Every January, offices across India fill with the same question: "What should I invest in to save tax?" The familiar tax saving options under 80C, 80D and 80CCD can cut your taxable income significantly, but there is a catch many people miss. Most of these deductions are available only under the old tax regime. Since the new regime is now the default, it's worth understanding both the deductions and whether they help you at all.
This is general information, not tax or legal advice. The rules below are as for FY 2025-26. The Income-tax Act, 2025 replaces the 1961 Act from 1 April 2026 and renumbers sections, though names like 80C and 80D remain in common use. Check the current provisions before you invest or file.
First, check which tax regime you are in
Under the new regime, rates are lower and, for FY 2025-26, income up to ₹12 lakh is effectively tax-free because of the rebate (₹12.75 lakh for salaried people after the ₹75,000 standard deduction). But almost all the deductions in this article are not allowed under it.
Under the old regime, rates are higher, but you can claim these deductions, plus a standard deduction of ₹50,000 for salaried people.
So before buying any "tax-saving" product, compare both regimes. Our guide on old vs new tax regime shows how.
A tax-saving product is only worth buying if you would want it anyway, and if you are actually in the old regime. Saving ₹15,000 in tax on a product that doesn't suit you is a poor trade.
Section 80C: up to ₹1.5 lakh
Section 80C is the most widely used deduction. The combined limit is ₹1.5 lakh a year across all of these:
| Option | Lock-in | Nature |
|---|---|---|
| ELSS mutual funds | 3 years | Market-linked equity |
| PPF | 15 years (partial withdrawal allowed later) | Government-backed, rate set quarterly |
| EPF (employee contribution) | Till retirement or job exit, with conditions | Rate declared yearly by EPFO |
| Life insurance premium | Policy term | Protection or savings |
| Home loan principal repayment | Property must be held 5 years | Part of your EMI |
| Children's tuition fees | — | Up to two children, full-time education in India |
| Sukanya Samriddhi Yojana | Till girl child turns 21 (with exceptions) | Government-backed |
| NSC | 5 years | Government-backed |
| 5-year tax-saving FD | 5 years | Bank deposit |
Many salaried people find that EPF, a life insurance premium and children's fees already fill most of the ₹1.5 lakh. Check what you're already claiming before investing more.
If you want equity exposure within 80C, ELSS has the shortest lock-in; see ELSS tax-saving mutual funds.
Section 80D: health insurance
Health insurance premiums get a separate deduction on top of 80C:
- Self, spouse and children: up to ₹25,000 (₹50,000 if you or your spouse is a senior citizen).
- Parents: an additional ₹25,000 (₹50,000 if either parent is a senior citizen).
- Preventive health check-ups: up to ₹5,000, within the above limits.
So a family paying for its own cover and for senior citizen parents could claim up to ₹75,000. Health insurance is worth having regardless of tax; explore options on our insurance page.
Section 80CCD(1B): extra ₹50,000 for NPS
Your own contribution to the National Pension System can be deducted up to ₹50,000 under 80CCD(1B). This is over and above the ₹1.5 lakh 80C limit, which makes it one of the few ways to go beyond 80C in the old regime. NPS has a long lock-in till retirement and market-linked returns; read NPS explained first.
Section 80CCD(2): employer contribution to NPS
If your employer contributes to NPS for you, that contribution is deductible under 80CCD(2):
- Up to 10% of salary (basic plus DA) in the old regime.
- Up to 14% of salary in the new regime.
Importantly, 80CCD(2) is allowed in the new regime too, making it one of the very few deductions available there. Note that combined employer contributions to EPF, NPS and superannuation above ₹7.5 lakh a year are taxable. If your employer offers NPS through salary restructuring, it's worth asking about.
Section 24(b): home loan interest
Interest on a home loan for a self-occupied property is deductible up to ₹2 lakh a year under the old regime. Under the new regime, this deduction isn't available for a self-occupied home, though interest on a let-out property is treated differently. The principal portion goes under 80C, as above.
A worked example (old regime)
Arjun, 40, salaried, is comparing regimes. His eligible deductions under the old regime:
| Deduction | Amount |
|---|---|
| Standard deduction | ₹50,000 |
| 80C (EPF + ELSS + home loan principal) | ₹1,50,000 |
| 80D (own family ₹25,000 + senior parents ₹50,000) | ₹75,000 |
| 80CCD(1B) NPS | ₹50,000 |
| 24(b) home loan interest | ₹2,00,000 |
| Total deductions | ₹5,25,000 |
With deductions this large, the old regime may work out better for Arjun at higher incomes. Someone with only EPF and a small health premium will very likely find the new regime simpler and cheaper. The only way to know is to calculate both.
Frequently asked questions
Can I claim 80C in the new tax regime?
No. Section 80C, 80D, 80CCD(1B) and 24(b) for a self-occupied home are not available under the new regime. Employer NPS contribution under 80CCD(2) is one of the few deductions that is.
Is the 80CCD(1B) ₹50,000 part of the ₹1.5 lakh limit?
No. It is an additional deduction on top of the ₹1.5 lakh under 80C, available in the old regime.
Which 80C option has the shortest lock-in?
ELSS, with a three-year lock-in. But it is market-linked, so its value can fall as well as rise.
When should I make tax-saving investments?
Spreading them across the year, for example through a monthly SIP or PPF instalments, avoids a last-minute rush in March and poor choices made in a hurry.
Key takeaways
- 80C allows up to ₹1.5 lakh across ELSS, PPF, EPF, life premium, home loan principal, tuition fees, SSY, NSC and 5-year FDs.
- 80D covers health insurance premiums for you and your parents.
- 80CCD(1B) gives an extra ₹50,000 for your own NPS contribution.
- 80CCD(2) for employer NPS contribution works in both regimes.
- Most of these deductions apply only in the old regime, so compare regimes first.
- Our team can help you organise your investments and proofs.
