Page 211 - DMGT515_PERSONAL_FINANCIAL_PLANNING

Personal Financial Planning

Notes component of the EMI qualifies for deduction under Sec 80C. Even the interest component can
save you significant income tax – but that would be under Section 24 of the Income Tax Act.
Please read “Income Tax (IT) Benefits of a Home Loan/Housing Loan/Mortgage”, which presents
a full analysis of how you can save income tax through a home loan.
Stamp Duty and Registration Charges for a home: The amount you pay as stamp duty when you
buy a house, and the amount you pay for the registration of the documents of the house can be
claimed as deduction under section 80C in the year of purchase of the house.

National Savings Certificate (NSC): National Savings Certificate (NSC) is a 6-Yr small savings
instrument eligible for section 80C tax benefit. Rate of interest is eight per cent compounded
half-yearly, i.e., the effective annual rate of interest is 8.16%. If you invest Rs 1,000, it becomes Rs
1601 after six years. The interest accrued every year is liable to tax (i.e., to be included in your
taxable income) but the interest is also deemed to be reinvested and thus eligible for section 80C
deduction.
Infrastructure Bonds: These are also popularly called Infra Bonds. These are issued by
infrastructure companies, and not the government. The amount that you invest in these bonds
can also be included in Sec 80C deductions.

Pension Funds – Section 80CCC: This section – Sec 80CCC – stipulates that an investment in
pension funds is eligible for deduction from your income. Section 80CCC investment limit is
clubbed with the limit of Section 80C – it means that the total deduction available for 80CCC and
80C is ` 1 Lakh. This also means that your investment in pension funds upto ` 1 Lakh can be
claimed as deduction u/s 80CCC. However, as mentioned earlier, the total deduction u/s 80C
and 80CCC can not exceed Rs. 1 Lakh.
5-Yr bank fixed deposits (FDs): Tax-saving fixed deposits (FDs) of scheduled banks with tenure
of 5 years are also entitled for section 80C deduction.
Senior Citizen Savings Scheme 2004 (SCSS): A recent addition to section 80C list, Senior Citizen
Savings Scheme (SCSS) is the most lucrative scheme among all the small savings schemes but is
meant only for senior citizens. Current rate of interest is 9% per annum payable quarterly.
Please note that the interest is payable quarterly instead of compounded quarterly. Thus,
unclaimed interest on these deposits won’t earn any further interest. Interest income is chargeable
to tax.
5-Yr post office time deposit (POTD) scheme: POTDs are similar to bank fixed deposits. Although
available for varying time duration like one year, two year, three year and five year, only 5-Yr
post-office time deposit (POTD) – which currently offers 7.5 per cent rate of interest –qualifies
for tax saving under section 80C. Effective rate works out to be 7.71% per annum (p.a.) as the rate
of interest is compounded quarterly but paid annually. The Interest is entirely taxable.
NABARD rural bonds: There are two types of Bonds issued by NABARD (National Bank for
Agriculture and Rural Development): NABARD Rural Bonds and Bhavishya Nirman Bonds
(BNB). Out of these two, only NABARD Rural Bonds qualify under section 80C.
Unit linked Insurance Plan: ULIP stands for Unit linked Saving Schemes. ULIPs cover Life
insurance with benefits of equity investments. They have attracted the attention of investors and
tax-savers not only because they help us save tax but they also perform well to give decent
returns in the long-term.
Others: Apart form the major avenues listed above, there are some other things, like children’s
education expense (for which you need receipts), that can be claimed as deductions under Sec
80C.

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