Section 80C Deductions Limit

Every individual taxpayer must be aware of the 80C deduction limits and provisions in India. This section, which is enshrined in the Income Tax Act, 1961, offers tax deductions on various investments (like PPF, SCSS and NSC) and expenses (home loan principal and life insurance premiums). That said, the 80C deduction limits only apply to the old tax regime. Assessees opting for the new tax regime cannot claim these deductions.

In this article, we get into the details of the 80C deduction limits for FY 2024-25 and explore the other tax benefits available under different sections of the Income Tax Act.

Tax deductions are specific benefits offered to taxpayers under the Income Tax Act. These benefits are available on certain investments and payments, which can be deducted from the assessee’s total income. This reduces the total taxable income and therefore, the tax liability too. Each provision for these deductions comes with its own sub-limit.

Such tax deductions are offered to encourage investments in the specified government schemes or to facilitate expenses that help meet different financial goals — like home ownership or financial security with a life insurance cover.

The 80C deduction limits have not changed after the Union Budget 2024. So, they remain the same for FY 2024-25 too. The maximum amount of deduction allowed under section 80C is Rs. 1.5 lakhs per year. This includes deductions under sections 80CCC and 80CCD(1).

The tax deductions available for investments covered under section 80C can help you save tax significantly. If you choose the old tax regime and have enough eligible investments to claim the maximum amount allowed under the 80C deduction limit, you can reduce your taxable income by Rs. 1.5 lakhs.

Some common investment options that qualify for this deduction include the Senior Citizens Savings Scheme (SCSS), Public Provident Fund (PPF), Equity-Linked Savings Scheme (ELSS), five-year tax-saving fixed deposits and Employees' Provident Fund (EPF), among others.

Aside from section 80C, the Income Tax Act also contains several other provisions that can help you save tax. This list explains each of the different tax deductions available to you.

• Income tax deduction under section 80C
  As mentioned above, section 80C deductions include various investments and expenses that you can claim to reduce your total taxable income. This is allowed under the old tax regime up to the 80C deduction limit of Rs. 1.5 lakhs.
• Income tax deduction under section 80CCC
  Section 80CCC of the Income Tax Act allows you to deduct up to Rs. 1.5 lakhs for contributions made to certain specific pension funds offered by life insurance companies. This limit is included in the 80C deduction limit and is only available under the old tax regime.
  
• Income tax deduction under section 80CCD
  This section deals with deductions for contributions made to pension schemes like the Atal Pension Yojana (APY) and the National Pension Scheme (NPS). It contains the following subsections:
  • 80CCD(1): This section, available only under the old tax regime, allows deductions for contributions made to NPS. Employee contributions can be deducted up to 10% of their basic salary plus dearness allowance (DA). Contributions by self-employed individuals can be claimed up to 20% of their gross total income in the financial year.
  • 80CCD(1B): An additional deduction of up to Rs. 50,000 is offered for NPS investments under the old tax regime.
  • 80CCD(2): Deduction under this section is available for employers’ contributions to NPS. Central government employees can claim this deduction up to 14% of their basic salary plus DA. Other employees can claim up to 10% of the basic salary plus DA under the old regime or 14% of this amount under the new regime (from FY 2024-25).

• Income tax deduction under section 80DD
  Individuals and HUFs with disabled persons who are wholly dependent on them can claim deductions u/s 80DD for supporting such dependents. The deduction limit is Rs. 75,000 if the disability is between 40% and 80% and Rs. 1,25,000 if the disability is 80% or higher. This deduction is not available in the new tax regime.
  
• Income tax deduction under section 80DDB
  Under section 80DDB, you can claim expenses incurred for treating specific diseases as deductions from your total income. The expenses may be incurred for your treatment or for the treatment of any of your dependents (like spouse, children, parents or siblings). The maximum deduction allowed depends on the age of the patient:

Below 60 years: Up to Rs. 40,000
Above 60 years: Up to Rs. 1,00,000

• Income tax deduction under section 80CCG
  Section 80CCG no longer applies in India. It offered deductions for investments in the Rajiv Gandhi Equity Savings Scheme (RGESS), which was introduced in the Union Budget 2012. 50% of the amount invested was deductible (up to Rs. 25,000). However, the benefits under this section were discontinued w.e.f April 1, 2017.
  
• Income tax deduction under section 80EE
  First-time homeowners can claim the interest paid on their home loans as a deduction under section 80EE. The maximum deduction, allowed only under the old tax regime, is Rs. 50,000. However, the loan should not exceed Rs. 35 lakhs and should have been taken between April 1, 2016, and March 31, 2017. Also, the property value should not exceed Rs. 50 lakhs.
  
• Income tax deduction under section 80EEA
  This section of the Income Tax Act, available only under the old regime, offers tax deductions for interest paid on low-cost housing loans. The maximum deduction allowed for the interest payment u/s 80EEA is Rs. 1.5 lakhs. This is in addition to any tax benefits claimed for home loan principal repayment under the 80C deduction limit. The housing loan should have been sanctioned between April 1, 2019, and March 31, 2022.
  
• Income tax deduction under section 80EEB
  Section 80EEB of the Income Tax Act lets you claim deductions up to Rs. 1.5 lakhs for interest payments made on EV loans. This deduction is available only under the old tax regime. Also, you should have availed the loan between January 1, 2019, and March 31, 2023, for the purchase of an electric vehicle.
  
• Income tax deduction under section 80GG
  If you live in a rental accommodation but do not receive a house rent allowance (HRA) as a part of your salary, section 80GG of the Income Tax Act can offer you some tax relief. Under this section, you can claim the least of the following amounts as a deduction if you opt for the old tax regime:
  Rs. 60,000 annually
  25% of your total income (before deduction u/s 80GG)
  Difference between the actual rent paid and 10% of your income (before deduction u/s 80GG)
• Income tax deduction under section 80GGC
  If you have made any donation to an electoral trust or a political party (other than in cash or kind), you can claim the amount donated as a deduction u/s 80GGC provided you choose the old tax regime.
  
• Income tax deduction under section 80U
  Any individual with a disability (of 40% to 80%) can claim a deduction of Rs. 75,000 u/s 80U. For any person with a severe disability (of 80% or more), the deduction limit is Rs. 1,25,000. This deduction is not available in the new tax regime.
  
• Income tax deduction under section 80D
  Medical insurance premiums (paid for self, spouse, children or parents) and medical expenses (incurred by senior citizens) are tax-deductible u/s 80D. The deduction limit is capped at Rs. 25,000 (or Rs. 50,000 if the premium is paid for a senior citizen). You can claim this benefit if you opt for the old tax regime.
  
• Income tax deduction under section 24(b)
  The interest paid on your home loan is tax-deductible u/s 24(b). If the property for which you have availed of the loan is self-occupied, you can claim interest deductions up to Rs. 2,00,000 annually (subject to the actual interest paid). However, if you have let out the property, the entire interest paid is deductible, without any limit. Deductions for let-out properties are allowed under both tax regimes, while deductions for self-occupied properties are only allowed under the old tax regime.
  
• Income tax deduction under section 80E
  If you have availed of an education loan for pursuing higher education, the total interest paid on this loan can be claimed as a deduction u/s 80E. The loan can be used to finance higher education for yourself, your spouse, your child or any student for whom you are the legal guardian. This tax benefit is also available only under the old tax regime.
  
• Income tax benefits under section 10(14)
  If you are a salaried employee, your employer may pay you different allowances to help you fulfil your responsibilities. Some of these allowances — like internet allowance, research allowance, travelling allowance and conveyance allowance — are exempt u/s 10(14) to the extent of expenses actually incurred. Additionally, any food allowance paid as a part of your salary is also tax-free up to Rs. 22,600 annually.
  
• Income tax deduction under section 80G
  Any contributions made to specified charitable institutions and relief funds are deductible u/s 80G under the old tax regime. Some contributions qualify for a 50% deduction, while others qualify for a 100% deduction.
  
• Income tax deduction under sections 80TTA and 80TTB
  For individuals less than 60 years of age, the interest earned on savings accounts is tax-deductible up to Rs. 10,000 u/s 80TTA. For senior citizens, the interest from bank deposits, post office deposits and deposits with cooperative societies is tax-deductible up to Rs. 50,000 u/s 80TTB. Both these benefits are only available under the old tax regime.
  
• Income tax deduction under section 80RRB
  Under this section, you can claim deductions for any royalty received up to Rs. 3 lakhs. The benefit is available under the old tax regime.
  
• Income tax deduction under section 80QQB
  Any royalty received by authors for specified publications is tax-deductible up to Rs. 3 lakhs u/s 80QQB. This benefit is also available in the old tax regime.

The provision of withholding tax offers many advantages to the Indian government. Check out the top reasons to levy this tax.

• Early revenue generation
  Since the tax is deducted at the time of making the payment and deposited soon thereafter, it results in early revenues for the government. This gives the government access to funds consistently during the year instead of only at the time of tax filings. Consequently, the government can continue to fund its projects and services without any financial hassles.
  
• Reduced tax evasion
  The nature of withholding tax ensures that the payer and the payee are both within the ambit of the income tax regime. This makes it harder for the payee to evade taxes. Since the tax is deducted from the payment before the non-resident payee receives the amount due, the chances of tax evasion are reduced.
  
• Increased scrutiny
  Both the payer and the payee maintain records of the deductions made for withholding tax. The payer needs to record these details to ensure that the tax is deducted and deposited on time. The payee needs to record it to facilitate refunds or file the necessary paperwork or returns, as the case may be. This makes scrutiny easier for the income tax department.
  
• Encouraging compliance
  Tax may be withheld at higher rates for persons who have not complied with the required regulations under the Income Tax Act. To avoid this issue, many residents and non-residents focus on ensuring compliance. This, in turn, makes tax administration in the country easier.

Knowing the 80C deduction limits and other tax benefits available to you can be beneficial in many ways. Here are the top advantages of such tax deductions.

Reduced tax liability

By claiming the tax deductions that you are eligible for, you can reduce your taxable income. Consequently, your total tax liability also comes down. This results in more cash in hand, which can be an excellent impetus to save and invest more for your future goals. For businesses, the additional liquidity can fuel further growth.

Encouragement of charitable contributions

Sections like 80G in the Income Tax Act offer tax benefits on contributions to specified charitable institutions. These contributions not only help you promote a cause that you believe in but also help you earn tax benefits on those donations. Furthermore, they also lead to meaningful developments and progress in society at large.

Stimulating investment and economic growth

Many tax deductions are offered on investments — both for individuals and businesses. These benefits can improve the overall investment ecosystem in the country. Furthermore, specified expenses can also be deducted by businesses. This indirectly supports economic growth over the long term.

Promoting homeownership and real estate investments

The Income Tax Act offers many tax deductions for home loan repayments. For instance, repayment of the principal on home loans is included in the 80C deduction limit. Furthermore, home loan interest can be deducted under sections 24(b) and 80EE or 80EEA. These benefits encourage individuals to invest in real estate.

Facilitating education and skill development

You can also claim tax deductions on loans taken for higher education. Businesspersons may also be eligible to claim skill development costs as deductions from their business income. These benefits promote education and upskilling among various demographics of the population. In turn, this improves the overall literacy and employability among Indians.

The following categories of persons can make use of the 80C deduction limit specified in the Income Tax Act:

• Resident Indians
• Non-resident Indians
• Hindu Undivided Families (HUFs)

By utilising the full 80C deduction limit of Rs. 1.5 lakhs, it is possible to save taxes to the tune of Rs. 46,800 (for those in the highest tax bracket of 30% tax plus 4% cess).

While section 80C offers a wide range of tax benefits to taxpayers, it is primarily applicable only if you choose the old tax regime. The new tax regime, which has lower tax rates overall, does not allow these deductions. So, if your tax planning strategy focuses on utilising the 80C deduction limit to the maximum possible extent, the old tax regime may be more suitable for you.

That said, you can always compute your tax liability under both tax regimes to identify the more suitable option. If you are a salaried taxpayer, you can easily switch between the two tax regimes from one financial year to the next based on which of them results in the least tax liability. However, if you report business income during the year and want to switch to or out of the new tax regime, you need to file Form 10-IEA.

To claim deductions under section 80C, you can follow the steps outlined here:

• Step 1: Identify the investments eligible for 80C deductions that also align with your financial goals, so you can invest in these schemes or assets during the financial year.
• Step 2: When you file your income tax returns, begin by entering the details of your income under the five heads — namely, salaries, rental income, business income, capital gains and other income. This will give you your gross total income.
• Step 3: Then, enter the details of all the deductions u/s 80C that you are eligible for.
• Step 4: Proceed to include the details of eligible deductions and exemptions under other sections, if any.
• Step 5: You will then get your net taxable income (adjusted for all the above deductions).
• Step 6: Check the tax due on the net taxable income. Pay any excess tax due or claim a refund for excess tax paid.

To make an informed choice between the two tax regimes, consider the following factors in your decision:

• Income levels: Your total taxable income plays a crucial role in this decision. The new regime generally benefits those with lower to moderate incomes due to its reduced tax rates. However, if you are in a higher income bracket, the old regime might still be more favourable if you can claim sufficient deductions.
  
• Deductions and exemptions: In the old tax regime, you can avail of various deductions and exemptions like HRA, LTA, section 80C deductions and more. This can potentially lower your taxable income significantly. On the other hand, the new tax regime may offer lower tax rates but eliminates most deductions. So, consider these aspects before you decide.
  
• Financial goals and investment strategy: Your financial goals and investment strategy are crucial to the choice between the two tax regimes. Factor in your future goals and the investment plan you have in place to achieve those goals. If they involve many investment schemes covered u/s 80C, the old tax regime may be more suitable. However, if your investment strategy involves other schemes and assets, the new regime may be better.
  
• Overall tax liability: Ultimately, the choice between the old tax regime and the new tax regime depends on your tax liability. If none of the above aspects differs vastly between the two regimes, it is best to consider the regime that results in the lower tax liability. You can use online calculators to find how much tax you need to pay in each regime and choose accordingly.

This sums up all you need to know about 80C deduction limits for FY 2024-25, other tax deductions available under various sections and how to make an informed choice between the old and the new tax regimes. It is also important to align your investments with your tax goals.
 

For instance, if you want to invest in mutual fund schemes but also save tax simultaneously, you can consider Equity-Linked Savings Schemes (ELSS), which have a lock-in period of 3 years. Before investing in mutual funds, however, you must ensure you make an objective decision. This is possible on the Bajaj Finserv Mutual Fund platform, where you can compare mutual funds and find those that align with your requirements. With 1,000+ schemes to choose from as well as handy investment planning tools like the mutual fund calculator, this platform makes mutual fund investments easy for all investors.