New deductions added under 80C in Budget 2025

Section 80C of the Income Tax Act is one of the most well-known provisions for taxpayers seeking to reduce their taxable income in India. It offers deductions for investments and expenditures, providing individuals with a chance to save on taxes while making certain eligible investments. The maximum deduction limit under Section 80C for the financial year 2025-26 (Assessment Year 2026-27) remains capped at Rs 1.5 lakh, just as in previous years.

Eligible deductions include contributions to provident funds (PPF, EPF), life insurance premiums, principal repayments on home loans, investments in tax-saving fixed deposits, and more. These options make Section 80C a crucial part of tax planning for taxpayers looking to lower their overall tax burden.

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Table of Contents

• New Deductions Added Under 80C in Budget 2025

• Is Section 80C Deduction Allowed in the New Tax Regime?

• How Section 80C Works in the Old Tax Regime

• Key Investment Options Under Section 80C for FY 2025-26

• Are New Forms or Declarations Introduced for Section 80C in Budget 2025?

• How Bank Account Opening Forms Relate to Section 80C Deductions

• Is There an Increase in the Section 80C Deduction Limit in Budget 2025?

• The Impact of Section 80C on Taxpayers in Different Income Brackets

• Summary of Section 80C Changes and Tax Regime Implications

• Conclusion

• FAQs

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New Deductions Added Under 80C in Budget 2025

In Budget 2025, there were no new deductions added under Section 80C of the Income Tax Act. The maximum deduction limit under this section remains capped at Rs 1.5 lakh for the Financial Year 2025-26 (Assessment Year 2026-27), consistent with previous years. Eligible investments and expenditures under Section 80C, such as contributions to Public Provident Fund (PPF), Employees' Provident Fund (EPF), life insurance premiums, and principal repayment on home loans, continue to qualify for deductions. While no new tax-saving options were introduced, the existing provisions remain key for taxpayers looking to reduce their taxable income under the old tax regime.

Is Section 80C Deduction Allowed in the New Tax Regime?

Taxpayers who choose the new tax regime introduced in Budget 2025 will not be able to claim deductions under Section 80C. The new tax regime offers reduced tax rates and higher exemption limits, including a Rs 75,000 standard deduction for salaried individuals, but it eliminates the need for tax-saving deductions like those under Section 80C. This makes the new tax regime attractive for those who do not wish to engage in extensive tax-saving investments or paperwork.

While the new regime provides immediate relief with lower tax rates and an increased basic exemption limit (up to Rs 12 lakh income tax-free), it does not allow the claim of deductions that could further reduce taxable income.

How Section 80C Works in the Old Tax Regime

In contrast to the new tax regime, the old tax regime allows taxpayers to benefit from the full range of deductions under Section 80C. Individuals opting for the old tax regime can continue to claim deductions up to Rs 1.5 lakh on eligible investments and expenses. This includes contributions to the Employees' Provident Fund (EPF), Public Provident Fund (PPF), life insurance premiums, National Savings Certificates (NSC), and more.

Taxpayers in the old regime are allowed to combine Section 80C deductions with other tax-saving provisions, such as health insurance premiums under Section 80D, home loan interest under Section 24(b), and more. Therefore, those who prefer maximizing their deductions and have sufficient tax-saving investments may find the old regime to be more beneficial than the new tax regime.

This dual-option structure between the old and new tax regimes provides taxpayers with the flexibility to choose the most advantageous route based on their specific financial situation.

Key Investment Options Under Section 80C for FY 2025-26

Section 80C continues to offer a range of tax-saving investment options that help taxpayers reduce their taxable income. For the Financial Year 2025-26, these options remain the same as in previous years, allowing individuals to invest in eligible instruments to claim deductions up to Rs 1.5 lakh. Some of the key investment options under Section 80C include:

Investment Option	Details
Public Provident Fund (PPF)	Contributions made to PPF accounts qualify for deductions.
Employees' Provident Fund (EPF)	Employee contributions to EPF are deductible under Section 80C.
Life Insurance Premiums	Premiums paid for life insurance policies are eligible.
National Savings Certificates (NSC)	Investment in NSC can be claimed for deductions.
Sukanya Samriddhi Yojana (SSY)	Contributions to SSY accounts for a girl child are deductible.
Tax-saving Fixed Deposits	Fixed deposits with a 5-year lock-in period qualify.
Principal Repayment on Home Loans	Repayment of principal on housing loans is deductible.
Children’s Tuition Fees	Tuition fees for children up to a limit of two children are eligible for deductions.

These investment avenues continue to provide individuals with an opportunity to save on taxes while simultaneously securing their financial future.

Are New Forms or Declarations Introduced for Section 80C in Budget 2025?

No new forms or declarations specific to Section 80C deductions have been introduced in Budget 2025. The process for claiming these deductions remains unchanged and follows the existing Income Tax rules. Taxpayers must continue to provide the necessary investment proof and documentation while filing their returns, such as investment receipts, insurance premiums, and loan statements. The requirement for submitting such proofs during the tax filing process is expected to remain consistent with previous years, ensuring that taxpayers can claim deductions effectively without additional paperwork.

How Bank Account Opening Forms Relate to Section 80C Deductions

While bank account opening forms themselves do not directly relate to claiming Section 80C deductions, they do play a role in managing tax-saving investments that qualify under this section. For example, investments in tax-saving fixed deposits and Public Provident Fund (PPF) are often linked to a bank account. When opening a bank account for these purposes, individuals may need to submit certain documents like PAN and KYC forms. These documents ensure that the investments are tracked properly for tax deduction purposes under Section 80C.

Banks also maintain records of these investments, which are necessary for taxpayers to claim deductions when filing their income tax returns. While the forms themselves do not ask for information about Section 80C investments, they support the proper administration of such accounts, helping taxpayers provide accurate documentation for their claims.

Is There an Increase in the Section 80C Deduction Limit in Budget 2025?

There has been no increase in the deduction limit under Section 80C in Budget 2025. The maximum amount that can be claimed as a deduction remains fixed at Rs 1.5 lakh, consistent with previous years. Despite the absence of an increase, taxpayers can still make the most of this limit by investing in various eligible instruments such as PPF, ELSS, and home loan principal repayments. The unchanged deduction limit means that taxpayers will need to be strategic with their investments to maximize the benefit within the existing cap.

The Impact of Section 80C on Taxpayers in Different Income Brackets

Section 80C plays a crucial role in tax planning, and its impact varies depending on the taxpayer's income bracket and tax regime choice. For individuals in the old tax regime, the Rs 1.5 lakh deduction helps reduce their taxable income, thereby lowering their overall tax liability. The deduction is especially valuable for those in higher income tax brackets, as it provides significant savings.

For taxpayers in the new tax regime, the situation is different. Since the new regime eliminates deductions like Section 80C, individuals will need to rely on the reduced tax rates and the higher basic exemption limit to save on taxes. Therefore, Section 80C remains a crucial benefit for those opting for the old tax regime, while those in the new tax regime will not benefit from these deductions but will instead enjoy lower tax rates.

Summary of Section 80C Changes and Tax Regime Implications

In Budget 2025, no new deductions have been introduced under Section 80C, and the maximum deduction limit remains at Rs 1.5 lakh. For taxpayers in the old tax regime, Section 80C remains a key tool for reducing taxable income through investments in eligible instruments like PPF, EPF, life insurance premiums, and more. On the other hand, those opting for the new tax regime will not benefit from Section 80C deductions but will enjoy the benefits of lower tax rates and a higher basic exemption limit. The decision between the two regimes ultimately depends on an individual's tax-saving strategy and investment goals, with Section 80C being more advantageous for those with significant tax-saving investments.

Conclusion

Section 80C of the Income Tax Act remains unchanged under Budget 2025. The maximum deduction limit stays at Rs 1.5 lakh, with the same investment options available as in previous years. Taxpayers in the old regime can continue to claim deductions, while those in the new regime will benefit from lower tax rates but lose out on these deductions. Understanding these nuances is key to effective tax planning for the Financial Year 2025-26.

FAQs

1. What are the key investments eligible under Section 80C?

   Section 80C offers deductions for a variety of tax-saving investments, including contributions to Public Provident Fund (PPF), Employees' Provident Fund (EPF), life insurance premiums, National Savings Certificates (NSC), tax-saving fixed deposits, Sukanya Samriddhi Yojana (SSY), principal repayment on home loans, and children's tuition fees (up to two children). These investments allow individuals to claim deductions up to the limit of Rs 1.5 lakh for the financial year.

   
   

2. Can taxpayers in the new tax regime claim Section 80C deductions?

   No, taxpayers opting for the new tax regime introduced in Budget 2025 are not allowed to claim deductions under Section 80C. The new regime offers lower tax rates and higher exemption limits but eliminates deductions such as those under Section 80C. Taxpayers who choose this regime will benefit from simplified tax calculations but will not receive tax-saving benefits from investments like PPF, ELSS, or home loan principal repayments.

   
   

3. What is the maximum deduction limit under Section 80C for FY 2025-26?

   The maximum deduction limit under Section 80C remains at Rs 1.5 lakh for the Financial Year 2025-26 (Assessment Year 2026-27). This cap has not changed in Budget 2025, and taxpayers can continue to invest in eligible instruments to claim deductions up to this limit.

   
   

4. Is there any change in the list of eligible investments for Section 80C in Budget 2025?

   No, there have been no changes to the list of eligible investments under Section 80C in Budget 2025. The list remains consistent with previous years, including investments such as PPF, ELSS, NSC, life insurance premiums, and tax-saving fixed deposits, among others.

   
   

5. Do I need to declare my Section 80C investments when opening a bank account?

   Typically, you do not need to declare your Section 80C investments when opening a regular bank account. However, if you are opening an account for specific tax-saving instruments like a tax-saving fixed deposit or PPF account, you may need to submit relevant documents such as PAN and KYC details. The bank will track your investments, which you can later use for claiming deductions during income tax filing.

   
   

6. How does Section 80C impact my tax savings for the old tax regime?

   For taxpayers in the old tax regime, Section 80C is an essential tool for reducing taxable income. By investing in eligible instruments, you can claim deductions up to Rs 1.5 lakh, lowering your overall tax liability. This deduction, combined with other exemptions and deductions under the old regime, such as health insurance premiums and home loan interest, can significantly reduce your taxable income.

   
   

7. Can I claim deductions for my children’s tuition fees under Section 80C?

   Yes, you can claim deductions for your children’s tuition fees under Section 80C. The deduction is applicable for tuition fees paid for up to two children, subject to the Rs 1.5 lakh limit. The fees must be for educational institutions in India, and the deduction is available for both government and private institutions.

   
   

8. Are there any new forms for claiming Section 80C deductions introduced in Budget 2025?

   No, there are no new forms or declarations for claiming Section 80C deductions introduced in Budget 2025. The existing procedure for claiming deductions remains the same. Taxpayers will need to provide the necessary investment proofs, such as receipts and certificates, during the income tax filing process to claim deductions under Section 80C.

   
   

9. How does Section 80C affect senior citizens' tax planning?

   Section 80C can be a useful tool for senior citizens to reduce their taxable income. By investing in eligible instruments like PPF, ELSS, and NSC, senior citizens can claim deductions up to Rs 1.5 lakh. However, they also have the option to explore other tax-saving provisions, such as Section 80D (for health insurance premiums), which may be more beneficial based on their specific needs and financial situation.

   
   

10. What happens if I opt for the new tax regime regarding Section 80C?

    If you opt for the new tax regime, you will not be able to claim any deductions under Section 80C. The new regime offers lower tax rates and a higher basic exemption limit but eliminates deductions like those available under Section 80C. As a result, taxpayers opting for the new regime will not benefit from tax-saving investments such as PPF, ELSS, or home loan principal repayment.

    
    

11. Can I claim Section 80C deductions on investments made through a joint bank account?

    Yes, you can claim Section 80C deductions on investments made through a joint bank account, provided you are the primary account holder or a co-holder, and the investment is in your name. For instance, if you have a joint PPF or tax-saving fixed deposit account, the deduction can be claimed by the person whose name the account is registered under.

    
    

12. Is it possible to open a bank account specifically for tax-saving investments under Section 80C?

    Yes, you can open a bank account specifically for tax-saving investments under Section 80C. For example, opening a PPF account or a tax-saving fixed deposit account at a bank can help you make investments that qualify for deductions. Banks offer specialized accounts for these purposes, and you will need to submit necessary documentation such as KYC details and PAN when opening these accounts to ensure that they are eligible for tax benefits.