Most of these benefits are available under the old tax regime. In the new tax regime, income up to ₹12.75 lakh is effectively tax-free due to the standard deduction of ₹75,000. However, it does not allow most exemptions and deductions available under the older framework.
For taxpayers opting for the old regime, Section 80C remains one of the most widely used provisions for tax savings. It allows a deduction of up to ₹1.5 lakh per financial year from taxable income, encouraging long-term savings and investment.
A range of financial instruments qualify under this section. Popular options include Equity Linked Savings Schemes (ELSS), Public Provident Fund (PPF), National Savings Certificate (NSC), life insurance premiums, and the Sukanya Samriddhi Yojana. Each option differs in terms of risk, lock-in period, and returns, making comparison important before investment decisions.
Equity Linked Savings Schemes (ELSS):
ELSS are equity mutual funds eligible for tax deduction under Section 80C up to ₹1.5 lakh. They come with a three-year lock-in period and carry market-linked risk, as investments are primarily in equities aimed at long-term growth.
Public Provident Fund (PPF): PPF is a long-term government-backed savings scheme with a 15-year maturity period. It currently offers an interest rate of around 7.1% per annum. Both the maturity proceeds and accumulated corpus are tax-free, making it a popular option for retirement planning. The scheme also allows partial withdrawals and loan facilities under specified conditions.
National Savings Certificate (NSC): NSC is a fixed-income savings instrument backed by the government, offering an interest rate of around 7.7% per annum with a five-year lock-in period. It can be purchased at post offices, with a minimum investment starting at ₹1,000.
Life insurance premiums: Premiums paid towards life insurance policies for self, spouse, or children qualify for deduction under Section 80C up to the overall ₹1.5 lakh limit. Additionally, Section 80D provides tax benefits on health insurance premiums and related covers.
Sukanya Samriddhi Yojana: This government-backed savings scheme is designed for the girl child, allowing deposits between ₹250 and ₹1.5 lakh annually. Accounts can be opened until the girl turns 10, and the scheme matures after 21 years. It also offers tax benefits under Section 80C, along with tax-free interest.
Taxpayers should note that the total deduction under Section 80C is capped at ₹1.5 lakh per financial year, regardless of the number of eligible instruments used. Careful allocation across available options can help optimise tax savings while aligning investments with financial goals.
