With EPF and a home loan, you may not need to worry about 80C basket

  • Under Section 80C, you can claim a deduction of 1.5 lakh from your total income, thereby bringing down your tax liability
  •  Stamp duty and registration charges are eligible for deduction under 80C

Remember the first time you invested to save taxes? When you sought advice on how to claim deductions, chances are the first thing you were told was to make the most of Section 80C. When it comes to tax saving, Section 80C is the go-to for most people. Under the Section, you can claim a deduction of 1.5 lakh from your total income. In other words, you can reduce your total taxable income by 1.5 lakh, thereby bringing down your tax liability. There are a range of investment options under Section 80C, from Public Provident Fund (PPF), National Savings Certificate (NSC) to equity-linked savings schemes (ELSS) and unit-linked insurance plans (Ulips).

However, some people don’t need to bother to buy or invest in products eligible for deduction under 80C. This is because mandatory deductions such as the Employees’ Provident Fund (EPF) and expenses such as children’s tuition fees may help them exhaust the 1.5 lakh deduction limit under 80C.

EPF contribution

For those with higher income, the EPF may be large enough contribution to cover the 80C bucket. Typically, both the employer and employee contribute 12% of the salary into the EPF account. The employee can choose to contribute more, but in that case, the employer is under no obligation to match the contribution. So, how much do you have to earn for the 80C deduction to be covered by EPF? If your basic salary is 12.5 lakh, your contribution to EPF at 12% would be 1.5 lakh. This means that if your basic salary is above 12.5 lakh, your EPF contribution will automatically reach the 80C deduction limit. But if this does not apply to you, there are other mandatory expenses to consider.

Expenses

Stamp duty on property registration: One provision under 80C that is often missed, but can account for a sizeable deduction, is that of stamp duty. Stamp duty is levied by the central or state government on the documentation for registering property ownership. If you have bought or built a house recently, you can claim deduction on the stamp duty you paid. Stamp duty and registration charges are eligible for deduction under 80C. You can only claim the deduction in the financial year in which you have made the payment towards the property purchase or construction. If you are the co-owner of a property, you can still claim this expense as deduction on your share in the property. 

Home loan principal repayment: If you are paying off a home loan, you can claim tax deduction for the repayment of the principal component. However, the interest paid is not deductible under Section 80C. To claim this benefit, you have to submit a statement issued by the lender showing the amount of loan principal repaid in a year.

Children’s tuition fees: Another mandatory expense, which you may not consider important in tax terms, can add to your 80C deduction. If you have children who go to school or college, you can claim tax deduction on the tuition component of their school or college fees. Save the receipts issued to you at the time of fee payment and submit them to claim the deduction.

Take these deductions into account before you rush to invest in a tax-saving instrument eligible for deduction under Section 80C.

Close