Section 80C Deductions

Section 80C of the Income-tax Act in India allows old-regime taxpayers to claim deduction of up to ₹1.5 lakh per financial year for specified investments and expenses, including EPF, PPF, ELSS, life insurance premium, 5-year tax-saver FD, NSC, SCSS, Sukanya Samriddhi Yojana, principal repayment of housing loan, stamp duty, and tuition fees for two children. Section 80CCD(1B) provides an additional ₹50,000 deduction for NPS Tier-I, and Section 80CCD(2) employer NPS contribution is fully deductible without affecting the 80C cap.

Mayank Wadhera

Published: 5 Jun 2023

Updated: 16 May 2026

3 min read

Section 80C remains the most widely claimed tax-saving section in India — a single basket of investments and expenses that lets old-regime taxpayers reduce taxable income by up to ₹1.5 lakh per year. For FY 2026-27, with the new tax regime as the default, Section 80C continues to anchor old-regime planning. Here is a complete map of every eligible instrument and the practical sequencing to maximise both tax savings and long-term wealth.

The ₹1.5 Lakh Aggregate Limit

Section 80C, read with Sections 80CCC and 80CCD(1), permits an aggregate deduction of up to ₹1.5 lakh per financial year from gross total income. Section 80CCD(1B) provides an additional ₹50,000 deduction for NPS contributions outside the 80C ceiling. Section 80CCD(2) — employer NPS contribution — is over and above the ₹1.5 lakh cap and remains available even under the new tax regime.

Investments Eligible Under Section 80C

The Section 80C basket covers a wide mix of instruments:

Employees' Provident Fund (EPF) and Voluntary PF contributions.
Public Provident Fund (PPF) — current limit ₹1.5 lakh per year per individual.
Equity Linked Savings Scheme (ELSS) — three-year lock-in.
5-year Tax-Saver Fixed Deposit with scheduled banks or post offices.
National Savings Certificate (NSC) — 5-year tenure.
Senior Citizens Savings Scheme (SCSS) — for taxpayers above 60.
Sukanya Samriddhi Yojana (SSY) — for daughters below 10.
Life Insurance Premium for self, spouse, or children.
Unit Linked Insurance Plans (ULIPs).

Expenses Eligible Under Section 80C

Section 80C also covers specified expenses, not just investments:

Principal repayment of housing loan on a residential property.
Stamp duty and registration charges paid on purchase of residential property.
Tuition fees paid to any university, college, school, or educational institution in India for up to two children.
Sukanya Samriddhi deposits for minor daughters.
Subscription to notified equity shares or debentures of approved companies (rare in 2026).

Section 80CCD: NPS Contributions

Section 80CCD(1) covers employee or self-employed contribution to NPS up to 10% of salary (basic + DA) or 20% of gross total income for self-employed, within the overall ₹1.5 lakh 80C cap. Section 80CCD(1B) gives an additional ₹50,000 for voluntary NPS Tier-I contribution. Section 80CCD(2) — employer contribution up to 14% of basic + DA — is fully deductible without affecting the 80C limit and is the only Chapter VI-A deduction available under the new tax regime.

Smart Sequencing for ₹1.5 Lakh

Build the basket strategically. EPF contributions for salaried taxpayers usually consume ₹50,000 to ₹1 lakh of the 80C cap automatically. Add ₹50,000-₹1 lakh in ELSS for equity exposure with the shortest three-year lock-in. Top up with PPF if the EPF + ELSS combination falls short. Use SSY for daughters under 10 (highest interest rate). Avoid stacking life insurance premiums above ₹50,000 — they offer low return and long lock-in.

Documentation and Claim Process

Maintain investment proofs for six years post-assessment. Submit Form 12BB to the employer with declarations and supporting receipts before the year-end payroll close, typically January-February. EPF contributions are auto-captured in Form 16. PPF, ELSS, and SSY are visible in AIS. Cross-verify the deduction claimed in your ITR with the pre-filled AIS and Form 16B summary.

Conclusion

Section 80C is one of the simplest and most rewarding tax-planning sections in Indian law for old-regime taxpayers. With careful sequencing of EPF, ELSS, PPF, and a measured NPS Tier-I top-up, you can save up to ₹46,800 in tax (30% slab plus cess) on the full ₹1.5 lakh and another ₹15,600 on the NPS ₹50,000 additional deduction. Treat it not as a tax exercise but as a forced-savings discipline that compounds into long-term wealth.

Frequently Asked Questions

What is the maximum deduction under Section 80C?

Section 80C read with Sections 80CCC and 80CCD(1) permits a maximum aggregate deduction of ₹1.5 lakh per financial year from gross total income, available only under the old tax regime. Section 80CCD(1B) gives an additional ₹50,000 deduction exclusively for NPS Tier-I contributions, taking the salaried-taxpayer total to ₹2 lakh.

Is ELSS the best Section 80C investment?

ELSS offers the shortest lock-in (3 years) and historically the highest long-term returns among 80C options through equity exposure. However, equity returns are volatile, so balance ELSS with stable instruments like PPF (15-year tenure, sovereign-backed) and EPF (mandatory for salaried). The right mix depends on age, risk tolerance, and goals.

Can Section 80C be claimed under the new tax regime?

No. Section 80C and most other Chapter VI-A deductions are not available under the new tax regime, which is the default for AY 2027-28. Only the ₹75,000 standard deduction, employer NPS contribution under Section 80CCD(2), and a handful of specific allowances remain available. Opt for the old regime via Form 10-IEA to claim 80C.

Is principal repayment of home loan covered under 80C?

Yes. Principal repayment of a housing loan taken from a financial institution for purchase or construction of a residential property is eligible under Section 80C within the ₹1.5 lakh cap. Stamp duty and registration charges paid in the year of purchase are also eligible. The property must not be sold within five years of possession.