Deductions: 80C, 80D and NPS

Part of Income tax. 7 min read. Free lesson with a short video, quiz and practice.

A deduction is an amount you subtract from your income before tax is worked out. Most deductions are available only in the old regime. In the new regime, apart from the standard deduction, the main one left is your employer's NPS contribution.

The Income-tax Act, 2025 gave these deductions new section numbers. For example, the deduction known as 80C is now in Section 123, and 80D is in Section 126. People still use the old names, so we use them here too.

80C: up to ₹1.5 lakh a year

One combined limit of ₹1,50,000 covers many items, such as:

• Your own EPF contribution (deducted from salary).
• PPF deposits and Sukanya Samriddhi deposits.
• ELSS (tax-saving) mutual funds, which have a 3-year lock-in.
• Life insurance premium.
• 5-year tax-saving bank FDs and NSC.
• Home loan principal repayment, and tuition fees for up to two children.

80D: health insurance

• For yourself, your spouse and children: up to ₹25,000 (₹50,000 if you are 60 or above).
• For your parents: another ₹25,000 (₹50,000 if a parent is 60 or above).
• Up to ₹5,000 of preventive health check-ups count within these limits.

NPS: an extra ₹50,000

Your own contribution to NPS Tier I gets an extra deduction of up to ₹50,000, over and above the ₹1.5 lakh limit (this is the one known as 80CCD(1B)). Your employer's NPS contribution is deductible in both regimes, up to 14% of salary in the new regime.

Other common deductions (old regime)

• Home loan interest on a self-occupied house: up to ₹2,00,000.
• Education loan interest: the full interest, for up to 8 years.
• Donations to approved charities: 50% or 100% of the amount.
• Savings account interest: up to ₹10,000 (₹50,000 of all bank interest for seniors).

What a deduction is worth

A deduction saves tax at your top slab rate. If you are in the old regime's 30% slab, using the full ₹1,50,000 under 80C saves ₹45,000, or ₹46,800 with cess. In the 5% slab, the same ₹1.5 lakh saves only ₹7,800.

Don't buy a product only to save tax. Check its lock-in (ELSS 3 years, tax-saving FD 5 years, PPF 15 years), risk and returns first, and check whether you even use the old regime.