Every year, taxpayers look for legal ways to reduce tax liability, and Section 80C of the Income Tax Act is the most powerful tool available for tax savings in India. Under this section, an individual or HUF can claim a deduction of up to ₹1,50,000 from taxable income in a financial year. But many people still struggle to choose the right investment options. In this blog, we will explain the best ways to save maximum tax under Section 80C along with expert tips to help you make smart decisions.
Top Investment Options Under Section 80C
Here are some popular and effective options to claim up to ₹1.5 lakh tax deduction:
1- Public Provident Fund (PPF)
PPF is a government-backed savings scheme with 15-year lock-in and attractive interest rates.
Safe and risk-free
- Tax benefit: EEE (Exempt-Exempt-Exempt)
- Ideal for long-term retirement planning.
2- Employee Provident Fund (EPF)
EPF contributions made by salaried employees qualify under 80C.
If possible, increase voluntary contributions (VPF) to boost retirement corpus and save more tax.
3- Equity Linked Savings Scheme (ELSS)
ELSS mutual funds come with the shortest lock-in of 3 years, offering higher returns due to equity exposure.
- Best for wealth creation
- Suitable for young and moderate-risk investors
4- Life Insurance Premium
Premiums paid for term insurance or traditional life insurance policies are eligible under 80C.
Tip: Always prefer term insurance for better protection and low cost.
5- National Savings Certificate (NSC)
A secure fixed-income investment with a 5-year lock-in.
Good for conservative investors wanting guaranteed returns.
6- Home Loan Principal Repayment
The principal component of your home loan EMI qualifies for deduction.
Additionally, stamp duty & registration charges also qualify under 80C.
7- Sukanya Samriddhi Yojana (SSY)
Best scheme for a girl child’s future education and marriage expenses.
Offers one of the highest government-backed interest rates.
Other Eligible Expenses
- Children’s tuition fees (up to two children)
- 5-year tax-saving fixed deposits with banks
- NABARD bonds
- Pension funds (Section 80CCC)
Expert Tips to Maximize Tax Savings
- Choose investments based on your financial goals, not just for tax savings
- Prefer long-term tax-efficient products like ELSS and PPF
- Avoid high-premium traditional insurance policies
- Regularly review investments to ensure maximum benefit
- Plan investments at the beginning of the financial year—avoid last-minute rush
- If salaried, check Form 16 and adjust 80C investments accordingly
Common Mistakes to Avoid
- Investing only for tax benefits without goal alignment
- Buying unnecessary insurance policies
- Ignoring risk profile while selecting investment options
- Investing more than ₹1.5 lakh (extra amount gives no tax benefit)