Budget 2025: A Look At Tax Saving Investment Options Under Section 80C

With the Union Budget 2025 nearing, the focus again is back on income tax with the taxpayers seeking a number of measures that can take away some of their financial burden and make planning finances easier and better. One of the demands for long has been for more tax exemptions and deductions including those under Section 80C.

Section 80C's limit of Rs 1.5 lakh has remained unchanged for many years and while the taxpayers hoped for some announcement in the last budget, the expectation continues to be the same for this year as well.

What Is Section 80C?

The Section 80C of the Income Tax Act provides an option to the taxpayers to reduce their tax liability by claiming certain deductions. This can be done by investing in some eligible financial instruments that are allowed for 80C deductions. Public Provident Funds, Equity Linked Savings Schemes and National Savings Certificate are among those that offer 80C deduction eligibility.

Key Deductions Under Section 80C

Life Insurance Premiums

Payments made towards premiums for your life insurance policies are eligible for 80C deductions. This also include those paid for your spouse and children’s policies.

Employee Provident Fund (EPF)

Investments made to EPF can also bring tax benefits under Section 80C. While employees' contributions are eligible for deductions under the Section, those from employers are tax-free.

Public Provident Fund (PPF)

PPF provides benefit of Exempt-Exempt-Exempt (EEE) tax status. Investments under this scheme are eligible for tax exemptions. Besides, any interest earned on the deposit also remains exempt. The maturity amount received at the closure of the scheme remains exempt.

Equity Linked Saving Schemes (ELSS)

ELSS is another way of saving taxes by claiming benefit under Section 80C under which they are eligible for exemption. The rebate is capped at Rs 1,50,000 a year, which can potentially lead to savings in taxes of up to Rs 46,800. However, one needs to keep in mind that the scheme comes with a lock-in period of 3 years. Any income and profits earned after this period are considered Long Term Capital Gains, hence, the amount exceeding Rs 1 lakh is subject to tax at 10%.

National Savings Certificates (NSC)

Investment in NSC offers tax savings under Section 80C of up to Rs 1.5 lakh a year. The total amount invested in NSC is deducted from total tax liability.

5-Year Fixed Deposit

Fixed deposits with banks or post offices that have a minimum lock-in of 5 years offer tax deductions under the Section, though with certain conditions. The limit for tax deductions is Rs 1.5 lakh annually while the income earned is taxable.

Home Loan

Amount paid towards the principal of your home loan offers the benefit of tax deductions. The maximum housing loan tax exemption is Rs. 1.5 lakh a year.

Senior Citizen Savings Scheme (SCSS)

Investments made to SCSS are also deductible under Section 80C for tax savings.

NPS

Over and above the Rs 1.5 lakh deduction available under this Section, a further deduction for investment up to Rs 50,000 in NPS is offered to NPS subscribers under subsection 80CCD (1B).

Tuition Fees

Fees paid for the education of your children (max of 2 children) also bring tax savings under Section 80C.

Sukanya Samriddhi Yojana

Investments made under the scheme for a girl child are eligible for deductions up to Rs 1,50,000 while the interest earned under the scheme is also tax-free.