Tax Planning

Section 80C: The Complete ₹1.5 Lakh Deduction Guide

It is the most popular tax-saving section in the Income Tax Act. But are you using it correctly? We decode the best investment options for FY 2025-26.

By Editorial Team • Updated: Jan 2026 • Old Regime Only

What is Section 80C?

Section 80C of the Income Tax Act, 1961, allows individuals and HUFs to claim a deduction of up to ₹1.5 Lakhs from their gross total income. This reduces your taxable income, thereby lowering your tax liability.

Impact on Wallet: If you fall in the highest tax bracket (30%), fully utilizing the ₹1.5 Lakh limit saves you ₹46,800 in taxes (including 4% cess).

Note on New Regime: Section 80C is NOT available under the New Tax Regime (Section 115BAC). This guide is relevant only if you opt for the Old Tax Regime.

The Big List: Eligible Investments

There are over a dozen ways to fill this ₹1.5 Lakh bucket. Here are the most popular ones:

1. Public Provident Fund (PPF)

A government-backed scheme with a 15-year lock-in.
Return: ~7.1% (Variable, declared quarterly).
Why choose it: It enjoys "EEE" status—Exempt on Investment, Exempt on Interest, Exempt on Maturity.

2. Employees' Provident Fund (EPF)

For salaried employees, this is automatic. Your share of the PF contribution (12% of Basic Salary) is counted under 80C.
Check your salary slip before making new investments; your 80C might already be half full!

3. Equity Linked Savings Scheme (ELSS)

These are diversified equity mutual funds with a tax benefit.
Lock-in: 3 Years (Lowest among all 80C options).
Return: Market-linked (Historically 12-15%).
Tax: Gains above ₹1.25 Lakh are taxed at 12.5% (LTCG).

4. Life Insurance Premiums

Premiums paid for yourself, spouse, or children (Term Plan, Endowment, or ULIP) are eligible.

5. Sukanya Samriddhi Yojana (SSY)

Dedicated to the girl child (below 10 years). Offers higher interest than PPF.
Maturity: 21 years from account opening.

6. 5-Year Tax Saving FD

Available at banks and post offices. Lock-in is 5 years. Interest is fully taxable.

Hidden Gems: Expenses That Count as 80C

Did you know you can claim 80C without investing a single rupee? Certain expenses are eligible:

  • Tuition Fees: Fees paid for the full-time education of up to 2 children (School/College/University in India). Does not include donation or development fees.
  • Home Loan Principal Repayment: The principal component of your EMI is eligible. (Interest goes under Section 24b).
  • Stamp Duty & Registration Charges: Paid during the purchase of a house property. Claimable only in the year of purchase.

The Ultimate Comparison Table

Which option is right for you? Compare them side-by-side.

Instrument Returns Lock-in Risk Profile Tax on Maturity
ELSS Funds 12-15% 3 Years High 12.5% LTCG
PPF ~7.1% 15 Years Zero Tax Free
EPF ~8.25% Till Retirement Zero Tax Free*
Tax Saver FD 6.5-7.5% 5 Years Zero Fully Taxable
NSC ~7.7% 5 Years Zero Fully Taxable

Editorial Strategy: What Should You Choose?

For Young Earners (Age 22-35)

Recommendation: 70% ELSS + 30% EPF/PPF.
At this age, you can afford market volatility. The 3-year lock-in of ELSS is an advantage, and the high returns help in wealth creation.

For Parents (Age 35-50)

Recommendation: Tuition Fees + Home Loan Principal + PPF.
Your expenses are high. Use the "Expenses" route (Tuition/Home Loan) to fill the 80C limit first before locking away cash in new investments.

For Senior Citizens

Recommendation: Senior Citizen Savings Scheme (SCSS) or Tax Saver FD.
Safety and regular income are the priority. SCSS currently offers excellent rates (above 8%).

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Important Disclaimer

Tax laws are subject to change in every Union Budget. The interest rates mentioned (like PPF 7.1%) are subject to quarterly revision by the Ministry of Finance. Please consult a CA for your specific tax filing.