee,
but shall not include any payment towards or by way of—
(A) 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; or
(B) 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; or
(C) any expenditure in respect of which deduction is allowable under the provisions of section 24;

(xix) as subscription to equity shares or debentures forming part of any eligible issue of capital approved by the Board on an application made by a public company or as subscription to any eligible issue of capital by any public financial institution in the prescribed form
Explanation — For the purposes of this clause,—
(i) “eligible issue of capital” means an issue made by a public company formed and registered in India or a public financial institution and the entire proceeds of the issue are utilised wholly and exclusively for the purposes of any business referred to in sub-section (4) of section 80-IA
(ii) “public company” shall have the meaning assigned to it in section 3 of the Companies Act, 1956 (1 of 1956);
(iii) “public financial institution” shall have the meaning assigned to it in section 4A of the Companies Act, 1956 (1 of 1956);

(xx) as subscription to any units of any mutual fund referred to in clause (23D) of section 10 and approved by the Board on an application made by such mutual fund in the prescribed form

(xxi) as term deposit—
(a) for a fixed period of not less than five years with a scheduled bank; and
(b) which is in accordance with a scheme27a framed and notified, by the Central Government, in the Official Gazette for the purposes of this clause.

(xxii) as 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, specify in this behalf.
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.