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Tax-Saving Investments in India: Deductions Under the Income Tax Act 2025
If you are a salaried employee in India, the tax you pay depends on which regime you are in and what deductions you can claim. The Income Tax Act 2025 keeps Chapter VIA deductions — 80C, 80D, 80CCD(1B) — but only in the old regime. This guide covers the deductions that matter most: Section 80C, Section 80D, and Section 80CCD(1B).
Section 80C: ₹1.5 lakh deduction
Section 80C of the Income Tax Act 2025 lets you deduct up to ₹1.5 lakh per year from your total taxable income. This is one of the most used deduction sections in India.
What qualifies:
| Investment or expense | Maximum deduction |
|---|---|
| ELSS mutual funds | ₹1.5 lakh |
| Public Provident Fund (PPF) | ₹1.5 lakh |
| Employees’ Provident Fund (EPF) | Employee share of contribution |
| Sukanya Samriddhi Yojana | ₹1.5 lakh |
| National Savings Certificate (NSC) | ₹1.5 lakh |
| Life insurance premium | ₹1.5 lakh |
| Home loan principal repayment | ₹1.5 lakh |
| Children’s tuition fees (2 children max) | ₹1.5 lakh |
| Tax-saving fixed deposits (5-year) | ₹1.5 lakh |
The lock-in periods that matter:
- ELSS: 3 years
- PPF: 15 years (partial withdrawal allowed after 5 years)
- Tax-saving FD: 5 years
- NSC: 5 years
What this saves you in tax:
If you are in the 20% tax bracket, ₹1.5 lakh in 80C deductions saves you ₹30,000 in tax (before surcharge and cess). In the 30% bracket, the saving is ₹45,000.
Example — ₹9 lakh salary, 80C full:
- Gross salary: ₹9,00,000
- Less: Standard deduction: ₹75,000
- Less: 80C deduction (ELSS + PPF): ₹1,50,000
- Taxable income: ₹6,75,000
- Tax (new regime, no 80C): ₹21,250
- Tax (old regime with 80C): nil (₹6.75L falls in the zero-tax band under old regime with basic exemption + rebate)
Section 80D: health insurance premiums
Section 80D of the Income Tax Act 2025 gives a deduction for health insurance premiums you pay for yourself, your spouse, children, and parents.
Deduction limits:
| Who is covered | Maximum deduction |
|---|---|
| Self, spouse, children | ₹25,000 |
| Self, spouse, children (if you are a senior citizen) | ₹50,000 |
| Parents (below 60) | ₹25,000 |
| Parents (above 60) | ₹50,000 |
| Preventive health check-up (included in above limits) | ₹5,000 |
The maximum deduction if you cover both yourself (under 60) and your parents (above 60) is ₹25,000 + ₹50,000 = ₹75,000.
What this saves you:
- At 20% bracket: ₹25,000 × 20% = ₹5,000 per year
- At 30% bracket: ₹25,000 × 30% = ₹7,500 per year
What counts as a senior citizen premium: any premium paid for a person aged 60 or above at any time during the previous year.
Section 80CCD(1B): extra NPS deduction
Section 80CCD(1B) of the Income Tax Act 2025 gives an additional deduction of up to ₹50,000 per year for contributions you make to the National Pension System (NPS). This is on top of the ₹1.5 lakh limit under 80C.
This is one deduction that is available even under the new tax regime — though only ₹50,000 of NPS contributions qualifies, not the full ₹1.5 lakh that 80CCD(1) covers.
How NPS works:
- You contribute to an NPS account
- The government adds 14% of your salary (if employed) as employer contribution
- You can claim 80CCD(1) for total NPS contributions (employee + employer, up to 10% of salary)
- You can claim 80CCD(1B) for an extra ₹50,000 of your own contribution
What this saves you: ₹50,000 × your slab rate. At 20%, that is ₹10,000 saved. At 30%, it is ₹15,000.
Putting it together — the old regime advantage
If you are in the old tax regime, the main deductions stack up like this:
| Section | Maximum deduction | Who it suits |
|---|---|---|
| 80C | ₹1.5 lakh | Everyone — EPF, ELSS, PPF, life insurance |
| 80D | ₹25,000–₹75,000 | Families with health cover needs |
| 80CCD(1B) | ₹50,000 | NPS contributors |
| HRA | Varies | Salaried employees who pay rent |
| 80E | Interest on education loan | Those repaying education loans |
| 80G | Donations | Those who donate to approved charities |
The break-even calculation:
If your total deductions (80C + 80D + HRA + 80CCD) exceed roughly ₹3.75 lakh on a salary of ₹12 lakh or more, the old regime typically produces a lower tax outgo than the new regime. Use the Income Tax Calculator to run both scenarios.
What the new regime does not allow
The new tax regime (default from FY 2026-27) does not allow:
- Section 80C deductions
- Section 80D health insurance deductions
- HRA exemption
- Section 80CCD(1) employer NPS contributions as a deduction
- Most Chapter VIA deductions
The only deductions available in the new regime are:
- Standard deduction: ₹75,000
- 80CCD(1B) NPS: ₹50,000
- 80JJAA (employment allowance): ₹3,00,000 for certain employees
This is why the regime choice matters — if you have significant 80C and 80D deductions, the old regime may save you more than the lower slab rates of the new regime.
How to claim these deductions
- At source (TDS): Give your employer Form 12BB showing your expected deductions so they can reduce TDS.
- At filing: Claim all deductions in the relevant sections of the ITR form.
- Retain proof: Keep premium receipts, investment certificates (ELSS, PPF), and Form 16 for at least 6 years.
Sources
- Income Tax Act 2025, Section 80C — deduction in respect of life insurance premia, etc. (verified 8 October 2026).
- Income Tax Act 2025, Section 80D — deduction in respect of health insurance premia (verified 8 October 2026).
- Income Tax Act 2025, Section 80CCD — deduction in respect of contribution to National Pension System (verified 8 October 2026).
- CBDT Income-tax Rules 2026, G.S.R. 198(E), notified 20 March 2026 (verified 8 October 2026).
Related reading
- New Income Tax Regime Slabs FY 2026-27: Complete Breakdown — slab rates and rebate calculation
- How to File ITR as a Salaried Employee in India — step-by-step filing guide
- Income Tax Calculator — compare both regimes — enter your salary and deductions