Did you know you can save up to ₹1.5 lakh in taxes every year? Yes, that's right. If you plan smartly, you can lower your taxable income significantly through deductions under Section 80C. For many Indian taxpayers—salaried professionals, business owners, and even first-time earners—Section 80C of the Income Tax Act offers one of the most effective ways to reduce tax liability.
Let’s take the example of Arjun, a 30-year-old marketing manager. He earns ₹10 lakhs annually. By using 80C deduction tools like ELSS, PPF, and term insurance premiums, he brings down his taxable income to ₹8.5 lakhs. Not only does he save money, but he also builds long-term wealth and security. So, how can you do the same? This article will walk you through everything you need to know, step by step.
Understanding Section 80C and who can claim it?
Section 80C of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim deductions up to ₹1.5 lakh in a financial year from their total income. The aim is to encourage people to save and invest in specific financial instruments.
This deduction is only available under the old tax regime. If you opt for the new tax regime, you cannot claim the 80C deduction.
Types of investments and expenses eligible under Section 80C
You don’t need to be a financial expert to start saving on taxes. Here are some commonly used options under deduction under Section 80C:
1. Employee Provident Fund (EPF)
Automatically deducted from your salary, EPF contributions are eligible for an 80C deduction. Employers also contribute, but only your share is considered for the deduction.
2. Public Provident Fund (PPF)
With a 15-year lock-in and attractive interest rates, PPF is a long-term savings tool. It’s ideal for risk-averse individuals. Contributions to PPF accounts qualify for deduction under Section 80C.
3. Equity-linked savings scheme (ELSS)
ELSS mutual funds offer the dual benefit of market-linked returns and tax savings. They come with the shortest lock-in period of 3 years among all Section 80C of Income Tax Act investments.
4. National Savings Certificate (NSC)
A low-risk investment backed by the Government of India, NSCs can be purchased from post offices and are eligible under 80C deduction.
5. Life insurance premiums
Premiums paid towards life insurance policies for yourself, your spouse, or your children are allowed as deduction under Section 80C.
6. Principal repayment on home loans
When you pay the principal amount of your home loan, it qualifies for 80C deduction. Only the principal amount is eligible, not the interest.
7. Tuition fees for children
You can claim up to two children’s tuition fees under deduction under Section 80C. This applies only to full-time education in Indian schools, colleges, or universities.
8. Sukanya Samriddhi Yojana
This scheme is meant for the girl child and offers attractive interest rates. Deposits made qualify for an 80C deduction.
What is the maximum limit under Section 80C?
The total deduction under Section 80C is capped at ₹1.5 lakh per financial year. You can choose a mix of the above options depending on your financial goals—whether it’s long-term wealth creation, insurance protection, or funding your child’s education.
How to claim deduction under Section 80C while filing ITR
Claiming deductions under Section 80C while filing ITR is simpler than you think. Follow these steps:
1. Gather documents: Collect receipts, premium payment proofs, and investment statements.
2. Choose the correct ITR form: Select the applicable ITR form depending on your income sources.
3. Report deductions: Enter the 80C deduction details in the appropriate section under "Deductions under Chapter VI-A".
4. Verify your filing: Make sure all entries are accurate to avoid any mismatch with Form 26AS.
If you're filing online, portals like the income tax e-filing website will guide you with prompts for declaring deductions under Section 80C.
Also read: How do you make the most tax benefits by investing in insurance products?
Tips to maximise your 80C deduction benefits
Here’s how you can make the most of your eligible investments and expenses under Section 80C of the Income Tax Act without any last-minute stress:
- Don’t wait till March
Many people scramble at the last minute in March to invest, often choosing suboptimal products. Start early in the financial year to distribute your investments and make informed choices.
- Match your goals to instruments
Choose ELSS if you’re comfortable with short-term market fluctuations. Opt for PPF or NSC if you prefer guaranteed returns. For dual benefits, consider life insurance products from trusted insurers like Future Generali, which also help you plan for life’s uncertainties.
- Keep all receipts and proofs
You’ll need these at the time of ITR filing or if your employer asks for tax-saving proof during the financial year. Digital lockers or apps can help you stay organised.
Common mistakes to avoid
· Claiming 80C deduction without valid proof
· Not checking whether the instrument is eligible under Section 80C of the Income Tax Act
· Missing out on employer-provided benefits like EPF
· Opting for the new tax regime unknowingly, which disqualifies deduction under Section 80C
Beyond 80C: Combining with other sections
To optimise tax savings, combine deduction under Section 80C with other sections such as:
· 80D: Health insurance premium payments
· 80E: Education loan interest
· 24(b): Home loan interest
Health insurance is particularly important, and with rising medical costs, it’s wise to explore reliable plans. Future Generali health insurance not only protects your finances but also offers additional tax-saving opportunities under Section 80D
Also read: How health insurance helps in saving tax?
In conclusion
Section 80C of the Income Tax Act is a smart starting point for tax planning. You can save up to ₹1.5 lakh annually while securing your future, family, and retirement. For a well-rounded strategy, include health coverage from Generali Central—it’s not just about tax savings but long-term financial security.
FAQs
1. What is the maximum limit under Section 80C?
You can claim a maximum deduction under Section 80C of ₹1.5 lakh in a financial year.
2. Can I claim an 80C deduction under the new tax regime?
No, the 80C deduction is available only under the old tax regime.
3. Is life insurance premium eligible under Section 80C?
Yes, premiums paid for life insurance policies for yourself, your spouse, or your children qualify for deduction under Section 80C.
4. Can I claim both EPF and PPF under Section 80C?
Yes, contributions to both EPF and PPF are allowed under the combined ₹1.5 lakh limit of Section 80C of the Income Tax Act.
5. Are tuition fees for children covered under Section 80C?
Yes, tuition fees paid for up to two children studying in India are eligible for 80C deduction.
