Tax Savings Alert: Section 80C Deduction Limit Increased in Union Budget 2025?

There is no increase in the Section 80C deduction limit in Budget 2025. The standard deduction. Finance Minister Nirmala Sitharaman has disappointed salaried employees who chose the old tax regime. For the upcoming fiscal year 2025-26, eligible taxpayers can still claim a maximum deduction of Rs. 1.5 lakh under Section 80C. There has been no change in this deduction limit since 2014.

Section 80C is a popular way for salaried individuals, Non-Residents, and Hindu Undivided Families (HUF) to reduce their income tax under the old tax regime. To claim this deduction, taxpayers need to make certain investments or spend money on specific expenses during the year.

Mandatory investment and expenditures under Section 80C

Under Section 80C of the Income Tax Act, there are certain investments and expenses individuals can claim to reduce their taxable income. This means you can lower the amount of income on which you have to pay tax. However, even if your total investments or expenses exceed Rs. 1.5 lakh, the maximum deduction you can get in a financial year is still Rs. 1.5 lakh.

Some of the investments eligible for tax benefits under Section 80C of the Income Tax Act are: Employees’ Provident Fund (EPF), Public Provident Fund (PPF), ELSS mutual funds, Senior Citizens Savings Scheme, 5-year fixed deposit either with bank or post office Sukanya Samriddhi Yojana etc.

Tax savings through Section 80C deduction

Section 80C allows you to save up to Rs. 46,800 in income tax (including 4% cess) This maximum tax saving is possible for those whose income is taxed at the highest rate of 30%.

The amount of tax taxpayers can save depends on your income tax rate. If your income is taxed at a lower rate, like 5% or 20%, the tax savings will be smaller compared to those taxed at higher rates.

For example, If an individual has a taxable income of Rs. 20 lakh and does not claim any deductions, their tax would be Rs. 4.29 lakh. But, if they claim a deduction of Rs. 1.5 lakh under Section 80C, their taxable income reduces to Rs. 18.5 lakh. In this case, the tax comes down to Rs. 3,82,200, saving them Rs. 46,800 in taxes.