In summary

Section 80C was the earlier provision that allowed individuals and HUFs to claim deductions of up to Rs. 1.5 lakh on specified investments and payments under the old tax regime. From 1 April 2026, the corresponding deduction is covered by Section 123 of the Income Tax Act, 2025, while eligible items such as life insurance premiums, provident fund contributions and tuition fees continue in substance.

• The earlier Section 80C deduction was up to Rs. 1.5 lakh under the old tax regime.
• From 1 April 2026, Section 123 of the Income Tax Act, 2025 carries this deduction structure for eligible savings and payments.
• Life insurance, provident fund, tuition fees, NSC and eligible housing loan principal payments can qualify, subject to applicable rules. 

The Rs. 1.5 lakh limit is an aggregate limit, so you cannot claim Rs. 1.5 lakh separately for every eligible investment. Understanding which payments qualify and how the limit works can help you plan your tax savings under the applicable tax regime.

For tax years beginning from 1 April 2026, the corresponding Rs. 1.5 lakh deduction is provided under Section 123 of the Income Tax Act, 2025. The Income Tax Department confirms that the eligible payments remain substantially similar, although they are now placed under Schedule XV of the new Act.

From 1 April 2026, the Income Tax Act, 2025 replaces the earlier Section 80C framework with Section 123, which retains the Rs. 1.5 lakh aggregate deduction for specified savings and payments for individuals and HUFs. The eligible items, including life insurance, provident fund and tuition fees, remain substantially similar.

So, for tax planning, the important point is that the Rs. 1.5 lakh limit was not increased in Budget 2025 and continues under the new tax law through Section 123.

Eligible payments and investments can include:

• Life insurance premiums
• Public Provident Fund (PPF)
• Equity Linked Savings Scheme (ELSS)
• Five year tax saving fixed deposits
• National Savings Certificate (NSC)
• Eligible home loan principal repayment
• Tuition fees for eligible children
• Sukanya Samriddhi Yojana

Eligible payments include life insurance premiums, provident fund contributions, tuition fees and certain housing loan principal payments, subject to the applicable rules. The eligible instruments and payments are now listed under Schedule XV of the Income Tax Act, 2025.

Can you claim this deduction under the new tax regime? 

No. The deduction under Section 123 is not available under the new tax regime. It can be claimed by eligible taxpayers who choose the old tax regime and meet the applicable conditions.

For life insurance, eligible premiums can qualify for a deduction of up to Rs. 1.5 lakh under Section 123, subject to the overall limit and applicable conditions.

Tax laws are subject to change. BFL does not provide tax or investment advisory services. Please consult your advisers.

The Section 123 deduction can reduce your taxable income by up to Rs. 1.5 lakh in a tax year if you choose the old tax regime and meet the applicable conditions. This is an aggregate limit for eligible savings and payments, including life insurance premiums, provident fund contributions, tuition fees and certain housing loan principal payments.
 

For example, if you have Rs. 8 lakh of eligible income and Rs. 1.5 lakh of qualifying payments, the deduction can reduce the income considered for tax calculation to Rs. 6.5 lakh, subject to the applicable rules.

From 1 April 2026, Section 123 of the Income Tax Act, 2025 carries forward the deduction structure that was earlier available under Section 80C and Section 80CCE of the Income Tax Act, 1961. The Rs. 1.5 lakh aggregate limit remains unchanged.
 

Budget 2025 also introduced other tax changes, including an additional deduction of up to Rs. 50,000 for eligible NPS Vatsalya contributions under Section 80CCD(1B). These benefits are separate from the Rs. 1.5 lakh limit under Section 123. The Section 123 deduction is not available under the new tax regime. Therefore, taxpayers who want to claim it need to choose the old tax regime and meet the applicable conditions.

Tax saving options differ in their lock in period, return structure and level of investment risk. Market linked options can fluctuate with market performance, while government backed savings schemes have notified interest rates.

*Rates shown are applicable for the relevant notified period and may be revised by the Government. The Department of Economic Affairs publishes small savings rates for each quarter.

The Rs. 1.5 lakh deduction for specified savings and payments continues under Section 123 of the Income Tax Act, 2025, structurally carrying forward the earlier Section 80C deduction. Eligible instruments are now specified under Schedule XV.

NPS has a separate tax deduction framework and should not be treated as part of the Rs. 1.5 lakh Section 123 limit. Market linked products such as ELSS and ULIPs also do not offer a fixed rate of return.

Section 80C and Section 80CCC of the Income Tax Act offers several tax benefits to lower the overall income tax liability. Under the Income Tax Act, 1961, Section 80C allowed eligible individuals and HUFs to claim an aggregate deduction of up to Rs. 1.5 lakh for specified investments and payments. These included life insurance premiums, provident fund contributions, National Savings Certificates, tuition fees and certain housing loan principal payments.

Section 80CCC separately covered contributions to eligible annuity pension plans of LIC or other insurers. The deduction under Section 80CCC formed part of the overall Rs. 1.5 lakh limit when combined with Section 80C and Section 80CCD(1).

From 1 April 2026, the Income Tax Act, 2025 replaced the earlier framework. Section 123 now provides the aggregate Rs. 1.5 lakh deduction for specified savings and payments, with the eligible items set out in Schedule XV. The deduction is available under the old tax regime and is not available under the new tax regime.

Under the Income Tax Act, 1961, individual taxpayers and Hindu Undivided Families (HUFs) could claim deductions under Section 80C for specified investments and payments. The aggregate deduction available under Section 80C and related provisions was limited to Rs. 1.5 lakh per financial year.

Eligible payments included life insurance premiums, provident fund contributions, PPF, NSC, tuition fees, specified five-year fixed deposits and eligible housing loan payments, subject to the applicable conditions.

From 1 April 2026, the corresponding provision is Section 123 of the Income Tax Act, 2025. It allows an individual or HUF to claim an aggregate deduction of up to Rs. 1.5 lakh for qualifying payments listed in Schedule XV. The deduction is not available under the new concessional tax regime.
 

Which payments qualify?

The qualifying categories include:

• Life insurance premiums: Eligible premiums paid for a life insurance policy covering the individual, spouse or child can qualify, subject to the applicable conditions.
• Provident fund contributions: Eligible contributions to recognised or specified provident funds can qualify.
• PPF contributions: Eligible contributions to a Public Provident Fund account can qualify.
• NSC and specified savings: Eligible subscriptions to notified savings certificates can qualify.
• ELSS: Eligible investments in Equity Linked Savings Schemes can qualify under the applicable provisions.
• ULIP contributions: Contributions to specified eligible Unit Linked Insurance Plans can qualify.
• Sukanya Samriddhi Yojana: Eligible deposits under the notified scheme can qualify.
• Five-year tax-saving deposits: Eligible five-year deposits with scheduled banks can qualify.
• Tuition fees: Tuition fees paid in India for full-time education of up to two children can qualify, subject to the applicable conditions.
• Housing payments: Specified payments towards the purchase or construction of a residential house can qualify when the prescribed conditions are met.
• Senior Citizen Savings Scheme: SCSS provides assured returns for retirees with tax-saving benefits under Section 123, ensuring financial stability.

These qualifying categories are set out in Schedule XV of the Income Tax Act, 2025 for the Section 123 deduction. The deduction is based on the amount actually paid or deposited during the relevant tax year, subject to the applicable conditions and the overall Rs. 1.5 lakh limit.
 

How does the Rs. 1.5 lakh limit work?

The Rs. 1.5 lakh limit is an aggregate limit, not a separate Rs. 1.5 lakh deduction for each investment.

For example, if you pay Rs. 60,000 towards eligible life insurance premiums and invest Rs. 90,000 in eligible PPF contributions during the same tax year, the total qualifying amount is Rs. 1.5 lakh. You cannot claim another Rs. 1.5 lakh for a separate eligible investment.

Tax laws are subject to change. BFL does not provide Tax or Investment advisory services. Please consult your advisers.

Section 80C of the Income Tax Act, 1961 allowed individuals and Hindu Undivided Families (HUFs) to claim deductions for specified investments and payments. The aggregate deduction was capped at Rs. 1.5 lakh in a financial year and was available under the old tax regime. 
From 1 April 2026, the corresponding provision is Section 123 of the Income Tax Act, 2025, which retains the Rs. 1.5 lakh aggregate deduction for specified payments listed in Schedule XV. This deduction is not available under the new concessional tax regime.
 

Which investments and payments qualify under Section 80C?

The main eligible investments and payments include:

• Life insurance premiums: Premiums paid to keep an eligible life insurance policies in force for yourself, your spouse or your child can qualify. For an HUF, premiums paid for a member can qualify, subject to the applicable conditions. Premiums paid for parents do not qualify.
• Public Provident Fund (PPF): Contributions made to a PPF account can qualify for the deduction, subject to the applicable conditions.
• Provident Fund contributions: Eligible contributions to specified provident funds can qualify for the deduction.
• Unit Linked Insurance Plans (ULIPs): Eligible payments towards specified ULIPs can qualify, subject to the prescribed conditions.
• National Savings Certificate (NSC): Amounts paid to subscribe to eligible National Savings Certificates can qualify for the deduction.
• Sukanya Samriddhi Scheme: Investments in this scheme for your daughter or any girl child under your guardianship can qualify for the deduction, subject to the applicable conditions.
• Five-year tax-saving fixed deposits: Deposits made for a five-year term with an eligible scheduled bank can qualify for the deduction.
• Senior Citizen Savings Scheme (SCSS): Eligible deposits made under the Senior Citizen Savings Scheme can qualify for the deduction.
• Specified mutual fund investments: Investments in specified eligible mutual fund schemes can qualify under the applicable Section 80C provisions.
• Home loan principal repayment: Repayment of the principal amount of an eligible housing loan can qualify. Stamp duty and registration charges paid for the purchase of a residential property can also qualify, subject to the applicable conditions.
• Tuition fees: Tuition fees paid in India for full-time education of up to two children can qualify. Payments such as development fees, donations and similar charges do not qualify.

The Rs. 1.5 lakh limit is an aggregate limit across all eligible investments and payments. For example, if you pay Rs. 70,000 towards eligible life insurance premiums and contribute Rs. 80,000 to PPF, the total qualifying amount is Rs. 1.5 lakh.

Below is a table summarising the sections and subsections under Section 80C of the Income Tax Act, detailing the various investment options and expenditures eligible for tax deductions: 

The deduction under Section 80CCD(1B) is available over and above the Rs. 1.5 lakh aggregate limit under Sections 80C, 80CCC and 80CCD(1). Employer contributions covered under Section 80CCD(2) are also outside this Rs. 1.5 lakh limit.

You can save tax under Section 80C by investing in eligible instruments or paying eligible expenses during the financial year. The total deduction available under Section 80C is up to Rs. 1.5 lakh, subject to the applicable conditions.

To calculate your Section 80C deduction, add the eligible investments and payments made during the financial year, subject to the overall Rs. 1.5 lakh limit. The deduction reduces your taxable income under the old tax regime.

For example, assume your gross income is Rs. 7.5 lakh and you make an eligible ELSS investment of Rs. 1.2 lakh during the year.
 

Without Section 80C deduction

With Section 80C deduction

Therefore, the Section 80C deduction reduces taxable income by Rs. 1.2 lakh in this example. The actual tax saving depends on the applicable tax slab and other deductions or rebates.

Under Chapter VI-A of the Income Tax Act, 1961, different sections provide deductions for specified investments, pension contributions and employer contributions. The key limits are as follows: 

The combined deduction under Sections 80C, 80CCC and 80CCD(1) cannot exceed Rs. 1.5 lakh. An additional deduction of up to Rs. 50,000 may be available for eligible own NPS contributions under Section 80CCD(1B). Employer contributions under Section 80CCD(2) are subject to a separate limit. For tax years beginning 1 April 2026, the Income Tax Act, 2025 uses Section 123 for the specified savings deduction corresponding to the earlier Section 80C structure.

Tax-saving investment options under Section 80C of the Income Tax Act offer a variety of avenues through which individuals can reduce their taxable income by investing in approved financial instruments.

Investment options under Section 80C include Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity Linked Saving Schemes (ELSS), Tax Saving Fixed Deposits, National Pension System (NPS), and Unit Linked Insurance Plans (ULIPs), among others.

1. Equity Linked Savings Scheme (ELSS)

ELSS is a market-linked mutual fund investment that invests primarily in equities. Eligible ELSS investments can qualify for deduction under Section 80C and have a three-year lock-in period.

Lock-in period: 3 years
Returns: Market-linked
Tax benefit: Eligible investment qualifies under the Section 80C limit

2. Tax-saving fixed deposits

A tax-saving fixed deposit is a bank deposit with a mandatory five-year lock-in period. Eligible five-year term deposits with scheduled banks can qualify for deduction under Section 80C.

Lock-in period: 5 years
Returns: Fixed interest, as offered by the bank
Tax benefit: Eligible deposit qualifies under Section 80C

3. Public Provident Fund (PPF)

PPF is a government-backed long-term savings scheme. Contributions to a PPF account can qualify for deduction under Section 80C, subject to the applicable conditions.

Tenure: 15 years
Returns: Interest rate notified by the Government
Tax benefit: Eligible contributions qualify under Section 80C

4. Employee Provident Fund (EPF)

For salaried employees, the employee's contribution to a recognised provident fund can qualify for deduction under Section 80C. The employer's contribution is not claimed as an employee's Section 80C deduction.

Eligibility: Salaried employees covered by the applicable provident fund rules
Tax benefit: Eligible employee contribution qualifies under Section 80C
Returns: Interest is credited at the notified rate

5. National Pension System (NPS)

Investments in the National Pension System (NPS) are voluntary retirement savings plans that provide flexible investment options in equities and fixed income. This 80C investment allows partial withdrawals upon reaching retirement age.

Type: Market-linked retirement investment
Tax benefit: Section 80CCD(1) and additional Section 80CCD(1B) deduction, subject to limits
Returns: Market-linked

6. Unit Linked Insurance Plans (ULIPs)

The Unit Linked Insurance Plans (ULIPs) combine life insurance protection with market-linked investment. Eligible ULIP premiums can qualify for deduction under Section 80C, subject to the prescribed conditions.

Lock-in period: 5 years
Components: Life insurance and market-linked investment
Tax benefit: Eligible premiums qualify under Section 80C

7. Sukanya Samriddhi Yojana (SSY)

Contributions to a Sukanya Samriddhi Account can qualify for deduction under Section 80C. An individual can make eligible contributions to accounts for girl children, subject to the scheme's conditions.

Purpose: Long-term savings for a girl child
Returns: Interest rate notified by the Government
Tax benefit: Eligible contributions qualify under Section 80C

Note: The Rs. 1.5 lakh Section 80C limit is an aggregate limit across eligible investments and payments; it is not a separate Rs. 1.5 lakh limit for each investment.

The minimum holding or lock-in period depends on the investment. ELSS has a three-year lock-in, PPF has a 15-year tenure. NPS under Section 80CCD is governed by its withdrawal and exit rules rather than a simple “till age 60” holding period.

For Section 80C, other investments also have specific conditions. For example, eligible ULIPs generally have a five-year lock-in, while eligible five-year tax-saving deposits have a five-year term.

Apart from investments, certain payments and expenses can qualify for deduction under Section 80C, subject to the applicable conditions and the overall Rs. 1.5 lakh limit.

• Life insurance premiums: Premiums paid to keep eligible life insurance policies in force for yourself, your spouse or your children can qualify. For an HUF, premiums paid for any member can qualify, subject to the prescribed conditions.
• Employees' Provident Fund (EPF): Your eligible contribution to a recognised provident fund can qualify for deduction.
• Public Provident Fund (PPF): Contributions to a PPF account in the name of yourself, your spouse or your child can qualify. For an HUF, eligible contributions for a member can qualify.
• National Savings Certificate (NSC): Eligible subscriptions to notified National Savings Certificates can qualify for deduction.
• Equity Linked Savings Scheme (ELSS): Investments in eligible ELSS or notified mutual fund schemes can qualify, subject to the applicable conditions.
• Sukanya Samriddhi Account: Investments in this scheme for your daughter or any girl child for whom you are the legal guardian can qualify.
• Five-year tax-saving fixed deposits: Deposits for a fixed period of at least five years with a scheduled bank under the notified scheme can qualify.
• Senior Citizens Savings Scheme (SCSS): Deposits made in an account under the Senior Citizens Savings Scheme can qualify.
• Tuition fees: Tuition fees paid to a university, college, school or other educational institution in India for the full-time education of up to two children can qualify. Development fees, donations and similar payments are excluded.
• Home loan principal repayment: Repayment of the principal amount of an eligible housing loan can qualify. Certain payments made towards the purchase or construction of a residential house can also qualify.
• Stamp duty and registration charges: Stamp duty, registration fees and certain other expenses paid for transferring a residential house property to you can qualify. 

To claim a deduction under Section 80C, choose eligible investments or payments, make the payment during the relevant financial year, and retain the supporting documents. The maximum aggregate deduction is Rs. 1.5 lakh for eligible taxpayers under the old tax regime.

1. Choose eligible options: Invest in or make payments towards options such as PPF, ELSS, NSC, eligible life insurance premiums, tuition fees and home loan principal repayment. 
2. Make the payment: The deduction is generally available on an actual payment basis for the year in which the eligible amount is paid or deposited. 
3. Keep documents: Retain investment statements, payment receipts, premium receipts and other supporting documents as proof. You do not normally attach these documents to your ITR, but you should keep them in case the tax authorities require them. 
4. Check the limit: The combined deduction under Section 80C and certain related provisions cannot exceed Rs. 1.5 lakh. 
5. Select the old tax regime: Section 80C deductions are available when you opt for the old tax regime; they are not available under the new tax regime.

The combined deduction under Sections 80C, 80CCC and 80CCD(1) is capped at Rs. 1.5 lakh. An additional deduction of up to Rs. 50,000 can be claimed under Section 80CCD(1B) for eligible NPS contributions, taking the potential deduction to Rs. 2 lakh.
 

1. Section 80C, 80CCC and 80CCD(1)

• Section 80C: Eligible investments and payments, such as life insurance premiums, PPF, provident fund contributions and housing loan principal repayment, can qualify for deduction up to the overall Rs. 1.5 lakh limit.
• Section 80CCC: Contributions to eligible annuity pension plans of LIC or other insurers can qualify, subject to the combined Rs. 1.5 lakh limit.
• Section 80CCD(1): Eligible contributions to NPS and Atal Pension Yojana can qualify up to the applicable percentage of salary or gross total income, subject to the combined Rs. 1.5 lakh limit. 
   

2. Section 80CCD(1B)

An additional deduction of up to Rs. 50,000 is available for eligible contributions to your NPS account. This deduction is over and above the combined Rs. 1.5 lakh limit under Sections 80C, 80CCC and 80CCD(1).

Example: If you claim Rs. 1.5 lakh under Sections 80C, 80CCC and 80CCD(1), you may claim another Rs. 50,000 under Section 80CCD(1B), subject to the applicable conditions.

dividuals and Hindu Undivided Families (HUFs) can claim deductions under Section 80C for specified investments and payments, subject to the applicable conditions. This includes salaried employees, self-employed individuals and freelancers, provided they are eligible taxpayers and opt for the old tax regime. The maximum aggregate deduction under Section 80C is Rs. 1.5 lakh.

To maximise your Section 80C tax benefit, first check your eligible payments and investments for the financial year. You can claim a combined deduction of up to Rs. 1.5 lakh under Section 80C, subject to the applicable conditions and tax regime.

• Use the full Rs. 1.5 lakh limit: Add eligible payments such as life insurance premiums, PPF, provident fund contributions, NSC, tuition fees and home loan principal repayment before making additional investments. 
• Choose investments based on your goals: Consider options such as PPF, ELSS, eligible life insurance policies or tax-saving fixed deposits based on your risk profile, liquidity needs and investment horizon.
• Avoid duplicate claims: The Rs. 1.5 lakh is an aggregate limit, so you cannot claim Rs. 1.5 lakh separately for each eligible investment. 
• Plan throughout the year: Track your existing eligible contributions first, then invest only the amount needed to use any remaining Section 80C limit.
• Check the tax regime: Section 80C deductions are available under the old tax regime and are not available under the new regime.

You should make the eligible investment or payment within the relevant financial year to claim the deduction for that year. Section 80C follows an actual payment basis, so the deduction is generally available in the year in which the eligible amount is paid or deposited.

When filing your Income Tax Return (ITR), you need to report the eligible Section 80C amounts and provide the required details. From AY 2025–26, taxpayers claiming Section 80C deductions must provide details such as the amount eligible for deduction and the policy number or document identification number, where applicable.

For example, an eligible payment made between 1 April 2025 and 31 March 2026 can be considered for the relevant financial year and reported while filing the corresponding ITR, subject to the applicable tax regime and conditions.

The old tax regime allows deductions such as Section 80C, while the new tax regime has lower tax rates but restricts most Chapter VI-A deductions. Section 80C deductions can therefore be claimed under the old regime, but not under the new regime.

• Old tax regime: You can claim eligible deductions such as Section 80C, subject to the applicable conditions and limits.
• New tax regime: Section 80C and most other Chapter VI-A deductions cannot be claimed. Certain deductions, such as eligible employer contributions under Section 80CCD(2), continue to be allowed. 
• Compare your tax liability: Consider your eligible deductions, income and applicable tax rates under both regimes before choosing one.
• While filing your ITR: Taxpayers without business or professional income can generally choose the old regime directly in their ITR. Taxpayers with business or professional income who want to opt out of the new regime need to comply with the applicable Form 10-IEA requirements.

You should make eligible investments or payments on or before 31 March of the relevant financial year to claim the deduction for that year. Section 80C follows an actual payment basis, so the eligible amount is considered in the year in which you make the payment or deposit.

It is better to plan these investments throughout the year rather than wait until the end of March. Before investing, check how much of the Rs. 1.5 lakh limit you have already used through eligible payments such as life insurance premiums, provident fund contributions or other qualifying investments.

You can then report the eligible amount while filing your ITR, subject to the applicable conditions and the tax regime you choose. Section 80C deductions are available under the old tax regime, not the new tax regime.

• Approved Superannuation Fund: Contributions made by an employee to an approved superannuation fund can qualify for deduction.
• National Housing Bank schemes: Subscription to specified deposit schemes or pension funds of the National Housing Bank can qualify.
• NABARD bonds: Investments in notified bonds issued by the National Bank for Agriculture and Rural Development (NABARD) can qualify.
• Senior Citizen Savings Scheme: Deposits made under the Senior Citizen Savings Scheme can qualify, subject to the applicable conditions.
• Public sector housing finance schemes: Subscriptions to notified deposit schemes of specified public sector housing finance companies can qualify.
• Housing-related investments: Specified investments in approved bonds or securities issued for housing and urban development purposes can qualify.
• Annuity plans: Payments towards specified annuity plans of LIC or other approved insurers can qualify under the applicable provisions.
• Eligible equity shares and debentures: Subscription to equity shares or debentures forming part of an approved eligible issue of capital by a public company or public financial institution can qualify, subject to the prescribed conditions. 

The overall deduction limit under Section 80C is Rs. 1.5 lakh for an individual or HUF, subject to the applicable rules.

From 1 April 2026, the corresponding provision under the Income Tax Act, 2025 is Section 123, with the eligible savings and payments listed in Schedule XV. It retains the Rs. 1.5 lakh aggregate deduction for individuals and HUFs.

Section 80C remains an important tax-saving provision for eligible taxpayers who opt for the old tax regime. It covers several investments and expenses, with the combined deduction capped at Rs. 1.5 lakh. From 1 April 2026, the corresponding provision is Section 123 of the Income Tax Act, 2025, with the eligible payments and investments listed in Schedule XV.

Choosing the right option depends on your financial goals, investment horizon and existing eligible payments. Check your available deduction before making additional investments, and report eligible amounts correctly while filing your ITR.