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What is the maximum deduction under Section 80C?

What is the maximum deduction under Section 80C?

06-Dec-2025

Tax

Answer By law4u team

Under Section 80C of the Income Tax Act, 1961, individuals and Hindu Undivided Families (HUFs) can claim deductions for certain investments and expenses, which helps to reduce their taxable income. The maximum deduction available under Section 80C is ₹1.5 lakh per financial year. Key Points about Section 80C Deduction: The total deduction under Section 80C is capped at ₹1.5 lakh in a financial year. This means that regardless of how many eligible investments or expenses you make, the total deduction you can claim under this section cannot exceed ₹1.5 lakh. This limit of ₹1.5 lakh is a combined limit for various investments and expenses that qualify for deduction under this section. Eligible Investments and Expenses under Section 80C Here are some common investment options and expenses that qualify for deduction under Section 80C: 1. Life Insurance Premium: Premium paid on life insurance policies for yourself, your spouse, children, or HUF members qualifies for deduction. This includes premiums paid for term insurance plans as well as endowment and ULIPs (Unit Linked Insurance Plans). 2. Employee Provident Fund (EPF): Contributions made by an employee to the Employee Provident Fund (EPF) are eligible for deduction under Section 80C. 3. Public Provident Fund (PPF): Contributions to the Public Provident Fund (PPF), which is a long-term savings scheme with tax-free returns, also qualify for deduction. The interest earned in PPF is also exempt from tax. 4. National Savings Certificates (NSC): Investment in National Savings Certificates, issued by India Post, can be claimed for deduction. The interest earned on NSCs is also taxable, but you can claim a deduction for the initial investment amount. 5. 5-Year Fixed Deposit with Banks: A 5-year fixed deposit (FD) with a bank that has a tax-saving feature qualifies for deduction under Section 80C. 6. Tax-Saving Fixed Deposit with Post Office: Similar to bank FDs, a 5-year tax-saving fixed deposit with the post office qualifies for deduction under Section 80C. 7. Senior Citizens Savings Scheme (SCSS): If you're a senior citizen (aged 60 or more), investments in the Senior Citizens Savings Scheme (SCSS) are eligible for a deduction under Section 80C. 8. Sukanya Samriddhi Yojana: Contributions to the Sukanya Samriddhi Account, a government-backed savings scheme for the girl child, are eligible for deduction under Section 80C. 9. National Pension System (NPS) (under sub-section 80C): While NPS falls under Section 80CCD, it is worth noting that contributions to the NPS by an individual also fall under the larger deduction umbrella of Section 80C. However, an additional deduction of up to ₹50,000 is available under Section 80CCD(1B) over and above the ₹1.5 lakh limit of Section 80C. 10. Housing Loan Principal Repayment: The repayment of the principal component of a housing loan qualifies for deduction under Section 80C. Note that this is only for the principal repayment and not the interest component (which can be claimed separately under Section 24(b)). 11. Tuition Fees for Children: Tuition fees paid for the education of up to two children are eligible for deduction under Section 80C. This includes fees for schooling and college education but does not cover donations, development fees, or other such fees. 12. Unit Linked Insurance Plans (ULIPs): Premiums paid for ULIPs (insurance products that offer both life coverage and investment) are eligible for deduction under Section 80C. 13. Post Office Time Deposit (5 years): Investments in a 5-year post office time deposit are eligible for a deduction under Section 80C. Important Notes: Combination of Deductions: The total of all eligible investments and expenses listed above can be claimed together, but the combined deduction limit is ₹1.5 lakh. For example, if you invest ₹50,000 in PPF, ₹30,000 in NSC, and ₹1,00,000 in life insurance premiums, the total deduction you can claim is ₹1.5 lakh (the maximum limit). Interest on PPF and NSC: The interest earned on these investments is taxable, but the amount invested in them is deductible under Section 80C. Additional Deduction for NPS: Apart from the ₹1.5 lakh under Section 80C, contributions to the National Pension Scheme (NPS) can also be eligible for an additional deduction of up to ₹50,000 under Section 80CCD(1B). This is over and above the Section 80C limit. Lock-in Period: Some of the investments like PPF, NSC, and 5-year fixed deposits have a mandatory lock-in period, meaning you cannot withdraw the money before a certain number of years (typically 5 years or more). Summary Maximum Deduction under Section 80C: ₹1.5 lakh per financial year. Eligible Investments/Expenses: Includes life insurance premiums, PPF, EPF, NSC, 5-year fixed deposits, tuition fees, and more. Additional NPS Deduction: You can claim an extra ₹50,000 deduction for NPS contributions under Section 80CCD(1B), over and above the ₹1.5 lakh limit. This section is a great way to reduce taxable income by investing in various tax-saving instruments while simultaneously securing your financial future. However, remember that the total deduction cannot exceed ₹1.5 lakh, so it’s essential to plan your investments accordingly to make the most of this limit.

Answer By Anik

Dear client, Section 80C of the Income Tax Act, 1961 is a critical provision in the Income Tax laws as it provides tax deduction benefits to taxpayers by reducing their gross total income, effectively lowering their taxable income and their overall tax liability for the financial year. Section 80C reduces the taxable income by way of deductions. The maximum permissible deduction under Section 80C is upto 1.5 Lakhs per year. However it is important to note that only individuals and HUFs are eligible to claim Section 80C deductions. Companies, Firms, LLPs, etc. are not allowed to claim the Section 80C deductions. Eligible Deductions under Section 80C 1. PPF (Public Provident Fund) and EPF (Employees’ Provident Fund) PPF investments are exempted at the investment stage and also exempted at the accrual stage. It has a mandatory lock in period of 15 years. Further EPF is a social security Scheme run by the Employees’ Provident Fund Organisation for the benefit of employees who are employed in industrial establishments. The employees' contribution can be used for tax deduction under section 80C. Voluntary Provident Fund (VPF) contributions are also eligible for deduction under Section 80C. 2. Life Insurance Premium The deduction can be claimed by a taxpayer for insurance premium paid. The premium can be paid for policies taken in the name of the assessee. 3.Five-Year Bank Deposit The amount deposited with banks as per the Bank Term Deposit Scheme, 2006, is admissible as a deduction from gross total income. For a deposit in a bank to be eligible for deduction, the deposit must be made for a minimum period of 5 years. Also, the deposit should not have been pledged to secure a loan or be encumbered. 4.NSC (National Savings Certificates) These tax-saving bonds issued by the Indian Postal Service can be used as a tax-saving tool as they are eligible for deduction under Section 80C. 5.Sukanya Samriddhi Account Deposit Scheme It is a type of Post Office Saving Schemes that is eligible for tax deduction under this section. The parent or a legal guardian can open a Sukanya Samriddhi Account in the name of the girl child up to the age of 10 years and the account can be closed after completion of 21 years. 6.SCSS (Post Office Senior Citizen Savings Scheme) Deposits made in the Post Office Senior Citizen Savings account that were opened on or after 8th December 2007 are eligible for section 80C deduction. Senior Citizen Savings Scheme account can be closed after an expiry of five years from the date of opening of the account can be extended for another three years. 7. Principal Repayment of Home Loan Taxpayers repaying home loans can claim deduction under Section 80C for the amount of principal repayment. Interest paid on a home loan is also eligible for income tax deduction under Section 24. The maximum deduction under section 80C is Rs 1.5 lakhs per financial year. It is important to note that deductions under section 80C are not available under the new tax regime and it is pertinent only to the old tax regime. I hope this answer was helpful. For any further queries please do not hesitate to contact us.

Answer By Ayantika Mondal

Dear client, Section 80C of the Income Tax Act, 1961 is a Tax saving provision which allows individuals and Hindu Undivided Families (HUF) to reduce their taxable income by making certain approved investments and payments. This section is the most used section for Tax Planning in India. The maximum amount of deduction under this section is ₹1.5 lakh in a financial year. This amount is directly deducted from an individual's total income, which reduces the overall tax liability. This section covers a wide range of investment options and expenses. Some of the eligible items include life insurance premium, contribution to Employees Provident Fund (EPF), Voluntary Provident Fund (VPF), Public Provident Fund (PPF), National Savings Certificate (NSC), Sukanya Samriddhi Yojana, Tax Saving Fixed Deposits (FDs), Senior Citizens Savings Scheme (SCSS), Principal Repayment on Home Loan and National Pention Scheme (NPS). In cases of joint investments, the deduction under Section 80C will be available only to the individual whose name is the first holder. The benefit of this section can be claimed by individual taxpayers and Hindu Undivided Families (HUF). Salaried employees, professionals, and self - employed persons can also utilize this deduction provided that the investment or payments fall within the eligible categories. There can be no double deduction such as if principal repayment on a home loan is claimed under this section, cannot be claimed under any other section. The primary and practical benefit under this Section 80C of the Act, 1962 is that it directly reduces the taxable income of the taxpayer. Under this Section a person can not only save but can also build long term financial security through disciplined savings and investment planning. I hope this answer was helpful. For further queries, please do not hesitate to contact us. Thank you.