Section 80C allows taxpayers to claim deductions of up to ₹1.5 lakh on eligible investments and expenses. These include contributions towards life insurance premiums, Public Provident Fund (PPF), home loan principal repayment, ELSS mutual funds, Sukanya Samriddhi Yojana, and several other approved instruments. By claiming these deductions, individuals can substantially reduce their annual tax burden. However, it is important to note that Section 80C deductions are not available under the New Tax Regime.
What is Section 80C?
Section 80C of the Income Tax Act, 1961 is one of the most widely used tax-saving provisions, allowing taxpayers to lower their gross total income, thereby reducing their overall taxable income and tax liability for the financial year.
Investments and payments eligible for deduction under this section include:
- ELSS Mutual Funds
- Sukanya Samriddhi Yojana
- Life Insurance Premiums
- Public Provident Fund (PPF)
- Employees’ Provident Fund (EPF)
- Post Office Time Deposits
- Bank Fixed Deposits (5 years or more)
- Home Loan Principal Repayment
- Tuition Fees for School or College
These deductions help taxpayers save significantly by reducing their taxable income through systematic and planned investments.
Budget 2025 Updates – Section 80C
It was widely anticipated that the deduction limit under Section 80C would be raised to ₹2 lakh starting April 1, 2025. However, the Budget 2025 made no changes to the existing provisions, and the current limit of ₹1.5 lakh remains unchanged.
Section 80C – A Preferred Tax-Saving Option
Section 80C remains the most popular tax-saving choice under the old tax regime due to the following advantages:
- Diverse Investment Choices: Options include life insurance, provident fund, fixed deposits, and government-backed schemes like the National Savings Certificate (NSC).
- Flexible Investment Tenure: Many 80C instruments have a relatively short lock-in period of around 5 years, offering good liquidity compared to long-term pension funds.
- Encourages Savings and Financial Planning: These investments not only help in tax reduction but also promote disciplined financial planning.
- Inflation-Adjusted Returns: Most 80C options yield returns that outpace inflation, helping investors preserve and grow their wealth over time.
What Are Section 80C Deductions?
Section 80C of the Income Tax Act offers taxpayers various opportunities to reduce their taxable income by making eligible investments or payments. These deductions can be claimed for Life Insurance Premiums, Public Provident Fund (PPF), National Savings Certificates (NSC), Equity Linked Savings Scheme (ELSS), Sukanya Samriddhi Yojana, tuition fees, home loan principal repayment, and several other approved schemes. The maximum deduction limit under Section 80C is ₹1.5 lakh per financial year.
Current Limitations
The deduction ceiling of ₹1.5 lakh, set back in 2014, has remained unchanged for over a decade. Many taxpayers and financial experts believe that this limit no longer reflects the current economic situation. Since just a few eligible investments can quickly exhaust the cap, an increase in the deduction limit would provide taxpayers with greater flexibility to optimize their savings and enhance tax efficiency.
Who Can Claim Section 80C Deductions?
Only individual taxpayers and Hindu Undivided Families (HUFs) are eligible to claim deductions under Section 80C.
Companies, LLPs, and partnership firms are not eligible to claim these deductions.
How to Claim Section 80C Deductions?
To avail of the benefits under Section 80C, taxpayers should follow these essential steps:
- Invest in eligible instruments before 31st March of the financial year.
- Maintain documentary proofs such as deposit slips, insurance premium receipts, and ELSS statements.
- Inform your employer about your eligible investments to ensure correct TDS adjustments.
- While filing your ITR, report these investments under the section “Deductions under Chapter VI-A.”
By following these steps, taxpayers can efficiently claim Section 80C benefits and reduce their tax liability for the year.
Eligible Investments Under Section 80C and Risk Comparison
The table below highlights the key features of various investment options eligible under Section 80C of the Income Tax Act. It provides a quick comparison of average returns, lock-in periods, and risk levels, helping taxpayers choose the most suitable tax-saving investment as per their goals and risk appetite.
| Investment Options | Average Interest / Returns | Lock-in Period | Risk Level |
| ELSS Funds (Equity Linked Savings Scheme) | 12% – 15% | 3 years | High |
| NPS (National Pension System) | 8% – 10% | Till 60 years of age | High |
| ULIP (Unit Linked Insurance Plan) | 8% – 10% | 5 years | Medium |
| Tax Saving Fixed Deposit (FD) | Up to 8.40% | 5 years | Low |
| PPF (Public Provident Fund) | 7.90% | 15 years | Low |
| Senior Citizen Savings Scheme (SCSS) | 8.60% | 5 years (extendable by 3 years) | Low |
| National Savings Certificate (NSC) | 7.90% | 5 years | Low |
| Sukanya Samriddhi Yojana (SSY) | 8.50% | Till the girl child turns 21 years (partial withdrawal allowed at 18) | Low |
Deduction Limits under Section 80C, 80CCC, 80CCD(1), 80CCE & 80CCD(1B)
Sections 80C, 80CCC, and 80CCD of the Income Tax Act offer valuable tax-saving opportunities for individuals investing in specific instruments and pension schemes. The combined deduction limit under Sections 80C, 80CCC, and 80CCD(1) is ₹1.5 lakh, as per Section 80CCE.
However, taxpayers can claim an additional deduction of ₹50,000 under Section 80CCD(1B) for contributions made to the National Pension Scheme (NPS). This brings the total maximum deduction to ₹2 lakh in a financial year, offering enhanced tax-saving benefits for retirement planning.
| Section | Eligible Investments for Tax Deductions | Maximum Deduction |
| 80C | Investments in ELSS, PPF, SPF/RPF, Life Insurance Premiums, Home Loan Principal, SSY, NSC, SCSS, etc. | ₹1,50,000 |
| 80CCC | Contributions to pension funds | ₹1,50,000 |
| 80CCD(1) | Payments towards NPS or Atal Pension Yojana | Employed: 10% of salary (Basic + DA)Self-employed: 20% of gross income |
| 80CCE | Combined limit for 80C + 80CCC + 80CCD(1) | ₹1,50,000 |
| 80CCD(1B) | Additional investment in NPS (beyond ₹1.5 lakh limit) | ₹50,000 |
| 80CCD(2) | Employer’s contribution to NPS (beyond ₹1.5 lakh limit) | Govt. employer: 14% of Basic + DAOthers: 10% of Basic + DA |
How to Save Tax Under Section 80C?
Section 80C of the Income Tax Act allows taxpayers to reduce their taxable income by investing in eligible instruments such as PPF, ELSS, NSC, life insurance premiums, and more. The maximum deduction limit is ₹1.5 lakh per financial year under this section.
Let’s understand how Section 80C helps in reducing tax liability with an example:
Example:
Mr. A earns a salary income of ₹10,00,000 and other income of ₹1,00,000. He invests ₹1,50,000 in PPF and claims a deduction under Section 80C.
| Particulars | Section 80C Deduction Claimed | Section 80C Deduction Not Claimed |
| Salary Income | ₹10,00,000 | ₹10,00,000 |
| Less: Standard Deduction | (₹50,000) | (₹50,000) |
| Net Salary Income | ₹9,50,000 | ₹9,50,000 |
| Other Income | ₹1,00,000 | ₹1,00,000 |
| Gross Total Income | ₹10,50,000 | ₹10,50,000 |
| Less: Section 80C Deduction | (₹1,50,000) | – |
| Taxable Income | ₹9,00,000 | ₹10,50,000 |
| Total Tax Payable (including cess) | ₹96,200 | ₹1,32,600 |
✅ Tax Saved: ₹1,32,600 – ₹96,200 = ₹36,400
Conclusion:
By investing ₹1.5 lakh in eligible 80C options, Mr. A effectively saves ₹36,400 in taxes under the old tax regime. Thus, Section 80C serves as a powerful tool to lower taxable income while simultaneously encouraging long-term financial investments.
FAQs on Section 80C Deductions
1. I have made an 80C investment on April 30, 2025. For which year can I claim this investment as a deduction?
You can claim deductions for investments made during a financial year in your ITR for the same year. For example, if you invested on April 30, 2025, the deduction can be claimed while filing your return for FY 2025–26 (AY 2026–27).
2. I have been paying life insurance premiums to a private insurance company. Can I claim an 80C deduction for the premium paid?
Yes. Deductions under Section 80C are allowed for life insurance premiums paid to any insurer approved by the Insurance Regulatory and Development Authority of India (IRDAI) — whether public or private. Hence, premiums paid to private insurers also qualify for the 80C deduction.
3. What is meant by 80C deduction under Chapter VI-A?
Section 80C falls under Chapter VI-A of the Income Tax Act and provides deductions for specific investments or payments such as Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana (SSY), ELSS, and life insurance premiums. These help reduce your taxable income up to the maximum permissible limit.
4. What is Section 80CCD(1)?
Section 80CCD(1) provides deductions for contributions made to the National Pension System (NPS).
- For salaried employees: Up to 10% of salary (basic + DA)
- For self-employed individuals: Up to 20% of gross income
This deduction is part of the overall ₹1.5 lakh limit under Section 80C.
5. What is Section 80CCD(2)?
Section 80CCD(2) allows a deduction for the employer’s contribution to the employee’s NPS account.
- Central Government employees: Up to 14% of salary (basic + DA)
- Other employers: Up to 10% of salary (basic + DA)
This deduction is over and above the ₹1.5 lakh limit under Section 80C.
6. What is the maximum deduction limit under Section 80C?
The maximum deduction limit under Section 80C is ₹1,50,000 per financial year, whether you invest in one eligible scheme or multiple.
7. Can I invest more than ₹1.5 lakh under Section 80C?
Yes, you can invest more than ₹1.5 lakh, but the tax deduction will be capped at ₹1.5 lakh per financial year as per current rules.
8. Can I claim 80C deductions while filing my ITR if I didn’t submit proof to my employer?
Yes. Even if you haven’t submitted investment proofs to your employer, you can still claim eligible 80C deductions while filing your income tax return, provided the investments were made before March 31, 2026 (for FY 2025–26).
9. Can I claim deductions under both Sections 80C and 80D?
Yes. You can claim deductions under both Section 80C (for investments like PPF, ELSS, etc.) and Section 80D (for medical insurance premiums). These are separate sections with distinct deduction limits.
10. Can NRIs claim Section 80C deductions?
Yes. NRIs (Non-Resident Indians) can claim deductions under Section 80C for certain eligible investments such as Life Insurance premiums, ELSS, and ULIPs, provided they are compliant with Indian tax laws.
11. What is Section 80CCD(1B)?
Section 80CCD(1B) provides an additional deduction of ₹50,000 for voluntary contributions to the National Pension System (NPS). This benefit is over and above the ₹1.5 lakh limit under Section 80C, giving taxpayers a total possible deduction of ₹2 lakh.
12. Can I claim Section 80C deduction for tuition fees?
Yes. Tuition fees paid for up to two children for full-time education in India at any school, college, or university qualify for deduction under Section 80C.
13. Are fixed deposits eligible for Section 80C deduction?
Yes. Tax-saving fixed deposits (FDs) with a 5-year lock-in period from scheduled banks are eligible for deductions under Section 80C.
14. Can I claim deduction for home loan repayment under Section 80C?
Yes. The principal portion of your home loan repayment is eligible for deduction under Section 80C, subject to the overall ₹1.5 lakh limit. However, the deduction can be reversed if the property is sold within 5 years of possession.
15. Are there any proposed changes to the 80C limit?
As of now, the limit remains ₹1.5 lakh (unchanged since 2014). However, many professionals and taxpayers have suggested increasing the limit to reflect current inflation and investment costs. Any changes would depend on upcoming Union Budgets.
