Section 80C – now Section 123 of the Income-tax Act, 2025 – lets you reduce taxable income by up to ₹1.5 lakh a year – but only under the old tax regime. If you are on the new regime (the default), these investments do not save tax. Check which regime suits you first in the income tax calculator.
Everything that counts under Section 123 (old 80C)
| Option | Lock-in | Return | Notes |
|---|---|---|---|
| Employee’s EPF contribution | Till retirement (partial withdrawals allowed) | Rate declared yearly | Already deducted from salary – counts automatically |
| PPF | 15 years | Government-set, reviewed quarterly | Interest and maturity tax-free |
| ELSS mutual funds | 3 years | Market-linked | Shortest lock-in; gains above the yearly limit are taxed |
| Life insurance premium | Policy term | Depends on plan | Term insurance is for protection, not returns |
| Sukanya Samriddhi Yojana | Till the girl turns 21 (partial at 18) | Government-set | For a daughter below 10 |
| NSC | 5 years | Government-set | Interest is taxable but reinvested interest qualifies for 80C |
| Tax-saver bank FD | 5 years | Bank rate | Interest is taxable |
| Senior Citizens Savings Scheme | 5 years | Government-set | For 60+ |
| Home loan principal repayment | – | – | Plus stamp duty and registration in the year paid |
| Children’s tuition fees | – | – | Up to two children, full-time education in India |
| NPS (own contribution) and pension plans | Till 60 | Market-linked / plan-based | Together with 80C, capped at ₹1.5 lakh |
| ULIPs | 5 years | Market-linked | Check charges carefully |
Beyond ₹1.5 lakh
- NPS extra deduction (80CCD(1B)): a further ₹50,000 for your own NPS contribution, over and above 80C.
- Health insurance (80D): separate limits for self/family and parents.
- Employer’s NPS contribution (80CCD(2)): allowed in both regimes.
How to use your ₹1.5 lakh well
- Start with what you already pay: EPF, home loan principal, tuition fees, term insurance premium.
- Fill the gap with goal-based options: PPF for safe long-term savings, ELSS for growth (see the SIP calculator).
- Avoid buying traditional endowment policies just for 80C – the returns are usually low.
- Invest early in the year. Rushing in March leads to poor choices.
Good to know
The Income-tax Act, 2025 (in force from 1 April 2026) renumbers many sections. Section 80C is now Section 123, with the eligible investments listed in Schedule XV. The ₹1.5 lakh limit and the old-regime-only rule are unchanged. From tax year 2026-27 your Form 16 and ITR forms will show Section 123; returns for 2025-26 still use 80C. Other sections mentioned here, such as 80CCD and 80D, also have new numbers. Compare returns with the PPF calculator and FD calculator.