Money Basics · Taxes & 80C

Section 80C

Section 80C is the most-used tax deduction in India. It lets you reduce your taxable income by up to ₹1.5 lakh per year by investing in specific approved instruments.

Note: only available under the old tax regime. And the label is changing. The Income-tax Act 2025, in force from 1 April 2026, renumbers Section 80C as Section 123. Same ₹1.5 lakh, same instruments; returns for FY2025-26 still use the old numbering.

What qualifies for 80C?

• EPF contribution (auto-deducted from salary, often fills much of the ₹1.5L)
• PPF (Public Provident Fund): ₹500–₹1.5L/year, rate set by the government and reviewed every quarter (7.1% now), 15-year lock-in
• ELSS mutual funds: 3-year lock-in, equity exposure, so the return is market-linked in both directions
• NSC (National Savings Certificate): 5-year lock-in, 7.7%. Locked at the rate on the day you buy
• Life insurance premium: if you're paying for term insurance
• Principal repayment of home loan
• Children's tuition fees
• SCSS (Senior Citizen Savings Scheme): for parents/seniors
• 5-year bank FD: lock-in required, FD rate applies

> Most salaried people find EPF alone already covers a large slice of the ₹1.5L before they invest a single extra rupee. Check what's already counted before you add more.

The tax saving

₹1.5 lakh deduction at 30% slab = ₹46,800 saved (including 4% cess). At 20% slab = ₹31,200 saved.

₹1.5 lakhMaximum 80C deduction

₹46,800Tax saved per year for 30% bracket

What you're actually trading off

Every instrument here gives you the identical ₹1.5L deduction. What differs is the price you pay for it, how long the money is locked, whether the return is fixed or market-linked, and how the returns get taxed on the way out.

• EPF: no decision to make. It's deducted from your salary automatically, and your employer matches it. Effectively locked until you leave the workforce, with partial withdrawals allowed for specific reasons like a house or a medical event. Rate is set by the government each year.
• PPF: 15-year lock-in, ₹500–₹1.5L a year, ~7.1% today but reset by the government every quarter, maturity fully tax-free. Partial withdrawal opens up from year 7. Zero market risk, and zero chance of beating equity across a 15-year stretch.
• ELSS: 3-year lock-in, the shortest in 80C. Equity-linked, so the return is whatever the market did. Could be 15% a year, could be sitting in the red on the day your lock-in ends. Gains above ₹1.25L are taxed at 12.5%.
• NSC: 5-year lock-in, currently 7.7%, locked at the rate on the day you buy. The interest is taxable each year, though reinvested interest itself counts toward the next year's 80C.
• 5-year tax-saver FD: 5-year lock-in that genuinely cannot be broken early. Interest is fully taxable at your slab, which takes a real bite out of a 6-7% return if you're in the 30% bracket.
• Term insurance premium: you were buying the cover anyway. The deduction is a side effect of a decision you made for other reasons.

Reading the pattern

Short lock-in tends to come bundled with market risk. Guaranteed returns come bundled with long lock-ins. Nothing in 80C hands you both, and the instrument that fits someone with a 30-year runway is not the one that fits someone retiring in six years. Match the lock-in to when you actually need the money back, and the risk to whether a bad year at the wrong moment would break your plan.

Takeaway. 80C saves up to ₹46,800 in tax for 30% bracket earners. Every instrument inside it trades lock-in against certainty of return. Match those to your own timeline rather than to a ranking. Old regime only.