section 80C
Tax Savings

How much tax can you save under 80C

Under Section 80C of the Income Tax Act of 1961, taxpayers are allowed certain deductions that allow them to lower their tax liability against their taxable income. These deductions are applicable for Assessment Years (A.Y.)

  • A.Y. 2018-19: Up to 1,50,000/-
  • A.Y. 2017-18: Up to 1,50,000/-
  • A.Y. 2016-17: Up to 1,50,000/-
  • A.Y. 2015-16: Up to 1,50,000/-
  • A.Y. 2014-15: Up to 1,00,000/-

Assuming you earned a gross total income of Rs. 10,00,000 as taxable income in P.Y. (Previous Year) 2017-18 (your A.Y. will be 2018-19 when you will estimate and pay the tax on this income). If you invest Rs.150,000 of this income in any or multiple products listed under section 80C, your total taxable income will be reduced to Rs.8,50,000 for the P.Y.

How to avail benefits under section 80C?

Products under section 80C can be divided into three parts
1) Fixed Interest Investment Products: your money is invested into a product for a fixed term with fixed interest.
2) Market-Linked Investment Products: your money is invested into a product for a fixed term and returns are linked to the movements in the stock market.
3) Expenditure Products: your money is spent on certain activities which are identified as tax saving.

Saving tax under Section 80C

ProductNature of InvestmentMinimum Lock-In Period/ Remarks
Fixed Interest Investment Products
Employee Provident Fund EPF/ VPF (employee’s contribution)Retirement
Public Provident Fund (PPF)Retirement15 Years- partial withdrawal allowed after 6 years
5 Year Fixed DepositsMedium Term Debt5 Years
5 Year Post Office DepositsMedium Term Debt5 Years
National Savings Certificate (NSC)Long Term Debt5 Years
Sukanya Samriddhi YojanaLong Term Debt21 Years – 50% withdrawal allowed after 18 Years
Senior Citizens Savings Scheme (SCSS)Long Term Debt5 Years
NABARD BondsMedium Term Debt
Market-Linked Investment Products
National Pension Scheme (NPS)RetirementTill Retirement
Equity Linked Saving Scheme (ELSS)Market Linked Mutual Fund3 Years
Unit Linked Insurance Plans (ULIP)Insurance + Market Linked Investment5 Years
Life Insurance Premium Payments (endowment plans)Insurance2 Years – Should not be over 10% of the sum assured
Expenditure Products
Children's School FeesMaximum of 2 kids studying in India
Home Loan Principal Payment5 Years – for construction or purchase of residential property
Stamp Duty and Registration of Home

How much can you claim under Section 80C?

Rs.150,000 is the maximum deduction that can be claimed under Section 80C and all its subsections combined.

Can I know more about the eligible products in detail?

PPF/ EPF/ VPF

  • An individual can claim deductions for deposits made in PPF accounts in the name of self, spouse, and children even if major.
  • HUFs can claim the deduction under the section for deposits made for any member of the family.
  • The maximum deduction allowed is Rs.100,000 for AY 2014-15 and Rs.150,000 for AY 2015-16, AY 2016-17, and AY 2017-18.
  • Investments in PPF earn fixed annual compound interest of 8.1% with a 15-year lock-in.
  • You can also take a loan against the total available amount in the account.
  • Contribution towards EPF/VPF upto Rs.150,000 too earns tax benefit under Section 80Cand earns an interest rate of 8.8% per annum.

5 Year Fixed Deposits or Post Office Schemes

  • They are eligible for deductions under Section 80C for a maximum investment of Rs.150,000.
  • These fixed deposits cannot be withdrawn prematurely.
  • Different banks offer different interest on the tax-saving FDs, which range from 7-9%.
  • The returns are guaranteed and the FDs offer 100% capital protection.
  • The total interest earned becomes eligible for taxation and gets added to the taxable income upon the maturity.

National Savings Certificate (NSC)

  • NSCs are eligible for tax breaks for the financial year in which they are purchased.
  • Investments of up to Rs 1.5 lakh in NSCs can be made to save taxes under Section 80C.
  • NSCs can be bought from designated post offices and come with a lock-in period of 5 years.
  • The current rate of interest for FY 2016-17 is 8.1% and is compounded annually.
  • The total interest earned becomes eligible for taxation and gets added to the taxable income upon the maturity.

Sukanya Samriddhi Yojana

  • Deposits of up to Rs 1.5 lakh are eligible for tax saving under section 80C under Sukanya Samriddhi Yojana
  • The current rate of interest for FY 2016-17 has been set at 8.6%.
  • Deposits in this scheme have to be made for a girl child by the parent or guardian.
  • The interest is compounded annually and is fully exempt from tax.
  • The receipts upon maturity are also tax-free.
  • This account matures 21 years after opening the account. A partial withdrawal of up to 50% of the previous year’s balance is allowed after the account holder turns 18.

Senior Citizens Savings Scheme (SCSS)

  • Investments of up to Rs 1.5 lakh in SCSS can be made to save taxes under Section 80C.
  • This scheme is exclusively structured for senior citizens i.e. anyone who is over 60 years old or someone over 55 who has opted for retirement.
  • The scheme has a lock-in of 5 years and gives 8.6% rate of interest per annum.

National Pension Scheme (NPS)

  • The NPS is a pension scheme that has been started by the Indian Government to allow the unorganized sector and working professionals to have a pension after retirement.
  • Investments of up to Rs 1.5 lakh can be used to avail tax deductions under Section 80C.
  • An additional Rs 50,000 can also be invested in the NPS for tax deductions under Section 80CCD(1B).
  • The NPS offers different plans that the subscriber can choose as per their risk profile but the highest exposure to equity is capped at 50%.
  • An option to change designated pension fund managers is also allowed.

  • Returns become eligible for taxation and gets added to the taxable income upon the maturity

Equity Linked Saving Scheme (ELSS)

  • ELSS investments of upto Rs.150,000 are eligible for tax deduction under Section 80C.
  • At least 65% of the ELSS funds are invested in the equity market.
  • They offer higher rate of returns and have the shortest lock-in time of 3 years amongst all tax-saving schemes.
  • The returns on these schemes held for more than a year are considered capital gains and are therefore 100% tax-free!

Unit Linked Insurance Plans (ULIP)

  • ULIP plans provide investment and insurance in the equity market.
  • They are eligible for deductions on a maximum investment of Rs.150,000 under Section 80C.
  • The disadvantage of ULIPs is that they don’t guarantee returns and offer clarity on where the investments are made and how much of the invested amount is deducted for commissions and expenses.

Life Insurance Premium Payments (endowment plans)

  • The annual premium paid for life insurance in the name of the taxpayer or the taxpayer’s wife and children is an eligible for tax-saving
  • The deduction is valid only if the premium is less than 10% of the sum assured.

Children's School Fees

  • You can claim the deduction of paying the tuition fee of upto two children.
  • Tuition fees are eligible only if paid to any university, college, school or other educational institution situated in India.
  • However, any development fees or donation or payment of similar nature shall not be eligible for deduction.

Home Loan Principal Payment and Stamp duty/ registration fees

  • The repayment of the principal of a loan taken to buy or construct a residential property is eligible for tax deductions under Section 80C. The loan can be for construction or purchase of residential property.
  • Deductions are allowed for registration fees, transfer expenses, and stamp duty