What Section 80C actually lets you deduct
Section 80C of the Income Tax Act, 1961 permits an aggregate deduction of up to ₹1,50,000 per financial year from gross total income, applicable only to taxpayers who opt for the old/alternative regime under Section 115BAC. The ₹1.5 lakh cap is shared with Section 80CCC (pension fund premium) and Section 80CCD(1) (NPS employee contribution) — you cannot stack three separate ₹1.5L limits. The statute is reproduced verbatim on the CBDT portal at incometaxindia.gov.in.
At a 30% marginal slab (plus 4% cess), fully exhausting the ₹1.5 lakh cap saves ₹46,800 in tax. At 20% slab the saving is ₹31,200. At 5% slab it drops to ₹7,800 — which is why first-job earners often choose the new regime instead. Our old vs new tax regime calculatormakes that call quantitatively.
Eligible 80C instruments
The ten most commonly used 80C avenues:
- Public Provident Fund (PPF) — 15-year lock-in, current rate 7.1% p.a., tax-free interest and maturity (EEE). Annual cap ₹1.5 lakh.
- Equity-Linked Savings Scheme (ELSS) — 3-year lock-in, market-linked returns (historical 12-15% p.a.), LTCG taxed at 12.5% above ₹1.25L.
- Employees' Provident Fund (EPF) — employee share — automatic for salaried staff; 12% of basic + DA counts.
- Life insurance premium — traditional, ULIP, or term; premium must be ≤ 10% of sum assured for post-Apr-2012 policies.
- Home loan principal repayment — principal portion of EMI on a residential property, provided property is not sold within 5 years of possession.
- National Savings Certificate (NSC) — 5-year lock-in, 7.7% p.a. (currently); interest is reinvested and itself 80C-eligible in years 1-4.
- 5-year tax-saving bank FD — 5-year lock-in; interest is fully taxable (unlike PPF/NSC).
- Sukanya Samriddhi Yojana (SSY) — for girl child under 10; current rate 8.2%, EEE treatment. See our SSY calculator.
- Children's tuition fees — full-time tuition paid to any registered Indian institution for up to two children.
- NPS Tier 1 — employee contribution — counts under 80CCD(1) within the ₹1.5L cap; see NPS calculator for the additional 80CCD(1B) ₹50k benefit.
80C instrument comparison
| Instrument | Lock-in | Current return | Tax on returns | Risk |
|---|---|---|---|---|
| PPF | 15 yrs | 7.1% | Tax-free | Sovereign |
| ELSS | 3 yrs | 12-15% (hist.) | 12.5% LTCG > ₹1.25L | Equity |
| EPF | Retirement | 8.25% | Tax-free (5+ yrs) | Sovereign |
| NSC | 5 yrs | 7.7% | Taxable at maturity | Sovereign |
| 5-yr tax FD | 5 yrs | 6.5-7.25% | Taxable | Bank credit |
| Sukanya Samriddhi | 21 yrs (or marriage) | 8.2% | Tax-free | Sovereign |
| ULIP | 5 yrs | Market-linked | Complex (> ₹2.5L premium) | Equity/Debt |
| NPS Tier 1 | 60 yrs | 9-12% (hist.) | 60% tax-free corpus | Equity/Debt mix |
Worked example — ₹15 lakh earner, old regime
Rahul earns ₹15,00,000 in FY 2026-27. Under the old regime (no 80C usage) his slab-wise tax works out to roughly ₹2,62,500 plus 4% cess = ₹2,73,000.
If he invests the full ₹1.5 lakh under 80C — say ₹70k PPF + ₹50k ELSS + ₹30k term insurance premium:
- Taxable income falls to ₹13,50,000
- Tax (old regime) ≈ ₹2,17,500 + cess = ₹2,26,200
- Tax saved: ₹46,800
That saving is the reason 80C planning matters. Quantify your own version with the income tax calculator and pair it with the SIP calculator (for ELSS projections) or PPF calculator for the compounding view.
Why 80C is dead in the new regime
From FY 2023-24 the new regime under Section 115BAC is the default. Its lower slabs — 0 / 5 / 10 / 15 / 20 / 30% — explicitly disallow Section 80C, 80D, HRA, LTA, Section 24(b) interest (for self-occupied), and most Chapter VI-A deductions. Only the standard deduction (now ₹75,000 for FY 2025-26 onwards) and employer NPS contribution under Sec 80CCD(2) survive. If you are relying on ₹1.5 lakh of 80C + ₹25,000 of 80D + ₹2 lakh of Section 24(b) home-loan interest, the old regime almost always wins. Salaried taxpayers with no significant deductions usually do better in the new regime.
How to allocate ₹1.5 lakh — a sensible default
- If you want equity exposure: up to ₹50,000 in ELSS (shortest lock-in at 3 years, highest long-term return)
- Debt anchor: ₹50,000–₹70,000 PPF for the EEE treatment
- Protection: ₹20,000–₹30,000 term insurance premium (don't over-insure via ULIPs — use pure term + mutual funds instead)
- If you have a home loan: principal repayment usually eats up 80C space by itself — no further top-up required
Round out the broader tax plan with the HRA calculator (if you rent), the EMI calculator (for home-loan principal component), the NPS calculator for the extra ₹50k under 80CCD(1B), and the Section 80D guide for health-insurance deductions.
Frequently asked questions
What is the Section 80C deduction limit for FY 2026-27?
The overall cap under Section 80C (including 80CCC and 80CCD(1)) remains ₹1,50,000 per financial year. NPS contributions under 80CCD(1B) give an additional ₹50,000 deduction, and employer NPS contributions under 80CCD(2) are separately deductible up to 10% of salary (14% for central govt employees).
Is Section 80C available in the new tax regime?
No. Section 80C, 80D, HRA, LTA and most other deductions are NOT available under the new tax regime (Section 115BAC default from FY 2023-24). Only the standard deduction of ₹75,000 and employer NPS (80CCD(2)) survive. If you rely heavily on 80C, compute both regimes with our old-vs-new calculator before choosing.
Can I claim 80C for tuition fees paid to a school?
Yes — tuition fees paid to any registered Indian school, college, or university for the full-time education of up to two children are 80C-eligible. Only the tuition component counts; donations, transport, hostel fees and uniforms do not.
Does ELSS lock-in of 3 years reset for each SIP instalment?
Yes. Every SIP purchase has its own 3-year lock-in from the date of that instalment. A 12-month ELSS SIP means the last instalment is locked until 3 years after that purchase, not 3 years from the SIP start.
Is the principal component of home loan EMI 80C eligible?
Yes — principal repaid on a home loan for a self-occupied or let-out residential property qualifies under Section 80C (within the ₹1.5 lakh cap). The property must not be sold within 5 years of possession, else the deduction claimed is reversed and added back to income.