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Equity Linked Savings Scheme
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Section 80 C


Investments that fall under Section 80C:

  • Provident Fund
  • Public Provident Fund
  • Life Insurance Premium
  • Unit Linked Insurance Plan
  • Pension Plans
  • Equity Linked Savings Schemes of Mutual Funds
  • Infrastructure Bonds
  • National Savings Certificate
  • Tuition Fees
  • 5 year deposits in Bank
  • Senior Citizens Saving Scheme 2004
  • Post Office Term Deposit Account

Apart from the above, the payment towards principal amount of home loan is also eligible for income deduction.

(Life insurance, contribution to provident fund, schemes for deferred annuities, tuition fees, repayment of principal on housing loans, ELSS and infrastructure bonds.) The investments in the above during the year 2008-2009 can only be taken into account for deduction from the income.

Limit: 1,00,000

Criteria: The limit is irrespective of how much you earn and under which tax bracket you fall. There is no sub-limit on any of the above and taxpayer can invest the full amount in any one category.

Income Tax Slab for Assessment year 2009-2010:

Lower LimitUpper LimitTax Payable
0Rs.150000Nil
Rs.150001Rs.30000010% of income in excess of Rs.150000
Rs.300001Rs.500000Rs.15000+20% of income in excess of Rs.300000
Rs.500001No upper limitRs.55000+30% of income in excess of Rs.500000

In the case of a woman assessee, the exemption will be upto Rs.180,000 from Rs. 145,000 whereas Senior Citizen will now have the exemption limit of Rs. 225,000 from Rs.195,000.

An additional deduction of Rs.15,000 under Section 80D has been allowed to an individual who pays medical insurance premium for his/her parent(s).

Example:

Salary650000
Home loan Interest Payment120000
Gross Total Income530000
Home loan Principal Payment80000
NSC Investment40000
Section 80C Investments120000
Limit for Section 80C100000
Taxable Income430000

In the above scenario, concerned individual should have invested only Rs.100000 under Section 80C schemes because the money would be locked for a fixed period if there is tax exemption.

Section 80C advantages:

  1. It gives a bigger tax break.
  2. Section 88 gave only a maximum of 20% rebate on tax saving schemes.
  3. Section 80L allowed interest deduction up to a limit of Rs.12000.
  4. 80 C to give tax breaks for all. There is no restriction on taxable income.
  5. Taxable income in 30% bracket to enjoy a savings of 30000 right away.
  6. Under Section 88 only Rs.20000 of home loan principal can be claimed. But, under Section 80C up to Rs.100000 can be claimed.
  7. Investment can be made in ELSS and earn a 30% return up-front in the form of tax break.

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