How to Save Income Tax Under Section 80C: Complete Guide (FY 2025-26)

Section 80C is the most popular tax-saving provision in India, allowing you to reduce your taxable income by up to ₹1.5 lakhs—translating to a tax saving of up to ₹46,800 (at 30% tax rate + 4% cess) annually.

But here's the catch: most people don't maximize this deduction. They contribute to EPF, take life insurance, and stop there—leaving thousands of rupees on the table.

This complete guide breaks down all 10+ eligible investments and expenses under Section 80C, shows you how to maximize your ₹1.5 lakh limit, and provides strategic planning tips to optimize your tax savings.

What is Section 80C?

Section 80C of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim a deduction of up to ₹1.5 lakhs from their total taxable income. This deduction is available for both the old tax regime (not available under the new tax regime).

Complete List of Section 80C Eligible Investments & Expenses

Here are all the investments and expenses that qualify for Section 80C deduction:

1. Employee Provident Fund (EPF)

What: Mandatory contribution deducted from your salary (12% of basic salary).

Tax Benefit: Your contribution is automatically deducted from taxable income (visible in Form 16).

Returns: ~8-8.5% annually (declared by EPFO).

Lock-in: Until retirement (premature withdrawal allowed in specific cases).

Best For: Salaried employees—this happens automatically.

2. Public Provident Fund (PPF)

What: Government-backed long-term savings scheme.

Investment Range: Minimum ₹500/year, Maximum ₹1.5 lakhs/year.

Returns: 7.1% p.a. (Q4 FY 2025-26, tax-free).

Lock-in: 15 years (partial withdrawal after 7 years).

Best For: Risk-averse investors looking for guaranteed, tax-free returns.

3. Equity Linked Savings Scheme (ELSS)

What: Mutual funds that invest in equities.

Investment: No upper limit (but 80C deduction capped at ₹1.5L).

Returns: Market-linked (historically 12-15% CAGR).

Lock-in: 3 years (shortest among all 80C options).

Best For: Young investors with higher risk appetite seeking wealth creation.

4. Life Insurance Premium

What: Premiums paid for life insurance policies (for self, spouse, children).

Condition: Premium should not exceed 10% of sum assured (20% for policies issued before April 1, 2012).

Returns: Depends on policy type (term plans give no returns, endowment/ULIPs provide returns).

Best For: Essential for life cover + tax saving. Avoid insurance purely for tax—buy term insurance for coverage.

5. Sukanya Samriddhi Yojana (SSY)

What: Government scheme for girl child education and marriage.

Investment Range: ₹250/year minimum, ₹1.5 lakhs/year maximum.

Returns: 8.2% p.a. (Q4 FY 2025-26, tax-free).

Lock-in: Until girl child turns 21 (or marriage after 18).

Best For: Parents with daughters below 10 years—highest returns among all 80C options.

6. National Savings Certificate (NSC)

What: Post office savings scheme.

Investment: No upper limit.

Returns: 7.7% p.a. (Q4 FY 2025-26, taxable).

Lock-in: 5 years.

Best For: Conservative investors looking for government-backed returns.

7. Tax-Saving Fixed Deposit (FD)

What: 5-year FD offered by banks.

Returns: 6-7% p.a. (taxable).

Lock-in: 5 years (no premature withdrawal).

Best For: Not recommended—low returns + taxable interest. Better options available.

8. Children's Tuition Fees

What: Tuition fees (not development/donation fees) paid to any educational institution in India.

Eligibility: Maximum 2 children.

Note: Only tuition fees count, not hostel fees or book expenses.

Best For: Parents paying school/college fees—automatic deduction.

9. Home Loan Principal Repayment

What: Principal amount repaid on home loan (not interest—that's Section 24).

Condition: Property should not be sold within 5 years (else deduction is reversed).

Best For: Homeowners—use this along with Section 24 interest deduction (up to ₹2L).

10. Senior Citizens Savings Scheme (SCSS)

What: Government scheme for individuals above 60 years.

Investment: Maximum ₹30 lakhs.

Returns: 8.2% p.a. (Q4 FY 2025-26, taxable).

Lock-in: 5 years (extendable by 3 years).

Best For: Senior citizens seeking regular income + high returns.

Other 80C Deductions:

• ULIP (Unit Linked Insurance Plans)
• Pension funds (like NPS Tier 1 under 80CCD—separate ₹50K deduction available)
• Infrastructure bonds (discontinued for new investments)

Strategic Tips to Maximize Section 80C

1. Don't Wait Until March

Start investing in April. Spreading investments throughout the year avoids last-minute panic and helps with cash flow planning.

2. Use Multiple 80C Options

Don't rely only on EPF or LIC. Diversify:

• EPF: ₹50,000 (automatic from salary)
• ELSS: ₹50,000 (wealth creation)
• PPF: ₹30,000 (safe returns)
• Children's tuition: ₹20,000
• Total: ₹1,50,000 (limit maximized)

3. Avoid These Mistakes

❌ Buying insurance just for tax: Term insurance for coverage, not endowment plans for returns.

❌ Tax-saving FDs: Low returns + taxable interest = poor choice.

❌ Ignoring ELSS: Best risk-reward in 80C if you have 3+ year horizon.

4. Beyond 80C: Other Deductions

Don't stop at ₹1.5 lakhs. Stack these:

• Section 80D: Health insurance (₹25K-₹75K)
• Section 80CCD(1B): NPS additional (₹50K)
• Section 24: Home loan interest (₹2L)
• HRA: House rent allowance exemption

Investment Option	Returns	Lock-in	Risk	Best For
EPF	8-8.5%	Till retirement	Very Low	Automatic for salaried
PPF	7.1% (tax-free)	15 years	Very Low	Safe, long-term
ELSS	12-15% (avg)	3 years	High	Wealth creation
SSY	8.2% (tax-free)	21 years	Very Low	Girl child savings
NSC	7.7%	5 years	Low	Conservative

FAQs About Section 80C

Q: Can I claim 80C under the new tax regime?

A: No. Section 80C deductions are only available under the old tax regime. Choose wisely based on your total deductions.

Q: What if I invest more than ₹1.5 lakhs?

A: Deduction is capped at ₹1.5 lakhs. Excess investment doesn't give additional tax benefit (but you still get returns).

Q: Can I claim tuition fees for coaching classes?

A: No. Only tuition fees paid to schools, colleges, or universities are eligible. Coaching/hobby classes don't count.

Q: If I withdraw my PPF/EPF early, what happens?

A: The tax deduction you claimed earlier will be added back to your income and taxed in the year of withdrawal (with interest penalty).

Final Recommendation

Here's a smart 80C allocation strategy for most salaried individuals:

Remember: Tax saving is important, but don't let it drive bad investment decisions. Choose options that align with your financial goals, not just tax benefits.