Thread by @manansmehta5

Here's a full list of eligible investments under 80C.

A Thread 🧵

This is the most commonly quoted deduction. Everyone should know about this. The next time someone says have you used your 80C limit, you will know what they mean!

Maximum deduction per year: INR 1,50,000

There is a whole laundry list of eligible investments under 80C.

1. Premium paid for life insurance policy

All premium paid towards life insurance is eligible for the deduction.

However, deduction would not be available if the premium payable for any of the years during the term of the policy exceeds 10% of “actual capital sum assured”.

Galactic Tip:

Usually, the insurance company will ensure the premium payable is below the 10% threshold – you don’t need to worry about it. However, it’s still better to ask your insurance agent/ insurance company before signing up for a new policy.

2. ELSS mutual funds:

Investments in equity linked savings scheme (ELSS) mutual funds are a popular 80C deduction.
Note that investment in any ordinary mutual fund would not count as a deduction. The mutual fund has to specifically be classified as an ELSS fund.

Galactic Tip: Which ELSS fund should you pick?

Unfortunately, this is a problem with picking active funds.
Here’s some context: Upto 2015-16, Nippon ELSS used to be one of the popular recommendation on many mutual fund portals.

Since then, the fund has underperformed due to it’s huge bets on infrastructure / manufacturing sectors.
Conversely, Axis Long Term Equity (not a recommendation, using as illustration) has done better than expected over the same period.

In 2020, Canara Robeco ELSS fund looked like a great fund, doing much better than its peers over last 3-4 years. But 3-4 years ago, it wasn't doing anything extraordinary.

The harsh truth is, you can pick an ELSS fund, and at best hope for it to do well-enough.

TLDR: Just pick one, you're as likely to be wrong as you could be lucky.

3. Contribution to PPF

Contribution made to any the public provident fund (PPF) also qualifies for deduction under section 80C. Such contribution can be made in the name of the individual, spouse and any child of the individual; and any member of the family, in case of a HUF.

4. Employee’s Contribution to EPF

Employee’s contribution to the Employee’s provident fund is considered a deduction under section 80C. This will usually be shown as a deduction in your salary slip.

5. Contribution to Sukanya Samridhi Account
Any sum paid by an individual into a Sukanya Samriddhi account is allowed as a deduction if paid for:
- any girl child of the individual
- any girl child for whom such individual is the legal guardian

6. Subscription to National Savings Certificates

Note that interest from NSCs are first considered taxable and then considered as a deduction under 80C.
This means that if your 80C limit is maxed out, interest on NSC becomes taxable.

7. Unit linked insurance (ULIP)

Contributions in the name of the individual, spouse or any child of the individual for participation in the Unit-linked Insurance Plan are eligible deductions.

In case of a HUF, the contribution can be in the name of any member.

Galactic Tip:

We usually advice our clients to stay away from ULIPs. It’s usually not a good idea to mix insurance and investment.

8. Payment of tuition fees to any university, college, school or other educational institutions within India for full-time education

for the purpose of full-time education of any two children of the individual.

9. Investment in five year Term Deposit

Almost every bank offers a tax saver fixed deposit. Note that the interest on these deposits is taxable.

This is a good option for US based individuals who need to avoid Indian mutual funds due to US tax laws.

That's it. That's the major investments under 80C. A full list of deductions under the Income tax Act is available below

#tax #ITR #80C

thegalacticadvisors.com/deductions