Section 80C: The ₹1.5 Lakh Deduction, Explained
Section 80C is the most popular deduction available to taxpayers under the old tax regime. It allows you to reduce your taxable income by up to ₹1,50,000 in a financial year by investing in specified instruments or making specified payments. At the 30% tax slab, that is a tax saving of up to ₹46,800 (plus cess) in a single year.
In this article
What counts under 80C
The ₹1.5 lakh limit is a combined limit — you can mix and match instruments, but the total deduction across all of them cannot exceed ₹1,50,000 in a financial year. Investments must be made from your taxable income and, for most instruments, must be locked in for a minimum period.
- Provident Fund contributions (EPF, PPF, and other recognised provident funds)
- Life insurance premiums (for yourself, spouse, or children)
- ELSS (Equity Linked Savings Scheme) mutual funds
- Public Provident Fund (PPF) — the classic 15-year lock-in
- National Savings Certificate (NSC)
- 5-year fixed deposits and Senior Citizen Savings Scheme (SCSS)
- Sukanya Samriddhi Yojana (SSY) for a daughter
- Principal portion of home loan repayments
- Tuition fees for children (up to two children)
- Stamp duty and registration on a new house
The popular instruments
PPF and EPF are the safest choices — government-backed with attractive interest and completely tax-free maturity. Your own EPF contributions (12% of basic + DA) already count towards 80C; topping up with a voluntary PPF is a common way to reach the limit.
ELSS mutual funds are the only 80C option with market exposure, carrying a 3-year lock-in. Historically they have delivered the highest long-term returns among 80C instruments, but they carry equity risk.
Home loan principal lets you turn an existing liability into a tax saving. Note the important difference: principal repayment is covered under 80C, while the interest is deductible separately under Section 24(b) — up to ₹2 lakh for a self-occupied home.
5-year tax-saving bank FDs offer guaranteed returns with a 5-year lock-in and are a good choice for conservative investors.
What does NOT count
Common mistakes: Medical insurance premiums are not 80C — they fall under Section 80D with a separate limit. Mutual fund dividends or stock purchases don't count. Repayment of a loan taken for a house sold within 5 years, or for someone else's house, also fails the test.
Worked example
Ravi earns ₹12,00,000 and invests under the old regime:
| Item | Amount (₹) |
|---|---|
| EPF contribution (12% of basic ₹5,00,000) | 60,000 |
| PPF top-up | 30,000 |
| ELSS investment | 40,000 |
| Life insurance premium | 20,000 |
| Total claimed under 80C (capped at limit) | 1,50,000 |
His taxable income drops from ₹12,00,000 to ₹10,50,000 (before other deductions), saving tax at the 30% slab — roughly ₹45,000 plus cess.
Smart planning tips
- Start early. Don't wait until March to make rushed, illiquid investments — spread 80C investments across the year.
- Use EPF first. It's already deducted from your salary and has an excellent risk-return profile.
- Balance lock-ins. Avoid locking everything for 15 years (PPF); combine a 3-year ELSS with longer instruments.
- Remember the regime choice. 80C applies only under the old regime. Under the new regime, none of these deductions help.
- Check Section 80CCD(1B) for an extra ₹50,000 deduction on NPS contributions, on top of the ₹1.5 lakh 80C limit.
Related: See how 80C fits into your overall regime decision with the regime flowchart.