Section 80C income-tax relief: Here's how to maximise your ₹1.5 lakh deduction

Section 80C of the Income-Tax Act allows some of your investments to be eligible for deduction of up to ₹1.5 lakh when your annual income for a fiscal or assessment year is calculated. When combined with other the other deductions, exemptions and rebate options, it allows taxpayers to their liability for the financial year.

In the new ITA 2025 implemented from April this year, the provision has been outlined under Section 123. Notably the provision is only available under the old tax regime.

A key feature of investment tools that are allowed for Section 80C deductions is that these offer dual advantage of tax saving while giving an interest income at the same time. Further, you can also claim additional ₹50,000 deduction under Section 80CCD(1B) on contribution to specified pension funds, and Section 80TTB for tax-saver fixed deposits (FDs).

What investments are eligible under Section 80C?

Some of the common financial instruments which provide tax exemption benefits under section 80C include the following:

Unit-linked insurance plan investments, tuition fees paid for up to two children, Sukanya Samriddhi Yojana (SSY), Senior Citizens Savings Scheme (SCSS), registration and stamp duty, Public Provident Fund (PPF), National Savings Certificate (NSC), National Pension Scheme (NPS), Loan principal repayment, Life Insurance Corporation of India (LIC) premiums, Equity Linked Saving Scheme (ELSS), Employees Provident Fund (EPF), and the five-year tax-saving fixed deposits.

How can I maximise Section 80C deductions?

• Invest early in the financial year to gain full benefit of compounding and avoid last minute hassles while filing taxes.
• For example, investors who put full lump sum in their PPF amount by 5 April ensure that the income generated for the year is for the full eligible period, including April. However, if you miss this date, your money starts earning from the next month (i.e. May) and you miss out on one full month of interest.

• Use the full ₹1.5 lakh limit to ensure you can claim the full deduction. This can be entirely in one instrument or spread across instruments.
• For example, you can invest ₹50,000 in PPF, ₹50,000 in ELSS and the remaining ₹50,000 towards life insurance premiums to diversify your allocations but still claim tax benefits.
• Diversify across schemes with varying interests, features and risks levels. Take a look at the eligible investment options and choose the ones that best serve your financial goals or requirements.

• For example, singles can allocate for retirement, insurance and equity; while parents could also include school fees and child-focused investment schemes; and senior citizens can take advantage of tailored options such as SCSS to maximise the benefits.
• Extend your total deductions to ₹2 lakh, using additional ₹50,000 claim under Section 80CCD(1B) by investing in NPS.
• Make sure all investments have been made under the taxpayer's name and relevant documents are available at time of ITR filing.

Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.