Tax-Saving Investments Under Section 80C: How To Reduce Taxable Income By Rs 1.5 Lakh

With March 2026 still some months away, taxpayers may feel there is plenty of time left to think about tax planning. Starting early can help avoid the familiar rush to invest at the last minute. Those opting for the old tax regime can reduce their taxable income by up to Rs 1.5 lakh through investments permitted under Section 80C of the Income Tax Act.

Section 80C of the Income Tax Act, 1961, enables taxpayers to claim deductions and reduce their gross total income, thereby lowering taxable income and reducing overall tax liability. Eligible options include provident funds, ELSS, National Savings Certificates, tax-saving fixed deposits, Senior Citizen Savings Scheme and specific life insurance premiums.

Only individuals and Hindu Undivided Families (HUFs) can claim Section 80C benefits. Companies, firms and LLPs are not eligible.

ELSS Funds: Equity-Linked Savings Schemes (ELSS) typically offer an average return of around 12% to 15%. They come with a 3-year lock-in period, which is the shortest among tax-saving options.

NPS (National Pension System): The NPS offers an average return of around 8% to 10%. Investments remain locked in until the investor turns 60, as it is meant for retirement planning.

ULIP (Unit Linked Insurance Plan): ULIPs aim to provide both insurance and investment benefits, with average returns of 8% to 10%. They have a mandatory 5-year lock-in period. The performance varies based on the chosen equity or debt allocation.

Tax-Saving Fixed Deposit: Tax-saving FDs provide a fixed return of up to 8.40%. They come with a 5-year lock-in period and are considered low-risk since returns are assured.

PPF (Public Provident Fund): PPF currently offers an interest rate of 7.90% with a 15-year lock-in period. It is ideal for long-term savings and is known for being a low-risk investment backed by the government.

Senior Citizen Savings Scheme (SCSS): The Senior Citizen Savings Scheme offers a return of 8.60%. It comes with a 5-year lock-in period, which can be extended for an additional three years. It is a low-risk option exclusively for senior citizens.

National Savings Certificate (NSC): NSC provides an interest rate of 7.90% and has a 5-year lock-in period. Since it is a government-backed investment, it carries low risk.

Sukanya Samriddhi Yojana (SSY): This scheme offers a return of 8.50%, with investments locked in until the girl child reaches 21 years. Partial withdrawal is allowed once the child turns 18. SSY is a low-risk, government-backed savings plan.

Life Insurance Premiums: Premiums paid for life insurance policies or deferred annuity plans for oneself, spouse, children or any member of a HUF qualify for deductions.