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What is Section 80C?
Section 80C of the Income Tax Act allows individuals (and HUFs) to claim deduction of up to ₹1.5 lakh per year from gross total income for specified investments and expenses. This deduction is available only under the OLD tax regime; the new regime (default since FY 2023-24) does not allow Section 80C.
It's the most popular tax-saving provision in India.
Eligible investments — Full list
Insurance & Long-term:
- Life Insurance Premium (LIC, ULIP, etc.) — own, spouse, children
- EPF (Employee Provident Fund) — employee's 12% contribution
- VPF (Voluntary Provident Fund)
- PPF (Public Provident Fund) — up to ₹1.5 lakh per year, 15-year lock-in
- NPS (National Pension System) — Tier I only (additional ₹50,000 u/s 80CCD(1B) over and above 80C)
- SCSS (Senior Citizen Savings Scheme)
Investments:
- ELSS (Equity Linked Savings Scheme) Mutual Funds — 3-year lock-in
- NSC (National Savings Certificate) — 5-year
- Tax Saving Fixed Deposits (5-year lock-in)
- NABARD bonds
Home loan and education:
- Home loan PRINCIPAL repayment (interest u/s 24 separately)
- Stamp duty & registration charges (first-time home buying)
- Children's tuition fees (max 2 children) — recognized institutions in India
Sukanya Samriddhi Yojana (SSY) — Girl child specific account
Smart 80C allocation strategy
For ₹1.5 lakh limit:
- Already covered: EPF (mandatory if employed), home loan principal, children's school fees — often these eat up most of ₹1.5 lakh
- If still have room: Top up with ELSS (best for long-term wealth + tax saving), then PPF (safer, 15-year lock-in)
- For senior parents: SCSS gives 7.4-8% interest + Section 80C deduction
Most middle-class salaried Indians easily exhaust ₹1.5 lakh through EPF + home loan + school fees combined.
Tax benefit calculation
Maximum tax saved per year (in old regime):
- Income up to ₹5 lakh: 5% slab → ₹7,500 tax saving
- ₹5-10 lakh income: 20% slab → ₹30,000 saving
- Above ₹10 lakh: 30% slab → ₹45,000 saving
Plus surcharge/cess. For high-income earners (30% slab), 80C effectively reduces tax by ~₹46,800/year. Over a working career, this compounds.
New regime vs old regime — 80C trade-off
New tax regime (default) does NOT allow 80C, 80D, 80G and most other deductions. But it has:
- Lower slab rates
- Standard deduction (₹75,000 for salaried in new regime, ₹50,000 in old)
- Standard deduction on family pension (₹25,000)
For salaried with ₹2 lakh+ deductions (80C + 80D + HRA + home loan), OLD regime is usually better. For salaried with minimal deductions, NEW regime wins. Compute both before deciding.