Section 80C
Also written 80C · Section 80C deduction
The income-tax deduction for money put into life insurance, provident fund, ELSS, five-year bank deposits, NPS Tier 1, NSC and home-loan principal, capped in aggregate at Rs 1,50,000 a year.
In plain language
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.
How it works
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.
The formula
Tax saved = Amount claimed under 80C (max Rs 1,50,000) × your marginal tax rate
A worked example
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:
| Item | Rs |
|---|---|
| Employee provident fund contribution | 72,000 |
| Term insurance premium | 12,000 |
| ELSS investment | 36,000 |
| Home-loan principal repaid | 84,000 |
| Total eligible | 2,04,000 |
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.
Why NISM asks about it
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.
Common exam traps
- 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.
Where this is taught
Free preparation for NISM Series V-ARelated terms
- Equity Linked Saving SchemeAn equity mutual fund category that carries a section 80C deduction of up to Rs 1.5 lakh with a compulsory three-year lock-in — the shortest lock-in of any tax-saving instrument.
- National Pension SystemA PFRDA-regulated, defined-contribution retirement scheme in which the subscriber builds a market-linked corpus and must convert part of it into an annuity at exit; there is no guaranteed return.
- Public Provident FundA 15-year government-guaranteed savings account for individuals, at a rate reset quarterly, where the contribution, the interest and the maturity value are all outside tax under the old regime.
- Term insuranceLife cover for a fixed period: if you die during the term your nominee receives the sum assured, and if you survive it nothing is paid back. It is the cheapest way to buy protection.
- Employee Provident FundA mandatory retirement savings scheme where employer and employee each contribute 12% of basic pay, credited to the employee's own account and paid out as a lump sum at retirement.
- Tax SavingThe investment objective of choosing an investment partly to cut tax — using the deductions from taxable income, or rebates from tax payable, that the tax authorities allow.
- Fixed DepositMoney placed with a bank for a fixed term at an agreed rate of interest. Safe and simple, but the interest is taxable, and TDS applies once interest crosses a stipulated amount.
- Clubbing of incomeSections 60 to 64 add someone else's income to yours — the Act's answer to families who move income to a lower-taxed relative while keeping the asset.
- Marginal reliefRelief that caps the tax on income just above the section 87A rebate threshold at the amount by which the income exceeds that threshold — so one extra rupee of income never costs more than a rupee of tax.
- NPS VatsalyaA saving-cum-pension scheme introduced in Budget 2024 under which a parent opens and operates an NPS Tier 1 account in a minor child's name until the child turns 18.
- Sukanya Samriddhi YojanaA Government savings scheme for a girl child, opened by a guardian when she is 10 or younger. Deposits qualify under Section 80C; partial withdrawal for education or marriage is allowed after 18.
- Previous yearUnder the Income Tax Act, 1961, the year in which income is earned. It is taxed in the following assessment year; each runs from 1 April to 31 March.
- Hindu Undivided FamilyAn HUF is taxed as its own person under the Income Tax Act — and, under Section 80TTA, one of only two kinds of taxpayer, with an individual, allowed the savings-account interest deduction.
- Section 24The Income Tax Act deduction for interest paid on a housing loan taken to buy, build or repair a property, for loans taken after 1 April 1999.
- Section 80DThe income-tax deduction for medical insurance premiums paid for yourself, your spouse, your dependent children and your dependent parents — the workbook does not state a rupee ceiling.
- Section 80TTAThe deduction against tax on savings bank interest, available only to an individual or HUF, and only for a savings account with a bank, post office or cooperative bank — not for fixed deposit interest.
- Special Bank Term Deposit SchemeA five-year, tax-saving bank term deposit eligible for a Section 80C deduction, with no premature withdrawal and no loan against it allowed.
- NPS Tier-II Tax Saver SchemeA Tier II NPS option for Central Government subscribers with an active Tier I account whose contributions qualify for the old-regime deduction, subject to a three-year lock-in per contribution.
- Senior Citizens Saving SchemeA five-year, government-guaranteed deposit for those aged 60 or above, capped at Rs 30 lakh across accounts, paying interest every quarter at a rate the government announces quarterly.
- National Savings CertificateA 5-year, government-guaranteed post office certificate with annual compounding paid at maturity, a Rs 1,000 minimum, no maximum, and an old-regime deduction on the investment.
- Bracket managementUsing tax-free or tax-adjusted income in retirement to stop taxable income from crossing into the next, higher income-tax slab.
- EEE tax regimeA tax treatment where contributions, returns and (largely) withdrawals are all exempt from tax — the category the NPS is described as falling under, though its exit stage carries some conditions.
- Tax-adjusted returnThe return an investor actually keeps after tax is deducted — the figure that tells them what income is really available to spend, unlike the pre-tax rate quoted on the product.