Section 80C

Section 80C lets you subtract certain savings and investments from the income you are taxed on.

It is not a discount on your tax bill and it is not money the government gives you. It reduces the income on which tax is computed, so what it is worth to you depends on the rate you would otherwise have paid on that slice of income. The same Rs 1,50,000 of 80C investment saves a person in a 30% bracket far more than it saves a person in a 5% bracket.

And the deduction is only available for money you have actually put away. Chapter 10 lists what counts: life insurance, provident fund, ELSS schemes of mutual funds, Special Bank Deposits of five-year term, contribution to an NPS account (Tier 1 only), National Savings Certificate, and principal repayment of a housing loan.

The number to know: the deductions for investments made under Section 80C, read with Section 80CCE, are available up to the aggregate limit of Rs 1,50,000, subject to the applicable conditions. Aggregate is the load-bearing word — it is one ceiling across every eligible item together, not Rs 1,50,000 per instrument.

Two structural facts sit alongside it:

• Section 80CCD(1B) gives an additional deduction of up to Rs 50,000 for investment in the NPS by an individual. It is over and above the amount available under Section 80C — subject to the condition that the same amount is not also claimed under 80C.
• These deductions are generally available under the old tax regime. Under the new regime only specified deductions, such as the employer's NPS contribution, are permitted. Choosing the new regime forfeits 80C.

The Income-tax Act, 2025 renumbers the provision: the deduction now sits at section 123 read with Schedule XV, corresponding to section 80C read with section 80CCE of the Income-tax Act, 1961. Both numberings appear in current NISM material, so recognise the pair.

The workbook also flags the Special Bank Term Deposit Scheme in Chapter 4 as an 80C item: a five-year lock-in, with no premature withdrawal and no loan allowed.

Tax saved = Amount claimed under 80C (max Rs 1,50,000) × your marginal tax rate

Kavita earns a salary that places her top slice of income in the 30% bracket, and she has opted for the old regime. Her eligible outgo for the year:

Her deduction is not Rs 2,04,000. The aggregate ceiling caps it at Rs 1,50,000.

Tax saved = 1,50,000 × 30% = Rs 45,000

The remaining Rs 54,000 earns her nothing under this section. She has already filled her 80C limit through EPF and home-loan principal alone — Rs 1,56,000 — which means the Rs 36,000 she put into ELSS bought no deduction at all. Worth holding for its own sake; not worth buying for the tax.

What she can still use is Section 80CCD(1B): up to Rs 50,000 into the NPS, over and above the 80C limit, saving a further Rs 15,000 at 30% — provided she does not also claim that same amount under 80C.

Chapter 10 (Tax Saving Options) tabulates the deductions — 80C, 80CCD(1B), 80D, 80G, 80TTA and Section 24 — and Chapter 4 flags the five-year Special Bank Term Deposit as an 80C product. Expect a question listing instruments and asking which qualify under 80C, and a question on how 80CCD(1B) relates to 80C (over and above, not within). The deduction-versus-rebate distinction is a standard distractor.

• Rs 1,50,000 is an aggregate limit across all eligible items together, not a limit per product.
• A deduction reduces taxable income; it is not a refund. What you save equals the limit multiplied by your marginal rate.
• 80CCD(1B) is over and above 80C — but the same rupees cannot be claimed under both.
• Only NPS Tier 1 counts under 80C in the workbook's list. Tier 2 does not.
• EPF and home-loan principal already consume the limit for most salaried people, long before they buy anything labelled "tax saving".
• The new tax regime generally forfeits these deductions. 80C belongs to the old regime.
• The five-year Special Bank Term Deposit permits no premature withdrawal and no loan — an 80C benefit bought with a total loss of liquidity.
• Current material carries both numberings: section 123 read with Schedule XV of the Income-tax Act, 2025 corresponds to section 80C read with 80CCE of the 1961 Act.