What is Section 80C?#
Section 80C of the Income Tax Act is the most popular tax deduction provision in India. It allows individuals and Hindu Undivided Families (HUFs) to reduce their taxable income by up to ₹1,50,000 per year by making investments or payments in specified categories.
Only applicable under the Old Tax Regime. Section 80C deductions are not available under the New Tax Regime.
Section 80C Deduction Limit#
| Regime | 80C Available? | Max Deduction |
|---|---|---|
| Old Tax Regime | ✅ Yes | ₹1,50,000 |
| New Tax Regime | ❌ No | Nil |
What Qualifies for 80C Deduction?#
Investments#
| Instrument | Lock-in | Returns |
|---|---|---|
| PPF (Public Provident Fund) | 15 years | ~7.1% p.a. (tax-free) |
| ELSS Mutual Funds | 3 years | Market-linked |
| NSC (National Savings Certificate) | 5 years | ~7.7% p.a. |
| 5-Year Tax Saving FD | 5 years | ~6.5–7.5% p.a. |
| Sukanya Samriddhi Yojana | Till daughter's marriage/18 | ~8.2% p.a. |
| Senior Citizens Savings Scheme | 5 years | ~8.2% p.a. |
| NPS Tier-II (notified) | Varies | Market-linked |
Payments#
| Payment | Condition |
|---|---|
| Life Insurance Premium | For self, spouse, children |
| Home Loan Principal | On first property |
| Children's Tuition Fees | Up to 2 children, full-time education |
| Stamp Duty / Registration | On house purchase (one-time) |
| Pension plan premium | Notified pension plans |
EPF (Employee Provident Fund)#
Your EPF contribution (12% of basic salary) automatically qualifies under 80C. This often uses a significant portion of the ₹1.5 lakh limit without you doing anything extra.
How to Calculate Your 80C Deduction#
EPF Contribution = ₹60,000
LIC Premium = ₹30,000
PPF Contribution = ₹50,000
Total = ₹1,40,000 → You can add ₹10,000 more
You cannot claim more than ₹1,50,000 even if your total investments exceed this limit.
80C + 80CCD(1B) = ₹2 Lakh Combined#
Section 80CCD(1B) provides an additional deduction of up to ₹50,000 for NPS (National Pension System) contributions — over and above the ₹1.5 lakh 80C limit. Combined, you can save tax on up to ₹2 lakh.
Tax Saving from 80C#
| Tax Slab | Tax Saved on ₹1.5L |
|---|---|
| 5% slab | ₹7,500 |
| 20% slab | ₹30,000 |
| 30% slab | ₹45,000 |
Add 4% cess for actual savings.