Paying taxes is important, but paying more than necessary is not. If you are a salaried employee, business owner, or professional in India, Section 80C of the Income Tax Act can help you save up to ₹1.5 lakh in taxes every year – legally.
In this guide, we explain what Section 80C is, how it works, and which investment options qualify for the deduction in the Financial Year 2024-25.
What is Section 80C?
Section 80C is a provision under the Income Tax Act of India that allows individuals and Hindu Undivided Families (HUFs) to reduce their taxable income by up to ₹1.5 lakh in a financial year by investing or spending in specified instruments.
This means, if your annual taxable income is ₹7.5 lakh and you invest ₹1.5 lakh in eligible options, your taxable income becomes ₹6 lakh. As a result, you pay less tax.
This deduction is available under the old tax regime, not the new regime (unless opted with conditions).
Who Can Claim 80C Deductions?
-
Salaried employees
-
Freelancers or consultants
-
Business owners
-
HUFs (Hindu Undivided Families)
Note: Companies or partnerships cannot claim 80C deductions
How Much Can You Claim?
-
Maximum limit: ₹1.5 lakh per financial year
-
If you invest more, only ₹1.5 lakh will be considered
-
This limit is inclusive of all 80C sub-sections like 80CCC and 80CCD(1)
Best Ways to Save Tax Under Section 80C
There are more than 15 eligible options under Section 80C. Here are the most popular and widely used methods:
Employee Provident Fund (EPF)
If you are salaried, your monthly EPF contribution is eligible for 80C. It’s deducted automatically from your salary.
Safe, long-term saving
Interest earned is tax-free if withdrawn after 5 years
Public Provident Fund (PPF)
Government-backed scheme with a 15-year lock-in period. You can open a PPF account in any post office or bank.
Interest rate around 7.1 percent
Completely tax-free (EEE benefit)
Life Insurance Premiums
Premiums paid for life insurance policies (Term Plan or Traditional Plans) for yourself, spouse, or children are eligible.
Policy must be in your name or family member
Premium should be less than 10 percent of sum assured
Sukanya Samriddhi Yojana (SSY)
Only for parents of girl children below 10 years. Helps in long-term savings for her education and marriage.
High interest rate (around 8 percent)
Tax-free maturity and yearly deductions under 80C
ELSS (Equity Linked Saving Schemes)
These are tax-saving mutual funds with a lock-in of 3 years. Returns are market-linked but generally higher.
Shortest lock-in among all 80C options
Can give returns of 10 to 15 percent over time
National Savings Certificate (NSC)
A small savings scheme available in post offices.
Maturity is 5 years
Interest is taxable but eligible for reinvestment
Home Loan Principal Repayment
If you are paying EMI on a housing loan, the principal portion is allowed as deduction under Section 80C.
Only for self-occupied or rented-out properties
Stamp duty and registration charges are also included
Children’s Tuition Fees
You can claim tuition fees paid for up to two children enrolled in any school, college, or university in India.
Only tuition fee part is allowed, not donations or transport fee
Fixed Deposit (Tax-Saving FD)
You can invest in a 5-year tax-saving FD in a scheduled bank to claim 80C.
Fixed interest
Cannot be withdrawn before maturity
Quick Summary of Popular 80C Options
| Investment Option | Lock-in Period | Risk Level | Returns |
|---|---|---|---|
| EPF | Till retirement | Low | 8 to 8.5% |
| PPF | 15 years | Low | 7 to 7.1% |
| ELSS | 3 years | Moderate | 10 to 15% |
| Tax-Saving FD | 5 years | Low | 6 to 7% |
| Life Insurance Premium | Varies | Low | Depends on plan |
Final Tips to Maximize Your 80C Benefits
-
Spread your investment across multiple tools
-
Start investing early in the financial year to avoid last-minute stress
-
Use a mix of safe and growth-oriented instruments (PPF + ELSS is a good combo)
-
Maintain proof of all investments for tax filing
-
File under the old tax regime to claim these deductions
Final Words
Section 80C is the easiest and most effective way to reduce your income tax burden. With careful planning, you can legally save up to ₹1.5 lakh in taxes every year while building wealth and securing your family’s future.
Choose the right mix of investments based on your risk profile, goals, and time horizon — and make the most of this powerful tax-saving option.