Section 80C of the Income Tax Act, 1961, allows individuals to claim deductions on their taxable income by investing in specified financial instruments and expenses. This section is designed to encourage individuals to save for their future while also reducing their tax liabilities.

Here’s a complete guide to Section 80C deductions:

1. Eligibility: All individuals and Hindu Undivided Families (HUFs) are eligible to claim deductions under Section 80C.
2. Maximum Deduction Limit: The maximum deduction limit under Section 80C is Rs. 1,50,000 for the financial year 2023-24. This means you can reduce your taxable income by up to Rs. 1,50,000 by investing in specified financial instruments and expenses.
3. Eligible Financial Instruments and Expenses: The following financial instruments and expenses are eligible for deductions under Section 80C:

a. Provident Fund: Contributions made towards the Employees’ Provident Fund (EPF) and Voluntary Provident Fund (VPF) are eligible for deductions under Section 80C.

b. Public Provident Fund (PPF): Contributions made towards PPF accounts are eligible for deductions under Section 80C.

c. Equity-Linked Savings Scheme (ELSS): Investments made in ELSS mutual funds are eligible for deductions under Section 80C.

d. National Savings Certificate (NSC): Investments made in NSC are eligible for deductions under Section 80C.

e. Tax-saving Fixed Deposits (FDs): Investments made in tax-saving FDs with a lock-in period of 5 years or more are eligible for deductions under Section 80C.

f. Unit-linked Insurance Plans (ULIPs): Premiums paid towards ULIPs are eligible for deductions under Section 80C.

g. Life Insurance Premiums: Premiums paid towards life insurance policies are eligible for deductions under Section 80C.

h. Senior Citizens Savings Scheme (SCSS): Investments made in SCSS are eligible for deductions under Section 80C.

i. Tuition Fees: Tuition fees paid for the education of up to two children are eligible for deductions under Section 80C.

j. Sukanya Samriddhi Yojna

4. Lock-in Period: Many of the financial instruments and expenses eligible for deductions under Section 80C come with a lock-in period. This means that you cannot withdraw your investments before the completion of the lock-in period without incurring penalties or forfeiting the deductions claimed.
5. Claiming Deductions: To claim deductions under Section 80C, you need to disclose the investments made and expenses incurred while filing your income tax returns (ITR). You can claim the deductions in the same financial year in which the investments were made or the expenses were incurred.

In conclusion, Section 80C is an excellent way to save for your future while also reducing your tax liabilities. By investing in specified financial instruments and expenses, you can claim deductions of up to Rs. 1,50,000 on your taxable income. However, it is crucial to understand the lock-in period and other terms and conditions of each financial instrument or expense before investing to ensure that you make informed decisions.