Section 80C of the Income Tax Act, 1961, is one of the most widely used tax saving provisions for individual taxpayers and Hindu Undivided Families (HUFs) in India. It allows a deduction of up to ₹1.5 lakh from taxable income every financial year through investments or payments in eligible schemes. In addition to lowering tax liability, many of these options can help build long-term wealth.
Key Highlights
- Maximum deduction: ₹1.5 lakh per year.
- Eligible for individuals and HUFs, not for companies or partnerships.
- Includes investments like Life Insurance, PPF, ELSS, NSC, tax-saving FDs, and certain tuition fees.
- NRIs can claim deductions for select instruments.
- An extra ₹50,000 deduction is available for NPS under Section 80CCD(1B).
Who Can Claim
Deductions are available to any individual taxpayer or HUF. Companies, partnerships, and LLPs are not eligible. There is no age restriction. Certain expenses, like tuition fees for up to two children, are also covered.
Eligible Investments and Expenses Under Section 80C
- Life Insurance Premium – Premiums paid for policies from LIC or other approved insurers for self, spouse, and children. Premiums should not exceed 10% of the sum assured for the deduction to apply.
- Public Provident Fund (PPF) – Investments between ₹500 and ₹1.5 lakh per year. Lock-in of 15 years with partial withdrawals allowed after 5 years. Interest earned is tax-free.
- Equity Linked Savings Scheme (ELSS) – Market-linked mutual funds with a 3-year lock-in, offering potentially higher returns.
- National Savings Certificate (NSC) – 5-year lock-in, fixed returns, and partial reinvestment of interest eligible for 80C deduction.
- Tax-Saving Fixed Deposits – 5-year lock-in deposits offered by banks. Interest is taxable.
- Pension Funds (Section 80CCC) – Premiums for eligible pension funds are included in the ₹1.5 lakh cap.
- National Pension System (NPS) – Deduction under Section 80C plus an additional ₹50,000 under Section 80CCD(1B).
- Other Eligible Investments – Sukanya Samriddhi Yojana, Senior Citizens Savings Scheme, 5-year post office time deposits, and tuition fees for up to two children (excluding donations and development fees).
Lock-In Periods at a Glance
- ELSS: 3 years
- PPF: 15 years
- NSC: 5 years
- Tax-Saving FD: 5 years
- NPS: Till retirement
Mistakes to Avoid
- Waiting until year-end to invest.
- Not keeping proof of investments.
- Claiming for ineligible expenses.
- Exceeding premium limits for life insurance policies.
Why It Matters
Using Section 80C strategically not only reduces your tax liability but also builds disciplined savings habits. Combining fixed-income and market-linked options can help achieve a balance between safety and growth.
Section 80C Investments – Quick Comparison Table
| Investment Option | Max Limit (₹) | Lock-in Period | Tax on Returns | Risk Level | Approx. Returns* |
|---|---|---|---|---|---|
| Life Insurance Premium | 1.5 lakh | Policy term | Tax-free** | Low | 4% – 6% |
| Public Provident Fund (PPF) | 1.5 lakh | 15 years | Tax-free | Low | 7% – 8% |
| ELSS Mutual Funds | 1.5 lakh | 3 years | Taxable (LTCG) | High | 12% – 15% |
| National Savings Certificate | 1.5 lakh | 5 years | Taxable | Low | 6% – 7% |
| Tax-Saving Fixed Deposit | 1.5 lakh | 5 years | Taxable | Low | 5% – 7% |
| Pension Funds (80CCC) | 1.5 lakh | Varies | Taxable | Low-Med | 5% – 8% |
| NPS (80CCD + 1B) | 2 lakh | Till retirement | Partially taxable | Medium | 8% – 10% |
| Sukanya Samriddhi Yojana | 1.5 lakh | Till maturity | Tax-free | Low | 7% – 8% |
| Senior Citizens Savings Scheme | 1.5 lakh | 5 years | Taxable | Low | 7% – 8% |
*Returns are indicative and subject to change.
**Subject to conditions under Section 10(10D).