Section 80C of Income Tax Act - Deductions u/s 80C, 80CCC & 80CCD
Section 80C deductions allow individuals and HUFs to reduce their taxable income by up to ₹1.5 lakh per year through investments like ELSS, PPF, life insurance premiums, tax-saving FDs, home loan principal repayment, and more. Understanding deductions under Section 80C helps in effective tax planning, and this guide covers everything you need to know about 80C deductions and who can claim them.
It is important to note that the deductions under Section 80C are only available under the Old Tax Regime and are disallowed under the New Tax Regime.
Eligible Investment Under Section 80C and Risk Comparison
The following table compares the various features of section 80C deduction options, easy for taxpayers to choose the most suitable option for them.
| Investment options | Average Interest | Lock-in period for | Risk factor |
| ELSS funds | 12% – 15% | 3 years | High |
| NPS Scheme | 8% – 10% | Till 60 years of age | High |
| ULIP | 8% – 10% | 5 years | Medium |
| Tax saving FD | Up to 8.40% | 5 years | Low |
| PPF | 7.90% | 15 years | Low |
| Senior citizen savings scheme | 8.60% | 5 years (can be extended for other 3 years) | Low |
| National Savings Certificate | 7.90% | 5 years | Low |
| Sukanya Samriddhi Yojana | 8.50% | Till girl child reaches 21 years of age (partial withdrawal allowed when she reached 18 years) | Low |
Expenses related to home loan principal repayment and tuition fees of children's education can also be claimed as deductions under Section 80C.
Deduction Limits under Section 80C, 80CCC, 80CCD(1), 80CCE, 80CCD(1B)
Sections 80CCC and 80CCD provide deductions for investments in pension schemes. The combined maximum deduction allowed under Sections 80C, 80CCC, and 80CCD(1) is ₹1.5 lakh. However, you can claim an additional deduction of ₹50,000 under Section 80CCD(1B) for contributions made to the National Pension Scheme (NPS).
Therefore, the total maximum deduction available under Sections 80C, 80CCC, 80CCD(1), and 80CCD(1B) is ₹2 lakh.
| Sections | Eligible investments for tax deductions | Maximum Deduction |
| 80C | Investment made in Equity Linked Saving Schemes (ELSS), PPF/SPF/RPF, payments made towards Life Insurance Premiums, principal sum of a home loan, SSY, NSC, SCSS, etc. | Rs 1,50,000 |
| 80CCC | Payment made towards pension funds | Rs 1,50,000 |
| 80CCD(1) | Payments made towards Atal Pension Yojana or other pension schemes notified by government | Employed: 10% of basic salary + DA Self-employed: 20% of gross total income |
| 80CCE | Overall combined limit of ₹1,50,000 for 80C + 80CCC + 80CCD(1) | Rs 1,50,000 |
| 80CCD(1B) | Investments in NPS (outside Rs 1,50,000 limit under Section 80CCE) | Rs 50,000 |
| 80CCD(2) | Employer’s contribution towards NPS (outside Rs 1,50,000 limit under Section 80CCE) | Central government employer: 14% of basic salary +DA Others: 10% of basic salary +DA |
Section 80C - An Illustration
Let us understand how section 80C helps in reducing tax implications using an example.
Mr. A has a salary income of Rs. 10 lakhs and other income of Rs. 1 lakh. He has invested Rs. 1.5 lakh in PPF.
The difference in tax implications when 80C deductions are claimed and not claimed is explained below:
| Particulars | Section 80C Deduction claimed | Section 80C Deduction not claimed |
| Salary Income | 10,00,000 | 10,00,000 |
| Less - Standard Deduction | (50,000) | (50,000) |
| 9,50,000 | 9,50,000 | |
| Other Income | 1,00,000 | 1,00,000 |
| Gross Total Income | 10,50,000 | 10,50,000 |
| Less - Section 80C deduction | (1,50,000) | - |
| Taxable Income | 9,00,000 | 10,50,000 |
| Total Tax payable (including cess) | 96,200 | 1,32,600 |
Therefore, by claiming a deduction of Rs. 1.5 lakh under Section 80C, Mr. A has saved Rs. 36,400 in taxes under the old tax regime.
Use ClearTax's free Income Tax Calculator to optimise tax savings and determine taxes.
Who Can Claim Section 80C Deductions?
Only individuals and HUFs are eligible to claim Section 80C deductions. Companies, Firms, LLPs, etc. are not allowed to claim the Section 80C deductions.
How to Claim Section 80C Deductions?
It is important to understand and comply with the following points to claim Section 80C deductions:
- Invest in eligible instruments before 31st March of the financial year.
- Collect proofs such as deposit slips, insurance premium receipts, ELSS statements, etc.
- Declare investments to your employer to adjust TDS.
- File ITR and report investments under “Deductions under Chapter VI-A”.
You can use ClearTax tax filing tool to help you claim deductions and ensure easy tax filing and compliance. Our tax experts can make your tax filing simpler
Final Word
While there are several tax-saving deductions under Chapter VI-A, taxpayers should carefully select the options that best align with their financial goals, ensuring both tax efficiency and long-term benefits.
Frequently Asked Questions
About the Author
CA Mohammed S Chokhawala
I'm a chartered accountant, well-versed in the ins and outs of income tax, GST, and keeping the books balanced. Numbers are my thing, I can sift through financial statements and tax codes with the best of them. But there's another side to me – a side that thrives on words, not figures. Read more
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