With financial year 2025–26 approaching, Indian taxpayers are exploring ways to save taxes under Section 80C of the Income Tax Act. Section 80C allows individuals and Hindu Undivided Families (HUFs) to claim deductions on investments up to ₹1.5 lakh, helping reduce taxable income while building wealth. Understanding eligible instruments and strategies can maximize tax benefits.
What is Section 80C?
Section 80C provides a deduction of up to ₹1.5 lakh per year on specific investments and expenses. Eligible taxpayers can reduce their taxable income, lowering overall tax liability.
Popular Tax-Saving Investment Options
a) Public Provident Fund (PPF)
Long-term investment with a 15-year tenure.
Offers tax-free interest and maturity amount.
Safe, government-backed option ideal for conservative investors.
b) Employee Provident Fund (EPF)
Automatic deductions from salaried employees’ salary.
Provides retirement benefits and tax exemption on contributions and interest.
c) Equity-Linked Savings Scheme (ELSS)
Mutual funds with 3-year lock-in period.
Offers potential for higher returns through equity market exposure.
Tax advantage under 80C and capital gains taxed favorably post-lock-in.
d) National Savings Certificate (NSC)
Fixed-income investment with a 5-year maturity.
Interest is taxable but eligible for 80C deduction.
e) Life Insurance Premiums
Premiums paid for life insurance policies qualify for 80C.
Offers financial security along with tax benefits.
f) Sukanya Samriddhi Yojana (SSY)
For parents of girl children.
Tax-free returns and government-backed security.
Encourages long-term savings for the child’s future.
g) Tax-Saving Fixed Deposits (FDs)
5-year bank FDs eligible for 80C deduction.
Provides guaranteed interest but returns are taxable.
h) Home Loan Principal Repayment
Principal portion of home loan repayments qualifies for deduction under 80C.
Encourages homeownership while saving taxes.
Tips to Maximize Section 80C Benefits
Plan Early: Spread investments across the year to maximize returns and liquidity.
Diversify: Combine safe instruments like PPF with higher-return options like ELSS.
Track Limits: Total deduction under 80C cannot exceed ₹1.5 lakh.
Consider Lock-in Periods: Understand maturity and liquidity before investing.
FAQs
Q1: What is the maximum deduction under Section 80C?
Up to ₹1.5 lakh per financial year.
Q2: Are ELSS returns tax-free?
Equity gains are subject to long-term capital gains tax if exceeding ₹1 lakh per year, but the principal investment is eligible for 80C deduction.
Q3: Can multiple 80C instruments be combined?
Yes, total contributions across eligible instruments should not exceed ₹1.5 lakh.
Q4: Are life insurance premiums fully deductible?
Premiums paid for self, spouse, or children are eligible within 80C limits.
Q5: Is principal repayment of home loans covered?
Yes, the principal portion qualifies for deduction under 80C.
Published on : 11th September
Published by : SMITA
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