Section 80C: As the Union Budget 2025 approaches, taxpayers and investors are hoping for measures that could ease their financial burden and encourage savings. An important area of focus is the long standing demand for an increase in the deduction limit under Section 80C of the Income Tax Act.
This limit has remained at ₹1.5 lakh since 2014, and there were expectations for an increase in the previous budget, which continue for the upcoming one. If the limit is raised, it could encourage more savings and help people plan their finances better. However, it is important to note that only individuals opting for the old tax regime can benefit from Section 80C. Those who choose the new tax regime will not be eligible for this deduction.
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What is Section 80C?
Section 80C is a provision under the Income Tax Act that allows individuals to claim deductions on certain types of investments and expenses. The total deduction that can be claimed in a financial year is up to ₹1.5 lakh, which helps reduce the taxable income and, consequently, the amount of tax that needs to be paid. According to Economic Times, you can also claim extra deductions for pension plans:
- Contributions to the National Pension Scheme (NPS) up to ₹1.5 lakh are deductible under Section 80CCD(1).
- There is an additional deduction of ₹50,000 under Section 80CCD(1B) for NPS contributions.
This means you can claim up to ₹2 lakh in total deductions for NPS contributions in a financial year if you use both options fully.
This section is available to individual taxpayers and Hindu Undivided Families (HUFs), but not to corporate bodies, partnership firms, or other businesses.
Investments eligible for claims under Section 80C are:
- Equity Linked Saving Schemes (ELSS) in mutual funds
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Employee Provident Fund (EPF) (voluntary contributions)
- Unit Linked Insurance Plans (ULIPs) with a minimum premium allocation of 60%
- Sukanya Samriddhi Yojana Account
- Senior Citizen Savings Scheme (SCSS)
- Five-year tax-saving fixed deposits with banks
- Tuition fees for up to two children
- Repayment of the principal amount on home loans
- Premiums paid for life insurance policies
- Contributions to pension schemes such as the National Pension System (NPS)
Eligible Investments Under Section 80C
There are several types of investments that qualify for deductions under Section 80C. For example, if you invest in Equity-Linked Saving Schemes (ELSS), Public Provident Fund (PPF), or National Savings Certificates (NSC), you can claim tax deductions. According to CNBC,, contributions to the Employee Provident Fund (EPF) and Unit Linked Insurance Plans (ULIPs) with at least 60% of the premium allocated for investment also qualify. Other eligible investments include Sukanya Samriddhi Yojana accounts, Senior Citizen Savings Schemes (SCSS), and five-year tax-saving fixed deposits with banks.
How to Claim Deductions Under Section 80C?
To claim deductions under Section 80C, taxpayers must make the necessary investments or incur eligible expenses throughout the financial year, which runs from April 1 to March 31. These investments and expenses should then be reported when filing the Income Tax Return (ITR), along with supporting documents like payment receipts and investment proofs. Once the ITR is processed, the claimed deductions will reduce your taxable income, which in turn lowers the amount of tax you owe.
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Investment Options
Several investment options can help you make the most of Section 80C. One of the most common is the Employees’ Provident Fund (EPF), where salaried employees contribute 12% of their salary, matched by the employer. While this scheme was once completely tax-free, recent amendments mean that the interest earned is no longer fully exempt from tax.
Another popular option is Equity-Linked Saving Schemes (ELSS), which involve investing in the stock market and come with a lock-in period of three years. ELSS offers the benefit of tax deductions along with the potential for wealth creation over time.
Life insurance premiums also qualify for tax exemptions under Section 80C, if the policy is for yourself, your spouse, or your dependent children. The exemption is currently limited to 10% of the value assured under the policy.
Similarly, Unit Linked Insurance Plans (ULIPs) offer both life insurance coverage and an investment opportunity. Investments in ULIPs can be claimed for tax exemptions up to ₹1.5 lakh.
Public Provident Fund (PPF) is another popular option for tax-saving. PPF contributions are eligible for a deduction of up to ₹1.5 lakh per year, and both the interest earned and the maturity amount are tax-free. However, PPF has a 15-year lock-in period, making it a long-term savings option.
