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With diverse recipes available for tax saving u/s. 80 C savings & investments require some smart planning!

             The scheme of Section80Cof the Income-tax Act provides for deduction out of taxable income of a taxpayer who is an individual or HUF, in respect of specified savings, investments and allocations made by them during the financial year.

             Section80C offers deduction to either an individual or HUF. However, there are diverse recipes under Section80Cprescribed for the two entities. An HUF does not enjoy the entire range of choices under Section80Cas available to an individual. Moreover, some investment or spending avenues, such as contribution to statutory or recognized provident fund or housing loan repayment are exclusively available only to the concerned salary earner or house owner as the case may be.

           However, there are several other deductions, which offer fairly flexible opportunities for tax planning and it is in respect of some of these, that a head of the household must do some smart thinking. 


                  Payment of Life Insurance Premium (LIP) is eligible for deduction, where an individual pays LIP in respect of a policy taken either for himself, his spouse and/or children (minor or major). In case of an HUF, payment of LIP for insurance taken on the life of any member of the HUF is also entitled to deduction under Section80C. Keeping this in view, switching of premium payments, from time to time, as required to enjoy the comfort level of the limits under Section80Ccan be usefully planned.

             To illustrate, if the limit of Rs.1,00,000 under Section 80Cgets saturated in the case of an individual,  LIP on his policy can be paid either by his spouse, his parent or even the HUF of which he is a member and the benefit of tax saving can be enjoyed in that case. 

      CAP ON LIP FROM 2012

           As per the provisions of Section 80C(3), deduction for Life Insurance Premium until Assessment Year 2012-13 was allowable for only so much of the premium payment, which was not in excess of 20% of the ‘actual capital sum assured’. However, with effect from Assessment Year 2013-14 and subsequent Assessment Years the provisions in this regard have been amended so as to provide that the deduction for Life Insurance Premium, in respect of insurance policies issued on or after 1st April, 2012, shall be allowed for only so much of the premium payable as does not exceed 10% of the ‘actual capital sum assured’.

                 In this context, the definition of ‘actual capital sum assured’ has been inserted to provide that the ‘actual capital sum assured’ shall be 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 the value of any premium agreed to be returned, or 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. The objective of this provision is to ensure that life insurance products are not designed to circumvent the prescribed limits by varying the capital sum assured from year to year.


            In case of payment for tuition fees for the full time education of any two children upto Rs.1,00,000, this deduction under Section80Ccan be availed in case of either or both of the parents.  Keeping this in mind, it should be decided which of the two parents should pay the tuition fees during the year to avail the maximum benefit of this deduction.

             So, draw out the Section80C allocations chart for your family at the beginning of each fiscal year, before it is too late.


             A new account under the Public Provident Fund (PPF) Scheme is not permitted to be opened by an HUF in its name after 13th May, 2005. However, it needs to be noted that Section80C allows deduction in respect of contribution to PPF by an individual in his own account or in the account of his spouse or children or in the case of an HUF in the PPF account of any of the member of the HUF. In view of the above, an HUF can, without opening a PPF account in its own name, still contribute Rs.1,00,000  to the PPF account of any of its member (including a minor). This planning would be of special significance, where the individual’s80C limit has already been exhausted with other savings and contributions and he does not wish to miss the opportunity of saving in PPF, while at the same time availing of the advantage of deduction under Section80C in the case of the HUF.


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