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Section 80C of the Income Tax Act allows taxpayers to claim deductions of up to ₹1.5 lakh by investing in approved tax-saving instruments and incurring eligible expenses. Popular options include life insurance premiums, Public Provident Fund (PPF), home loan principal repayment, ELSS mutual funds, Sukanya Samriddhi Yojana, and other notified schemes.
These investments help reduce taxable income under the old tax regime. It is important to note that Section 80C deductions are not available if you opt for the new tax regime. In this blog, we will understand the meaning of Section 80C, explore the deductions available under it, and see how it can help reduce your taxable income.
What is Section 80C?
Section 80C of the Income Tax Act, 1961 helps taxpayers reduce their tax liability by allowing deductions from gross total income under the old tax regime. It remains a preferred tax-saving option due to the following reasons:
- Wide range of investment options: Taxpayers can choose from life insurance premiums, provident fund, tax-saving fixed deposits, and government-backed schemes such as National Savings Certificate.
- Shorter investment horizon: Many Section 80C instruments have a lock-in period of around 5 years, which is relatively shorter compared to pension and retirement funds.
- Supports tax savings and financial planning: These investments encourage disciplined saving while helping individuals plan their finances efficiently.
- Inflation protection: Several Section 80C options offer returns that may outpace inflation, helping preserve the real value of savings.
- By using these deductions effectively, taxpayers can significantly lower their taxable income and achieve meaningful tax savings.
As per the Indian Income Tax Act of India, deductions covered by Section 80C are further categorized into specific sub-sections including Section 80C, Section 80CCC, Section 80CCD(1), Section 80CCD(1B), and Section 80CCD(2).
80C Deduction List (FY 2025–26)
Section 80C of the Income Tax Act offers multiple avenues to reduce taxable income through eligible investments and expenses. These deductions are available under the old tax regime. The major Section 80C options include:
- Life insurance premiums
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)
- Sukanya Samriddhi Yojana (SSY)
- Tuition fees for children
- Principal repayment of a home loan
The table below highlights and compares the key features of these Section 80C deduction options.
| Investment Option | Minimum Lock-In Period | Rate of Interest | Associated Risk | Assured Return |
|---|---|---|---|---|
|
NPS |
Till age 60 |
8% to 10% |
High |
No |
|
ELSS |
3 years |
12% to 15% |
High |
No |
|
PPF |
15 years |
7.1% |
Low |
Yes |
|
SCSS |
5 years |
8.2% |
Low |
Yes |
|
NSC |
5 years |
7.7% |
Low |
Yes |
|
ULIP |
5 years |
8% to 10% |
Moderate |
No |
|
Fixed Deposit |
5 years |
Up to 8.40% |
Low |
Yes |
|
Sukanya Samriddhi Yojana |
21 years |
8.2% |
Low |
Yes |
National Pension System (NPS)
National Pension Scheme (NPS) is a government-supported retirement savings scheme available to individuals working in the private sector and unorganised workforce. However, it is not applicable to members of the armed forces. NPS is a long-term investment aimed at retirement, with funds generally locked in until the subscriber reaches 60 years of age.
Equity Linked Savings Scheme (ELSS)
ELSS, or Equity Linked Savings Schemes, is the only mutual fund in India that qualifies for a tax deduction.
It allows investors to claim an annual tax deduction on investments up to ₹ 1.5 lakh, under Section 80C of the Income Tax Act, with a mandatory 3-year lock-in period.
You can invest in ELSS either through a Lump Sum amount or through regular Systematic Investment Plans (SIPs). And, if your gains exceed ₹1 .25lakh in a financial year, you will need to pay a 12.5% tax on Long-Term Capital Gains (LTCG).
Public Provident Fund (PPF)
Public Provident Fund, commonly known as PPF, is a savings plan offered by the government, through banks and post offices. It is designed for long-term savings with a 15-year duration.
How PPF Works: You can start a PPF account with just ₹100, but you must deposit a minimum ₹500 and a maximum ₹1.5 lakhs each year. If you invest more than ₹1.5 lakhs in a year, you won’t earn interest on the extra amount. And, the highest deduction limit is set at ₹1,50,000.
Once you put your money in, your money is locked in for 15 years, but you have the option to make partial withdrawals starting from the 7th year. At the time of withdrawal, both the interest earned and the initial deposit are tax-free. To keep your account active, you need to make at least one deposit each year for the full 15 years.
Senior Citizens Savings Scheme (SCSS)
SCSS or Senior Citizens Savings Scheme is a retirement plan, supported by the Indian government for individuals above 60 (or those above 55 opting for voluntary retirement), with a 5-year lock-in period. Senior Citizens can invest up to ₹30 lacks with an attractive interest rate of 8.20% p.a. SCSS qualifies for tax exemption up to ₹1.5 lakh under Section 80C.
Additionally, premature withdrawal is allowed. This scheme provides both tax benefits and a steady income after retirement, making it an appealing option for senior citizens.
National Savings Certificate (NSC)
National Savings Certificate or NSC, is a secure government backed investment option, available at local post offices. It requires 5-year lock-in period and offers an attractive interest rate of 7.7% annually (from April to June 2023). You can start with just ₹100, and there is no maximum limit, but only up to ₹1.5 lakh is exempted annually under Section 80C.
NSC provides premature withdrawals with some specific conditions, including cases where the certificate-holder has passed away or if the certificates have been surrendered. NSC account can be opened by an adult in their own name or on behalf of a minor. Additionally, NSC certificates can be used as collateral to avail loans for meeting short-term financial requirements.
Unit Linked Insurance Plans (ULIPs)
ULIP, or Unit Linked Insurance Plan, combines long-term investments with life insurance coverage. When you pay the premium, it’s divided between insurance and investments in equity, debt, or a combination of both, this makes ULIPs an excellent choice for achieving your and your family’s financial goals.
ULIPs have gained popularity, due to its dual benefits of saving money and offering tax advantages, investors can avail of tax exemptions up to ₹ 1.5 lakh on the invested amount u/s 80C income tax provisions. ULIPs have 5 year lock in period.
Tax Saving FD
Tax Saving Fixed Deposits are a type of savings plan, offered by banks or post offices. It Allows you to save on taxes under Section 80C but comes with 5-year lock-in period, and you can claim a maximum of ₹1.5 lakh tax exemption, the profits you earn from these deposits are subject to taxes.
Sukanya Samriddhi Yojana (SSY)
SSY or Sukanya Samriddhi Yojana is a government savings scheme, focused on meeting the financial requirements for a girl’s education and marriage. Launched in 2015 under the ‘Beti Bachao, Beti Padhao’ initiative, it encourages parents to start saving from their daughter’s birth.
Parents can open an SSY account in post offices and specific banks with a minimum investment amount of ₹250 and a maximum annual amount of ₹1.5 lakh annually. Partial withdrawals are allowed after the girl turns 18, specifically for her education expenses. This scheme provides tax exemption of up to ₹1.5 lakh per year, under Section 80C of the Income Tax Act.
Life Insurance Premiums (LIC)
Life Insurance Policy can get you a tax deduction of up to ₹1.5 lakh every year, under Section 80C of the Income Tax Act. This applies, whether you have taken out the policy for yourself, your kids, or your spouse, even if you have more than one life insurance policy from different companies, you can add up all the premiums you’ve paid and claim deductions up to ₹1.5 lakh annually.
Currently, up to 10% of the total amount assured by the policy is exempted from tax, before April 1st, 2012, you could get an exemption on premiums up to 20% of the assured sum.
This means policies issued after April 1, 2012, the premium should be under 10% of the assured sum. For policies issued before that date, the premium should not exceed 20% of the assured sum to claim this deduction.
Employee Provident Fund (EPF)
EPF or Employee Provident Fund is a government-backed retirement savings scheme, for salaried employees. It allows a tax benefit of up to ₹1.5 lakh annually under Section 80C. Withdrawals after 5 years of continuous service, EPF balance (including the interest) are tax-free. Voluntary contributions also qualify for tax exemptions.
It offers an attractive interest rate of 8.25% and requires a basic salary of over ₹ 15,000 per month to open an account.
Home Loan’s Principal Repayment Amount
When you’re paying the EMI for a home loan, your monthly payment goes toward repaying the actual loan amount, which can be claimed for tax deductions under Section 80C. However, it’s important to remember that the interest you pay on the loan does not qualify for this tax benefit.
Who Can Claim Section 80C Deductions?
- Section 80C deductions are available only to individuals and Hindu Undivided Families (HUFs).
- Other entities such as companies, partnership firms, and LLPs are not eligible to claim benefits under this section.
How to Claim Section 80C Deductions?
To successfully claim deductions under Section 80C, taxpayers should keep the following points in mind:
- Make investments in eligible instruments on or before 31st March of the relevant financial year.
- Maintain proper documentation such as investment receipts, premium payment proofs, and ELSS statements.
- Submit investment declarations to your employer in time to ensure correct TDS adjustment.
- While filing your income tax return, disclose these investments under the “Deductions under Chapter VI-A” section.
Final Words
Section 80C of the Income Tax Act remains a tax-saving way under the old tax regime, offering deductions up to ₹1.5 lakh on a wide range of investments and expenses. By choosing the right options from the Section 80C deductions list, taxpayers can reduce taxable income, save tax efficiently, and build long-term financial security through disciplined planning.
FAQS on Section 80C
Can I claim Section 80C deductions while filing ITR if I did not submit proofs to my employer?
Yes. You can claim eligible Section 80C investments directly while filing your income tax return, provided the investments were made before 31st March of the relevant financial year.
Can a company or firm claim benefits under Section 80C?
No. Section 80C deductions are available only to individuals and Hindu Undivided Families (HUFs), not to companies, partnership firms, or LLPs.
Are life insurance premiums paid to private insurers eligible under Section 80C?
Yes. Premiums paid to IRDAI-approved life insurance companies, whether public or private, qualify for deduction under Section 80C.
In which year can stamp duty paid on house purchase be claimed under Section 80C?
Stamp duty and registration charges can be claimed as a deduction in the same financial year in which the payment is actually made.
What does Section 80C deduction under Chapter VI-A mean?
Section 80C allows tax deductions for investments made in specified instruments such as PPF, NSC, ELSS, and Sukanya Samriddhi Yojana under Chapter VI-A.
Can I claim deductions under both Section 80C and Section 80D?
Yes. You can claim deductions under Section 80C for investments and Section 80D separately for health insurance premiums in the same financial year.
Can NRIs claim Section 80C deductions?
Yes. NRIs can claim Section 80C deductions for eligible investments such as life insurance premiums, ELSS mutual funds, and certain other permitted instruments.
Can I invest more than ₹1.5 lakh under Section 80C?
Yes. You may invest more than ₹1.5 lakh, but the tax deduction under Section 80C will be limited to ₹1.5 lakh only.
Is a fixed deposit eligible for Section 80C deduction?
Yes. Only tax-saving fixed deposits with a minimum lock-in period of 5 years qualify for deduction under Section 80C.
Can tuition fees be claimed under Section 80C?
Yes. Tuition fees paid for full-time education of children in Indian schools, colleges, or universities are eligible under Section 80C, excluding donations and development charges.
Does SIP investment qualify under Section 80C?
Only SIPs made in Equity Linked Savings Schemes (ELSS) qualify for deduction under Section 80C. Regular mutual fund SIPs are not eligible.
Is the full EPF contribution eligible for Section 80C deduction?
No. Only the employee’s contribution to EPF qualifies for deduction under Section 80C, not the employer’s share.
Can I claim both EPF and PPF investments under Section 80C?
Yes. Contributions made to both EPF and PPF can be claimed together under Section 80C, subject to the overall ₹1.5 lakh limit.
Is interest earned on 80C investments also deductible?
No. Interest earned is generally taxable, except for NSC, where reinvested interest qualifies for deduction under Section 80C in the year of reinvestment.
Happy investing and thank you for reading!
Disclaimer:
This website content is only for educational purposes, not investment advice. Before making any investment, it’s important to do your own research and be fully informed. Investing in the stock market includes risks, and you should carefully read the Risk Disclosure documents before proceeding. Please remember that past performance doesn’t guarantee future results, and due to market fluctuations, your investment goals may not always be achieved.
