Section 80C of Income Tax Act 1961, is one of the most useful parts of the Indian Income Tax system. It helps people reduce the amount of income on which they pay tax. If you are a taxpayer in India, this section can help you save money and build wealth at the same time. It is a smart tool for planning your finances.
This section allows certain investments and payments to be deducted from your taxable income. When you reduce your taxable income, you pay less tax. Many people use this section every year to lower their tax bill and grow their savings.
Who Can Use Section 80C of Income Tax Act?
Only individual taxpayers and Hindu Undivided Families (HUFs) can claim deductions under Section 80C of Income Tax Act. This means that people like salaried employees, self-employed professionals, business owners, and retirees can all take advantage of this section. However, companies and partnership firms cannot use Section 80C. It is designed for personal and family-level tax planning.
Elevate your career with our Advanced Certification Program in Mergers & Acquisitions designed to transform your professional journey in just six months. This high- engagement course emphasizes real-world applications and features master classes from NLU and industry partners led by expert faculty.
How Much Can You Claim?
Under Section 80C, the government allows a maximum deduction of ₹1.5 lakh per financial year. You can invest or spend in eligible areas and then subtract this amount from your total income before calculating tax. Even if your investments go above ₹1.5 lakh, you cannot claim more than that.
For example, if you invest ₹2 lakh in different options, your deduction will still be limited to ₹1.5 lakh. This limit applies to the total of all eligible items combined, not to each item separately.
Eligible Investments and Payments Under Section 80C
Here are the most common investments and expenditures that qualify for deduction under section 80C of the Income Tax Act:
Public Provident Fund (PPF)
PPF is a long-term investment option backed by the government. It has a lock-in period of 15 years. Both the interest earned and maturity proceeds are tax-free.
Employees' Provident Fund (EPF)
If you are a salaried employee, your contribution to EPF is eligible for deduction. Employer's contribution is not counted under Section 80C.
Life Insurance Premium
Premiums paid for life insurance policies for yourself, your spouse, or your children are eligible. The insurance company must be registered under IRDAI (Insurance Regulatory and Development Authority of India).
National Savings Certificate (NSC)
NSC is a government savings bond available at post offices. Interest earned is taxable, but is also counted towards 80C in the year of accrual.
5-Year Fixed Deposits
Fixed deposits with a lock-in period of five years with scheduled banks qualify. The interest earned is taxable.
Equity Linked Savings Scheme (ELSS)
ELSS are mutual fund schemes that invest in equities (stocks). They have a lock-in period of three years and offer potentially higher returns, though they carry market risk.
Sukanya Samriddhi Yojana
This scheme is for the benefit of a girl child. Parents or legal guardians can open an account for a girl under the age of 10. It offers attractive interest rates and tax-free maturity benefits.
Senior Citizens Savings Scheme (SCSS)
This is a government-backed savings instrument for individuals above 60 years of age. It offers regular income and the investment qualifies for deduction.
Home Loan Principal Repayment
Repayment of the principal portion of a home loan qualifies under Section 80C. Interest payments, however, are claimed separately under Section 24(b).
Tuition Fees
Fees paid to any university, college, school, or educational institution situated within India for the full-time education of any two children of the taxpayer are allowed. Only tuition fees qualify; donations, development charges, and capitation fees are not covered.
Stamp Duty and Registration Charges
Stamp duty and registration charges paid for the purchase of a new house can be claimed in the year they are paid.
Postgraduation in law is being pursued by many students. Check out the online LLM courses available. Know about the best LLM colleges in India. Read LLM corporate law is the most followed legal field.
Important Conditions to Remember
Before claiming deductions under Section 80C, it is essential to understand the key rules and requirements. These conditions help ensure your investments are eligible and that you don’t lose tax benefits due to simple mistakes.
Lock-in Periods: Most investments have a mandatory lock-in. For example, PPF has 15 years, ELSS has 3 years, and bank fixed deposits have 5 years.
Early Withdrawal Rules: If you withdraw or surrender an insurance policy early, or sell a house within 5 years after claiming deductions, the benefits are reversed. You may have to pay extra tax in that case.
Investment Must Be in Your Name or Family’s Name: You can claim deductions for investments made for yourself, your spouse, and your children. In the case of tuition fees, only for two children is allowed.
Aggregate Limit: Section 80C, 80CCC, and 80CCD(1) together allow a maximum deduction of ₹1.5 lakh.
Check out the article and find corporate law courses to gain specialisation in this field of law.
Real-Life Example
Suppose your annual income is ₹8 lakh. You invest ₹1 lakh in PPF and pay ₹50,000 as tuition fees for your two children. Thus, you invest ₹1.5 lakh under Section 80C.
Now, instead of paying tax on ₹8 lakh, you will pay tax only on ₹6.5 lakh. This lowers your tax significantly depending on the slab you fall under.
If you fall under the 20% tax bracket, you save ₹30,000 in taxes directly!
Advantages of Section 80C of Income Tax Act
Section 80C offers more than just tax savings—it encourages disciplined financial planning. Understanding its benefits can help you make smart investment choices that support long-term goals while reducing your overall tax burden effectively.
Helps Save Taxes: You pay less tax legally.
Encourages Investment and Savings: You create long-term wealth and financial security.
Supports Major Life Goals: It helps in planning for children’s education, buying a house, or securing retirement.
Flexibility: You can choose from different investment options based on your goals and risk appetite.
Find out about the certificate of incorporation.
Recent Updates
As of April 2025, Section 80C of the Income Tax Act, 1961, continues to offer a maximum deduction of ₹1.5 lakh per financial year for eligible investments and expenses. This deduction is available exclusively under the old tax regime; taxpayers opting for the new tax regime under Section 115BAC are not eligible to claim this deduction
In the Income-tax Act, 2025 draft proposal, Section 80C has been renumbered as Clause 123 to simplify the legislation structure.
There is currently no increase in the deduction limit beyond ₹1.5 lakh, though there is frequent public demand for enhancement due to inflation.
Summing Up
Section 80C of the Income Tax Act, 1961, offers a great way to reduce your tax liability and build your financial future at the same time. It provides multiple investment options suitable for all types of investors—from those who prefer safety to those who are ready to take some market risk. Understanding the rules of Section 80C properly helps you make informed decisions. Start early, invest wisely, and take full advantage of this wonderful tax-saving opportunity. With careful planning, Section 80C can help you save a large amount of money every year and achieve your life goals.
Related posts
Section 80C of Income Tax Act: FAQs
Q1. What is Section 80C?
It is a provision that allows deductions from your taxable income for certain investments and expenses.
Q2. What is the maximum limit under Section 80C?
You can claim up to ₹1.5 lakh in a financial year.
Q3. Who can claim this deduction?
Only individuals and Hindu Undivided Families (HUFs) can claim it.
Q4. Can NRIs claim Section 80C benefits?
Yes, NRIs can claim certain deductions like PPF, life insurance, and ELSS.
Q5. What investments are allowed under Section 80C?
PPF, EPF, ELSS, NSC, life insurance premiums, 5-year FDs, and more.
Q6. Is tuition fee eligible under Section 80C?
Yes, for full-time education of up to two children in India.
Q7. Can I claim a deduction for interest on a home loan under 80C?
No, only the principal portion is covered under Section 80C. Interest is covered under Section 24(b).
Q8. Can I claim Section 80C if I invest after March 31?
No, investments must be made within the same financial year.
