Section 80C Deductions List FY 2026-27 — Every Instrument, Limit and Tax Saving Explained

✓ Updated for FY 2026-27 (AY 2027-28) · Reflects Income Tax Act 2025 renumbering · All rates verified July 2026 · Source: Income Tax Department India

Section 80C — now Section 123 under the Income Tax Act 2025 — is the most widely used tax-saving provision in India. It allows you to deduct up to ₹1,50,000 from your taxable income every financial year, saving between ₹15,600 and ₹46,800 in tax depending on your income slab. At the 30% slab with 4% cess, that is ₹46,800 in tax saved annually — or ₹7,02,000 over 15 years if you maximise the limit every year.

The catch most people miss: ₹1,50,000 is a combined ceiling across all eligible instruments. Your EPF contribution already counts. So does your life insurance premium. For many salaried employees, a portion of the 80C limit is used up before they consciously invest a single rupee. The first step to maximising 80C is knowing exactly how much headroom you actually have left — and then choosing the right instruments for the remaining amount.

This guide covers every instrument eligible under Section 80C (Section 123) for FY 2026-27: what each one is, the current interest rate or expected return, the lock-in period, tax treatment at maturity, and precisely who should consider it.

How Much Tax Does Section 80C Actually Save?

Before choosing instruments, know what the deduction is worth for your income:

The Complete Section 80C Instruments List — FY 2026-27

1. Employee Provident Fund (EPF) — Most Used, Often Overlooked

80C limit: Your employee contribution, up to the ₹1.5L ceiling
Current return: 8.25% p.a. (EPF interest rate FY 2025-26; FY 2026-27 rate typically announced by March 2027)
Lock-in: Until retirement (age 58) or resignation; partial withdrawals permitted after 5 years for specific purposes
Tax treatment: EEE — contribution is 80C-deductible, interest is tax-free, maturity is tax-free (subject to 5-year minimum service)

If you are a salaried employee, your EPF contribution is already happening automatically. You contribute 12% of your basic salary every month — and this entire amount counts toward your ₹1.5L 80C ceiling before you invest a single additional rupee.

Check your salary slip or Form 16 for your actual EPF deduction before investing in any other 80C instrument. For employees with high basic salaries, EPF alone nearly consumes the full ₹1.5L limit.

Who should use: Every salaried employee is already contributing to EPF automatically. The decision here is not whether to use EPF, but how much headroom it leaves for other instruments.

2. Public Provident Fund (PPF)

80C limit: Up to ₹1,50,000 per financial year (same as overall ceiling)
Current return: 7.1% p.a., compounded annually (Q2 FY 2026-27, confirmed July 2026)
Minimum investment: ₹500 per year
Lock-in: 15 years; partial withdrawals from year 7 onwards
Tax treatment: EEE — contribution deductible, interest tax-free, maturity fully tax-free

PPF is India's most trusted long-term savings instrument. It combines a government-guaranteed return with complete tax-free status at every stage. Investing ₹1,50,000 per year for 15 years at 7.1% grows to ₹40,68,209 — with zero tax on the entire ₹18,18,209 of interest earned.

The key constraint is the 15-year lock-in. Unlike ELSS, money in PPF cannot be accessed for major planned goals until the account matures, with limited partial withdrawal provisions from year 7. This makes PPF ideal as a retirement corpus builder but unsuitable as the only instrument for investors with medium-term goals.

Who should use: Risk-averse investors building long-term wealth, self-employed individuals without EPF access, anyone in the 30% slab wanting completely guaranteed, tax-free compounding. Not suitable as the only 80C instrument for investors who may need funds before age 50.

3. ELSS — Equity Linked Savings Scheme

80C limit: Up to ₹1,50,000 per year (no upper investment limit, but 80C deduction capped at ₹1.5L)
Expected return: 10–15% p.a. historically (not guaranteed — market-linked)
Minimum investment: ₹500 lump sum or ₹500/month SIP
Lock-in: 3 years (shortest among all 80C instruments)
Tax treatment: Contribution deductible under 80C (Old Regime); gains at redemption taxed as LTCG at 12.5% on amounts above ₹1.25L annual exemption

ELSS is the only 80C instrument that invests in equity markets. This brings the potential for significantly higher long-term returns than any fixed-return instrument — but also the certainty of short-term volatility. Over 15 years at 12% CAGR (a moderate, historically supported assumption for diversified large-cap ELSS funds), ₹1.5L/year invested in ELSS grows to a gross corpus of ₹62,62,992. After LTCG tax of ₹4,85,999 (12.5% on gains above ₹1.25L), the net in hand is ₹57,76,993 — over ₹17 lakh more than PPF, after tax.

The 3-year lock-in per instalment is also ELSS's biggest practical advantage over PPF and NSC. An ELSS SIP started today can be partially redeemed starting in 3 years, making it accessible for medium-term goals.

Who should use: Investors with a minimum 3-5 year horizon who can tolerate equity market volatility, young professionals in the wealth accumulation phase, anyone looking to maximise long-term post-tax corpus within the 80C limit.

4. National Savings Certificate (NSC)

80C limit: No upper limit on investment, but 80C deduction capped at ₹1.5L combined ceiling
Current return: 7.7% p.a., compounded annually, paid at maturity
Minimum investment: ₹1,000; no maximum
Lock-in: 5 years (no premature withdrawal)
Available at: Any post office in India

Tax treatment: Contribution deductible under 80C. Interest accrues annually and is treated as reinvested — this reinvested interest also qualifies under 80C in the year it accrues (a hidden bonus many investors miss). Only the final year's interest is fully taxable at slab rate, since it is received rather than reinvested.

The annual reinvested interest creates a quiet additional 80C deduction each year that most investors never consciously claim — but which appears automatically if you track your NSC correctly in Schedule VI-A of your ITR.

Who should use: Conservative investors who want a guaranteed return, a 5-year horizon (shorter than PPF), and the certainty of a post office/government backing. NSC suits retired individuals or those approaching retirement who want safe, short-term, semi-liquid savings with guaranteed returns.

5. Life Insurance Premiums

80C limit: Premium paid, up to the ₹1.5L combined ceiling; premium must be less than 10% of sum assured (policies issued after March 2012)
Return: Depends entirely on the policy type (term, endowment, ULIP, money-back)
Lock-in: Varies by policy type
Tax treatment: Premium deductible under 80C; maturity proceeds tax-free under Section 10(10D) if premium is less than 10% of sum assured (for policies issued after 2012)

Life insurance premium is the most commonly used 80C deduction by default — millions of Indians pay LIC and other insurance premiums each year, often without realising this counts toward the ₹1.5L limit. The important distinction is between types of insurance for 80C purposes.

Term insurance premium qualifies for 80C deduction and provides pure life cover — this is the most efficient use of the life insurance 80C deduction, since the premium is low and the cover is high. A ₹1 crore term policy for a 30-year-old costs approximately ₹8,000–₹12,000 per year in premium — qualifying for 80C at minimal cost.

Endowment policies and money-back policies also qualify, but their returns are typically 4–6% — significantly below PPF or ELSS — and the premium absorbs 80C headroom that could generate higher returns elsewhere. Most financial advisors recommend separating insurance (buy a term plan) from investment (use PPF or ELSS for the remaining 80C limit) rather than relying on endowment policies for both.

ULIPs (Unit Linked Insurance Plans) qualify for 80C but have high charges in early years (typically 2–5% of premium), reducing the effective net return. Pure term insurance plus separate ELSS investment almost always outperforms a ULIP over 15+ years.

Who should use: Every earning individual should have a term life insurance policy — the premium qualifies for 80C and costs very little relative to the cover. Avoid using endowment or money-back policies as the primary 80C instrument.

6. Five-Year Tax-Saving Fixed Deposit

80C limit: Principal invested, up to the ₹1.5L combined ceiling
Current return: 6.5%–7.5% p.a. depending on bank (senior citizens get 0.25%–0.5% additional)
Lock-in: Exactly 5 years — no premature withdrawal permitted
Tax treatment: Principal deductible under 80C; but all interest is fully taxable at slab rate every year — this is the key disadvantage versus PPF and NSC

The taxability of interest is what makes the 5-year FD the least attractive 80C instrument for investors in the 20% or 30% tax slabs — the post-tax return frequently falls below the inflation rate. However, for investors in the nil or 5% slab, the FD qualifies for 80C while the interest remains below the taxable threshold if Form 15G is submitted.

Who should use: Senior citizens earning 7.5% or above (with the 0.5% senior citizen premium) who are in lower slabs, and investors in the nil or 5% slab who need the 80C deduction but want guaranteed capital with a shorter lock-in than PPF. Not recommended as a primary 80C instrument for anyone in the 20% or 30% bracket.

7. Sukanya Samriddhi Yojana (SSY)

80C limit: Up to ₹1,50,000 per year per girl child account (max 2 accounts per family)
Current return: 8.2% p.a., compounded annually (Q1 FY 2026-27, confirmed)
Eligibility: Only for parents or legal guardians of a girl child below 10 years of age
Minimum investment: ₹250 per year; maximum ₹1,50,000 per year
Account matures: 21 years from account opening (deposits made for 15 years)
Tax treatment: EEE — fully tax-free at contribution, accumulation, and maturity

SSY currently offers the highest return among all government-backed, guaranteed 80C instruments — 8.2% versus PPF's 7.1%. Over 21 years (15 years of deposits + 6 years of compounding to maturity), ₹1.5L invested annually at 8.2% grows to approximately ₹71,82,119 — compared to ₹40,68,209 from PPF over its 15-year maturity. That is a difference of over ₹31 lakh for the same annual investment, purely from the rate and the longer compounding duration.

The trade-off: SSY money is tied to the girl child and cannot be accessed until she turns 18 (50% partial withdrawal for education) or 21 (full maturity). This makes it less flexible than PPF for general-purpose savings.

Who should use: Any parent or guardian of a girl child below 10 years of age. SSY is unequivocally the best risk-free 80C instrument for this group — higher rate than PPF, same EEE tax status, government-backed.

8. Home Loan Principal Repayment

80C limit: Principal repaid during the year, up to the ₹1.5L combined ceiling
Return: Not an investment — this is money already being paid as EMI
Lock-in: Must own the property for 5 years from end of the year of possession; selling before 5 years reverses the deduction
Tax treatment: Principal repayment qualifies for 80C; interest repayment qualifies separately under Section 24(b) up to ₹2L for self-occupied property (not counted in 80C)

If you have a home loan, a portion of every EMI is already qualifying for 80C automatically. On a ₹50 lakh home loan at 8.5% for 20 years (EMI: ₹43,391/month), the principal component in Year 1 is approximately ₹99,511. This means your first year of home loan EMIs already generates ₹99,511 of 80C deduction before you invest anything else — leaving only ₹50,489 of 80C headroom for other instruments.

Who should use: Every home loan borrower — this deduction happens automatically and should be checked each year in your loan statement (principal repaid, available in the annual loan certificate from your bank).

9. Tuition Fees for Children

80C limit: Actual fees paid, up to the ₹1.5L combined ceiling; covers maximum 2 children; self's own education does not qualify
Eligible fees: Full-time education tuition fees at any recognised school, college, or university in India
Not eligible: Admission fees, development fees, hostel charges, coaching class fees, private tuition fees, fees paid for part-time or correspondence courses
Tax treatment: Deductible under 80C in the year of payment; no lock-in

Tuition fees for up to two children at recognised Indian educational institutions qualify under 80C. Only the actual tuition fee component qualifies — not the total fee charged by the institution. Schools often invoice a combined amount covering tuition, development fees, transport, and other charges; only the tuition fee portion as separately stated on the invoice qualifies for 80C.

Who should use: Parents paying tuition fees at any recognised school or college — this deduction is often missed because it happens automatically as part of normal expenditure, without requiring a new investment. Check your school fee receipts at year-end and include the tuition component in your 80C total.

Quick Reference Summary Table

How to Prioritise Your ₹1.5L Limit

Step 1 — Add up what is already happening automatically: EPF contribution + home loan principal + life insurance premium + tuition fees. Check your salary slip, loan statement, insurance receipts, and school fee invoices.

Step 2 — Calculate remaining headroom: ₹1,50,000 minus the total from Step 1.

Step 3 — Allocate remaining headroom based on your situation:

If you have a daughter below 10: SSY gets priority — 8.2% EEE, highest guaranteed rate available.
If you are risk-tolerant with a 3+ year horizon: ELSS for remaining amount — highest historical returns.
If you are risk-averse or in the 30% slab wanting guaranteed compounding: PPF for remaining amount.
If you are approaching retirement: NSC or PPF for capital safety.

Step 4 — Consider NPS separately: Section 80CCD(1B) gives an additional ₹50,000 deduction above the ₹1.5L ceiling — saving an extra ₹15,600 in tax at the 30% slab. This is the only provision that genuinely expands beyond the ₹1.5L limit.

Frequently Asked Questions

What is the Section 80C deduction limit for FY 2026-27?

The maximum deduction under Section 80C — now Section 123 under the Income Tax Act 2025 — remains ₹1,50,000 per financial year for FY 2026-27. This is a combined ceiling across all eligible instruments: EPF, PPF, ELSS, NSC, life insurance premium, 5-year tax-saving FD, home loan principal repayment, Sukanya Samriddhi Yojana, tuition fees for up to 2 children, and several others. Investing or spending ₹2 lakh across these instruments does not give you a ₹2 lakh deduction — the cap stays at ₹1.5L regardless of total investment. Beyond this, an additional ₹50,000 deduction is available specifically for NPS contributions under Section 80CCD(1B) — this is a genuine extra ₹50,000 above the ₹1.5L limit, making NPS uniquely valuable for investors in the 20% or 30% slab who have already maximised their ₹1.5L.

Is Section 80C deduction available under the New Tax Regime in FY 2026-27?

No. Section 80C deductions — along with virtually all other Chapter VI-A deductions — are not available under the New Tax Regime, which has been the default regime in India from FY 2025-26. If you have opted for the New Regime or have not actively chosen otherwise, your tax is calculated on gross income after the standard deduction of ₹75,000, without any reduction for 80C investments. For most salaried individuals earning below ₹12.75 lakh, the New Regime already results in zero tax because of the Section 87A rebate — in this case, switching to the Old Regime solely for 80C deductions would not reduce your tax further since it is already zero. For higher income levels, a detailed comparison of both regimes using actual deduction amounts is necessary to determine which regime gives a lower tax bill.

Does my EPF contribution count toward the ₹1.5 lakh 80C limit?

Yes — your employee's share of EPF contribution (12% of basic salary) counts toward the ₹1.5L Section 80C ceiling. The employer's matching contribution does not count toward your personal 80C deduction. This is a critical point that most salaried employees overlook when planning their 80C investments. An employee with a basic salary of ₹50,000 per month is already contributing ₹72,000 per year to EPF — using up nearly half the ₹1.5L 80C limit before making any deliberate investment decision. Someone with a basic salary of ₹80,000 per month contributes ₹1,15,200 annually to EPF, leaving only ₹34,800 of 80C headroom for all other instruments combined. Always check your EPF contribution on your salary slip or Form 16 first — it determines how much remains for voluntary 80C investments.

What is the difference between Section 80C and Section 80CCD(1B) for NPS?

NPS (National Pension System) contributions qualify under two distinct provisions. Under Section 80CCD(1), NPS contributions up to 10% of salary (basic + DA) are eligible for deduction — but this falls within the ₹1.5L combined Section 80C ceiling and does not increase it. Under Section 80CCD(1B), a separate additional deduction of up to ₹50,000 for NPS Tier 1 contributions is available over and above the ₹1.5L 80C ceiling. At the 30% slab including cess, this additional ₹50,000 saves ₹15,600 in tax. This makes NPS the only 80C-category instrument that can genuinely expand your total deduction beyond ₹1.5L — giving a combined maximum of ₹2,00,000 in Section 80C + 80CCD(1B) deductions for someone who maximises both.

Is Section 80C the same as Section 123 in the new Income Tax Act 2025?

Yes, completely. The new Income Tax Act 2025, which came into effect from 1 April 2026, has consolidated and renumbered many sections of the old Income Tax Act 1961. Section 80C has been renumbered as Section 123 under the new Act. Critically — and this cannot be overstated — the deduction limit, the list of eligible instruments, the rules for each instrument, and the overall ceiling all remain exactly the same. Not a single rupee of deduction has changed. The renumbering is purely administrative. Tax returns for FY 2025-26 (AY 2026-27) filed between July and December 2026 still reference "Section 80C" because they cover income earned under the old Act. Tax returns for FY 2026-27 (AY 2027-28) filed from July 2027 will reference "Section 123." If you see both terms used interchangeably in financial content this year, they mean the same thing.