Introduction
If you are a salaried employee or a taxpayer in India, you must have heard about Section 80C. It’s the most popular section of the Income Tax Act that helps you save tax legally. But many people still wonder: how to use 80C deduction?
This guide will explain the step-by-step process of using Section 80C to reduce your tax burden, with examples and best practices for 2025.
1. What is Section 80C Deduction?
Section 80C allows individuals and Hindu Undivided Families (HUFs) to deduct up to ₹1.5 lakh from their taxable income every financial year by investing in certain approved instruments.
๐ก Example:
If your annual taxable income is ₹8,00,000 and you invest ₹1,50,000 under 80C, your taxable income becomes ₹6,50,000 → reducing your tax liability.
2. How to Use 80C Deduction – Step by Step
Step 1: Check the Deduction Limit
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Maximum limit: ₹1.5 lakh per year (available only under the old tax regime).
Step 2: Choose Eligible Investments / Payments
Some common options under Section 80C:
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ELSS Mutual Funds – 3-year lock-in, high growth potential.
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PPF (Public Provident Fund) – 15-year lock-in, safe, government-backed.
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Tax Saving FD (5-year) – Guaranteed returns.
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Life Insurance Premiums – For self, spouse, children.
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Sukanya Samriddhi Yojana (SSY) – Girl child savings scheme.
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NSC (National Savings Certificate) – Safe, fixed return option.
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EPF/VPF Contributions – Automatic for salaried, can add voluntary contributions.
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Home Loan Principal Repayment – EMI’s principal part counts under 80C.
Step 3: Calculate How Much You Need to Invest
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Salaried? Check your EPF contribution first.
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Deduct what is already counted.
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Invest the balance to maximize ₹1.5 lakh.
Step 4: Make Smart Choices
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For growth → ELSS
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For safety → PPF or NSC
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For children’s future → Sukanya Samriddhi Yojana
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For insurance → Term or life insurance premiums
Step 5: Claim Deduction While Filing ITR
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Keep proofs (receipts, statements).
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Submit to employer (if salaried) or upload during ITR filing.
3. Example – Using 80C Deduction
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Annual Income = ₹9,00,000
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EPF = ₹50,000
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Life Insurance = ₹20,000
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ELSS = ₹80,000
๐ Total 80C = ₹1,50,000 (Limit Reached)
๐ Taxable Income = ₹7,50,000
4. Mistakes to Avoid
❌ Ignoring EPF (already part of 80C)
❌ Investing without checking lock-in
❌ Waiting till March to invest
❌ Buying wrong insurance only for tax saving
✅ Frequently Asked Questions (FAQ)
Q1. What is the maximum deduction allowed under Section 80C?
You can claim up to ₹1.5 lakh in a financial year under Section 80C.
Q2. Can I claim both PPF and ELSS under 80C?
Yes, you can invest in multiple 80C instruments, but the total combined limit is ₹1.5 lakh.
Q3. Is 80C deduction available in the new tax regime?
No, most deductions including 80C are available only in the old tax regime.
Q4. Can I claim home loan repayment under 80C?
Yes, the principal portion of your home loan EMI qualifies under 80C. (The interest portion qualifies under Section 24B).
Q5. Do I need to submit proof to claim 80C deduction?
Yes. Salaried employees must submit proof to employers. Others should keep documents ready for ITR filing or tax scrutiny.
Conclusion
Now you know how to use 80C deduction effectively:
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Check the ₹1.5 lakh limit.
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Choose the right mix of investments.
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Invest early, keep proofs, and claim in ITR.
This simple strategy can save you thousands of rupees in tax while building long-term wealth.
๐ก Next: Best Tax Saving Options Under Section 80C – Which One Should You Choose?
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