A Guide to Tax-Saving Options Under Section 80C

The Income Tax department allows several deductions from your taxable income under Chapter VI A of the IT Act. Among all these provisions, Section 80C creates room for up to Rs. 1.5 Lakh deduction from every taxpayer’s annual income. Read on to understand what Section 80C is and the deductions under Section 80C for better tax planning, as well as the top investment options that enable tax savings through Section 80C.

11 Tax-saving Options Under Section 80C Deductions List

What is Section 80C?

Section 80C is a provision under the Income Tax Act 1961 that allows individuals and Hindu Undivided Families (HUFs) to claim deductions from their gross total income by investing in specified financial instruments or incurring certain expenses. This helps reduce total taxable income, thereby lowering the overall tax liability.

• Maximum Deduction Limit: ₹1.5 lakh per financial year.

• Applicable Only Under: The Old Tax Regime (not available under the New Tax Regime).

What are Section 80C Deductions?

Section 80C deductions refer to the tax benefits you can claim by investing in or spending on eligible items listed under this section. These deductions are subtracted from your gross income, reducing your taxable income:

• These deductions are part of Chapter VI-A of the Income Tax Act.

• Only individuals and HUFs are eligible to claim these; companies, firms, and LLPs are not eligible.

Who Is Eligible to Claim Section 80C Deductions?

Section 80C deductions are exclusively available to individual taxpayers and Hindu Undivided Families (HUFs). This means that entities such as companies, partnerships, and LLPs are not permitted to claim benefits under this section in any given financial year. The provision is designed to support personal savings and investments, making it relevant only for individual financial planning.

11 Tax-saving Options Under Section 80C Deductions List

To establish the habit of saving among the citizens, the Indian Government has included these investment options as a savings scheme under the tax-saving column:

1. Life Insurance Premium

Based on 80C deduction policies, the life insurance premiums paid towards a life insurance policy are considered non-taxable. This benefit is particularly extended when the life insurance plan is owned by you, as a taxpayer. Otherwise, the plan needs to cover the family members of a Hindu Undivided Family.

Currently, you can expect to receive up to 10% of the annual assured sum for tax exemption purposes. Previously, before April 2012, insurance holders could claim up to 20% of the insured sum as tax-deductible under Section 80C, potentially reducing their tax liability.

2. Public Provident Fund (PPF)

The Public Provident Fund (PPF) is a government-backed savings scheme and has been one of the most preferred investment options for many. This is not only due to its guaranteed returns but also due to its tax-free nature. Every Indian can start a PPF account and contribute up to ₹1.5 Lakhs within one financial year.

This directly indicates that you can claim the entire contribution for tax exemption as per the norms of the Income Tax Act. In addition, if your employer decides to contribute towards your PPF savings voluntarily, then that contribution can also be listed under tax deduction as per Section 80C.

3. Employees Provident Fund (EPF)

The Employees Provident Fund or EPF will be a mandatory inclusion in your investment portfolio in case:

• You work in a company with more than 20 members.

• Earn more than ₹15,000 each month

Since its introduction, the employer’s contribution has been considered entirely tax-exempt. Following this, in the 2021 Budget, the Union Finance Minister also declared the interest earned through mutual fund contributions as tax-deductible. 

However, the latter rule applies only to employees who have served a company for more than five years and are also making principal repayments on their home loan.

Note: Voluntary contributions to any EPF account are also regarded as an 80C investment. Hence, they are tax-exempt.

4. Equity Linked Savings Scheme (ELSS)

ELSS schemes are a specialised group of mutual funds that are eligible for tax deductions under Section 80C. They come with a minimum lock-in period of 3 years.

Also, there's an upper limit for the exemption provision. Under no circumstances can you claim tax benefits on ELSS contributions exceeding ₹1.5 Lakh for a single financial year. However, the Ministry of Finance introduced specific slight changes in the ELSS tax slabbing in the Union Budget 2020.

As per the new rules, you can either opt for the old tax exemption regulations under Section 80C deductions, or you may prioritise the new flat tax scheme. The older rules will be advantageous when your annual income is within ₹9 Lakhs, and as a result, the tax liability is already lower. 

5. Unit Linked Insurance Plan (ULIP)

Tax deductions on one ULIP depend on the funds selected and the proportion chosen. The primary reason to invest in Unit Linked Insurance Plans is that they yield more compared to other traditional insurance schemes, potentially leading to the maximum deduction benefit.

In recent years, many individuals have considered initiating ULIP investments due to the tax deduction benefits associated with Section 80C. Even after the new tax regime has been introduced, no changes have been noticed in the deductions. Thus, you can claim tax exemptions on up to ₹1.5 Lakh worth of premiums paid in a year.

6. Tax Saver Fixed Deposits

You can opt for a tax-savings fixed deposit that features a 5-year lock-in period. It is among the best examples of tax-saving investments other than 80C, which has no such stringent eligibility criteria.

However, there's an upper limit to investing in this type of fixed deposit. You cannot put more than ₹1.5 Lakh in a single fiscal year, and there is no provision for foreclosing a tax-saving FD.

7. National Pension Scheme (NPS)

One of the most popular government-regulated pension schemes, the NPS, enables all Indians to build a corpus for their retirement. Anyone aged 18 to 70 can apply for an NPS account.

What’s the best part about this scheme? You can separately avail a ₹50,000 tax deduction under Section 80CCD(1B). This is an additional benefit, in addition to the standard ₹1.5 Lakh deduction under Section 80C. 

8. Home Loan Principal Repayment

The principal component of a home loan EMI isn’t subject to tax deductions under Section 80C. However, there’s a maximum limit for tax exemption, which is ₹1.5 lakh per year.

To claim this benefit, you should own the house for at least 5 years. If this condition is not met, you will again be liable to pay the tax in the same year of the property sale.

9. Sukanya Samriddhi Yojana

Legal guardians or parents of a girl child (under the age of 10 years) voluntarily invest in this scheme to strategically save for their education, marriage, or other requirements. The interest income from this scheme, along with tuition fees paid, is tax-deductible as per Section 80C.

10. Senior Citizens Savings Scheme

The Senior Citizens Savings Scheme (SCSS) is a government-controlled plan that aims to provide a fixed income to individuals after retirement. You must continue investing in this scheme for at least 5 years to receive the maturity amount.

While making these contributions, you can include up to ₹1.5 Lakh under tax-deductible income. Also, when the interest exceeds ₹50,000 per year, then TDS is deducted from the recipient.

11. National Savings Certificate

According to Section 80C investment norms, the National Savings Certificate (NSC) is eligible for multiple deductions and tax benefits. Starting with the primary amount invested, here you can claim deductions for contributions made up to ₹1.5 Lakh each year.

Additionally, the cumulative interest earned on an NSC is exempt from tax under Section 80C provisions. This is because the interest continues to be reinvested throughout the investment tenure.

Finally, the net applicable interest on an NSC is deducted at the end of its maturity. Therefore, the beneficiaries can experience the deferred tax advantage for 5 years.

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How Much Tax Exemption Can Be Claimed Under Section 80C?

Under Section 80C of the Income Tax Act, you can claim tax-deductible income of up to ₹1.5 Lakh annually. These claims can be filed individually as well as on behalf of a Hindu Undivided Family.

Apart from the investments listed above, you can include the following expenses under 80C:

• Tuition fees for up to 2 children

• Amount furnished as stamp duty

• Registration fee for a property

Nevertheless, the maximum cap on deductible income cannot exceed ₹1.5 Lakh for a fiscal year.

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How to Claim Deductions Under Section 80C

To successfully claim tax benefits under Section 80C, it’s essential to follow a few key steps:

• Make eligible investments before 31st March of the financial year to ensure they count toward your deductions.

• Keep all relevant documents handy, including insurance premium receipts, ELSS account statements, deposit slips, and other proof of investment.

• Inform your employer about your investments early in the year so they can adjust your TDS (Tax Deducted at Source) accordingly.

• When filing your Income Tax Return (ITR), report these investments under the section titled “Deductions under Chapter VI-A.

To Conclude

Section 80C allows various payments to be included under tax deductions. Most of them involve contributions made towards home loan repayments, life insurance policies, and children's tuition fee payments. You can refer to the specifics and adjust your investments accordingly to enjoy the maximum tax benefits.

Frequently Asked Questions

Is the National Pension Scheme (NPS) covered under Section 80C?

Yes, contributions up to ₹1.5 lakh are deductible under Section 80C, and an additional ₹50,000 under Section 80CCD(1B).

Can I claim Section 80C benefits if I sell my house within 5 years?

No, if the property is sold within 5 years, the claimed deductions become taxable.

Can I claim tax benefits for Employees Provident Fund (EPF) contributions under section 80C?

Yes, both employer and voluntary employee contributions to the EPF are eligible for tax deduction under Section 80C of the Income Tax Act.

How do I claim Section 80C deductions while filing ITR?

Report eligible investments under “Deductions under Chapter VI-A” in your Income Tax Return.

Is investment in Public Provident Fund (PPF) eligible under Section 80C?

Yes, contributions to PPF up to ₹1.5 lakh annually are eligible for tax deduction under Section 80C.

Is the interest earned on NSC taxable?

No, the interest earned is reinvested and qualifies for deduction under Section 80C, making it tax-deferred until the maturity date.

Can I claim registration charges for a property under Section 80C of the Income Tax Act?

Yes, registration fees paid for a residential property are deductible under Section 80C of the Income Tax Act in the year of payment.

How can I maximise my Section 80C deductions?

Here are some ways you can maximise section 80C deductions:

• Start early in the financial year to plan wisely.

• Diversify between safe (PPF, NSC) and growth-oriented (ELSS) options.

• Include mandatory expenses, such as EPF and the principal of a home loan.

• Use insurance premiums for both protection and tax savings.

• Track your investments to ensure you reach the ₹1.5 lakh limit.