Section 80C of Income Tax Act "Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc"
80C. (1) In computing the total income of an assessee,
being an individual or a Hindu undivided family, there shall
be deducted, in accordance with and subject to the
provisions of this section, the whole of the amount paid or
deposited in the previous year, being the aggregate of the
sums referred to in sub-section (2), as does not exceed one
hundred and fifty thousand rupees.
(2) The sums referred to in sub-section (1) shall be any
sums paid or deposited in the previous year by the assessee-
(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, in the name of any person specified
in sub-section (4), 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,
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:
Provided that this clause shall apply if the amount of
subscription to such units is subscribed only in the
eligible issue of capital of any company.
Explanation.-For the purposes of this clause "eligible issue
of capital" means an issue referred to in clause (i) of the
Explanation to clause (xix) of sub-section (2);
(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 scheme framed and
notified, by the Central Government, in the Official Gazette
for the purposes of this clause.
Explanation.-For the purposes of this clause, "scheduled
bank" means the State Bank of India constituted under the
State Bank of India Act, 1955 (23 of 1955), or a subsidiary
bank as defined in the State Bank of India (Subsidiary
Banks) Act, 1959 (38 of 1959), or a corresponding new bank
constituted under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1970 (5 of
1970), or under section 3 of the Banking Companies
(Acquisition and Transfer of Undertakings) Act, 1980 (40 of
1980), or any other bank, being a bank included in the
Second Schedule to the Reserve Bank of India Act, 1934 (2 of
1934);
(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;
(xxiii) in an account under the Senior Citizens Savings
Scheme Rules, 2004;
(xxiv) as five year time deposit in an account under the
Post Office Time Deposit Rules, 1981;
20[(xxv) being an employee of the Central Government, as a
contribution to a specified account of the pension scheme
referred to in section 80CCD-
(a) for a fixed period of not less than three years; and
(b) which is in accordance with the scheme as may be
notified by the Central Government in the Official Gazette
for the purposes of this clause.
Explanation.-For the purposes of this clause, "specified
account" means an additional account referred to in
sub-section (3) of section 20 of the Pension Fund Regulatory
and Development Authority Act, 2013 (23 of 2013).]
(3) The provisions of sub-section (2) shall apply only to so
much of any premium or other payment made on an insurance
policy, other than a contract for a deferred annuity, issued
on or before the 31st day of March, 2012, as is not in
excess of twenty per cent of the actual capital sum assured.
Explanation.-In calculating any such actual capital sum
assured, no account shall be taken-
(i) of the value of any premiums agreed to be returned, or
(ii) of 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.
(3A) The provisions of sub-section (2) shall apply only to
so much of any premium or other payment made on an insurance
policy, other than a contract for a deferred annuity, issued
on or after the 1st day of April, 2012 as is not in excess
of ten per cent of the actual capital 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,
the provisions of this sub-section shall have effect as if
for the words "ten per cent", the words "fifteen per cent"
had been substituted.
Explanation.-For the purposes of this sub-section, "actual
capital sum assured" in relation to a life insurance policy
shall mean the minimum amount assured under the policy on
happening of the insured event at any time during the term
of the policy, not taking into account-
(i) the value of any premium agreed to be returned; or
(ii) 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.
(4) The persons referred to in sub-section (2) shall be the
following, namely:-
(a) for the purposes of clauses (i), (v), (x) and (xi) of
that sub-section,-
(i) in the case of an individual, the individual, the wife
or husband and any child of such individual, and
(ii) in the case of a Hindu undivided family, any member
thereof;
(b) for the purposes of clause (ii) of that sub-section, in
the case of an individual, the individual, the wife or
husband and any child of such individual;
(ba) for the purposes of clause (viii) of that sub-section,
in the case of an individual, the individual or any girl
child of that individual, or any girl child for whom such
person is the legal guardian, if the scheme so specifies;
(c) for the purposes of clause (xvii) of that sub-section,
in the case of an individual, any two children of such
individual.
(5) Where, in any previous year, an assessee-
(i) terminates his contract of insurance referred to in
clause (i) of sub-section (2), 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) terminates his participation in any unit-linked
insurance plan referred to in clause (x) or clause (xi) of
sub-section (2), 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) transfers the house property referred to in clause
(xviii) of sub-section (2) 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,-
(a) no deduction shall be allowed to the assessee under
sub-section (1) with reference to any of the sums, referred
to in clauses (i), (x), (xi) and (xviii) of sub-section (2),
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 preceding
such previous year, 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.
(6) If any equity shares or debentures, with reference to
the cost of which a deduction is allowed under sub-section
(1), are sold or otherwise transferred by the assessee to
any person at any time within a period of three years from
the date of their acquisition, the aggregate amount of the
deductions of income so allowed in respect of such equity
shares or debentures in the previous year or years preceding
the previous year in which such sale or transfer has taken
place 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.
Explanation.-A person shall be treated as having acquired
any shares or debentures on the date on which his name is
entered in relation to those shares or debentures in the
register of members or of debenture-holders, as the case may
be, of the public company.
(6A) If any amount, including interest accrued thereon, is
withdrawn by the assessee from his account referred to in
clause (xxiii) or clause (xxiv) of sub-section (2), before
the expiry of the period of five years from the date of its
deposit, the amount so withdrawn shall be deemed to be the
income of the assessee of the previous year in which the
amount is withdrawn and shall be liable to tax in the
assessment year relevant to such previous year:
Provided that the amount liable to tax shall not include the
following amounts, namely:-
(i) any amount of interest, relating to deposits referred to
in clause (xxiii) or clause (xxiv) of sub-section (2), which
has been included in the total income of the assessee of the
previous year or years preceding such previous year; and
(ii) any amount received by the nominee or legal heir of the
assessee, on the death of such assessee, other than
interest, if any, accrued thereon, which was not included in
the total income of the assessee for the previous year or
years preceding such previous year.
(7) For the purposes of this section,-
(a) the insurance, deferred annuity, provident fund and
superannuation fund referred to in clauses (i) to (vii);
(b) unit-linked insurance plan and annuity plan referred to
in clauses (xii) to (xiiia);
(c) pension fund and subscription to deposit scheme referred
to in clauses (xiiic) to (xiva);
(d) amount borrowed for purchase or construction of a
residential house referred to in clause (xv),
of sub-section (2) of section 88 shall be eligible for
deduction under the corresponding provisions of this section
and the deduction shall be allowed in accordance with the
provisions of this section.
(8) In this section,-
(i) "Administrator" means the Administrator as referred to
in clause (a) of section 2 of the Unit Trust of India
(Transfer of Undertaking and Repeal) Act, 2002 (58 of 2002);
(ii) "contribution" to any fund shall not include any sums
in repayment of loan;
(iii) "insurance" shall include-
(a) a policy of insurance on the life of an individual or
the spouse or the child of such individual or a member of a
Hindu undivided family securing the payment of specified sum
on the stipulated date of maturity, if such person is alive
on such date notwithstanding that the policy of insurance
provides only for the return of premiums paid (with or
without any interest thereon) in the event of such person
dying before the said stipulated date;
(b) a policy of insurance effected by an individual or a
member of a Hindu undivided family for the benefit of a
minor with the object of enabling the minor, after he has
attained majority to secure insurance on his own life by
adopting the policy and on his being alive on a date (after
such adoption) specified in the policy in this behalf;
(iv) "Life Insurance Corporation" means the Life Insurance
Corporation of India established under the Life Insurance
Corporation Act, 1956 (31 of 1956);
(v) "public company" shall have the same meaning as in
section 3 of the Companies Act, 1956 (1 of 1956);
(vi) "security" means a Government security as defined in
clause (2) of section 2 of the Public Debt Act, 1944 (18 of
1944);
(vii) "specified company" means a company as referred to in
clause (h) of section 2 of the Unit Trust of India (Transfer
of Undertaking and Repeal) Act, 2002 (58 of 2002);
(viii) "transfer" shall be deemed to include also the
transactions referred to in clause (f) of section 269UA.