Before you file your income tax returns, your chartered accountant or CA will ask you a few questions like the following:

How much was your income or salary from your job?

Do you have any other source of income other than your employment?

What different investment instruments have you used?

Investments form a core part of financial planning. They also play a very important role in tax planning, as your investments can help in tax deductions.

One of the most important sections that aid in this is Section 80C of the Income Tax. So what is Section 80C in Income Tax, and which deductions are covered under it? Here is a detailed sec 80c deduction list to help you understand better.

Section 80C deductions allow individuals to exempt certain investments and expenditures from the tax computation and tax liability. According to the Income Tax Act, ’Deduction in respect of life insurance premium, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.’ can be claimed under deduction 80C.

Investment instruments like Unit Linked Insurance Plans, Public Provident Funds (PPF), Pension Plans like National Pension System (NPS), Term Life Insurance Plans, etc., can help in acquiring tax deductions. These basic deductions 80c are essential to know when planning your taxes

One must remember that most investment plans come with a lock-in period and must remain invested until its completion to gain any tax benefit.

In the Financial Year 2020-2021, Anirudh Dasgupta earned Rs. 20,00,000 as salary. As part of his tax saving initiative, he had invested Rs. 75,000 in PPF, Rs. 30,000 in a tax saving fixed deposit, and Rs. 45,000 in an ELSS fund.

When the time to pay his tax came around, his accountant asked him to submit all his investments for Assessment Year 2021-2022. Based on the calculations, Anirudh’s accountant told him his taxable income amount would be Rs. 18,50,000.

Anirudh’s investment of Rs. 1,50,000 in various investment schemes is a part of the Section 80C deduction list, and the limit for Section 80C is Rs. 1.5 lakhs per year.

he entire purpose of section 80C was to encourage savings among citizens while providing tax breaks as an incentive. It can be claimed by individuals and HUF only and not by companies or organisations.

While these investments are broadly classified under one section, that is, Section 80 C, they are further bifurcated as Section 80CCC, 80CCD(1), and 80CCD(2).

To know how to avail tax deductions under 80C, you need to know a few things about where you can invest your money:

Money can be invested in investment instruments that have a fixed holding period like Public Provident Funds, Bank Fixed Deposits, Employee Provident Funds, National Savings Certificates (NSC), etc. After completing the holding period, you get the invested amount back.

Money can also be spent as an investment, where returns may or may not give monetary returns like your children’s tuition fees, home loan principal amount, etc.

Some of the investments under category one that can aid in availing a deduction under Section C are as follows:

Also included in Category 1 are some market-linked instruments:

Under Category 2, you can claim a tax deduction under 80C from the following spending activities: