If you are on the old tax regime, Section 80C lets you claim up to ₹1.5 lakh in deductions. Picking the right instrument matters as much as using the deduction.
Quick comparison table
| Instrument | Lock-in | Expected Returns | Risk | Tax on Maturity |
|---|---|---|---|---|
| ELSS Mutual Fund | 3 yrs | 12-15% p.a. | High (market-linked) | LTCG 12.5% above ₹1.25L/yr |
| PPF | 15 yrs | 7.1% p.a. (current) | None (govt-backed) | Fully tax-free (EEE) |
| NPS Tier-I | Until age 60 | 9-12% p.a. | Moderate | 60% tax-free, 40% annuity (taxable) |
| Tax-Saver FD | 5 yrs | 6.5-7.5% p.a. | Very low | Interest fully taxable |
| EPF (employee) | Until leaving job | 8.25% p.a. | None | Tax-free if 5+ yrs service |
| Sukanya Samriddhi | Until daughter 21 | 8.2% p.a. | None | Fully tax-free (EEE) |
The best pick by goal
Long-term wealth building (15+ years)
ELSS wins. Historical 12-15% CAGR on equity crushes every other option, and the shortest lock-in (3 years) means the least opportunity cost. Keep ₹1.5L annually in 2-3 quality ELSS funds.
Debt allocation with tax benefit
PPF is the best guaranteed-return option. 7.1% tax-free equals ~10% pre-tax for a 30% slab investor. 15-year lock-in is long, but you can withdraw partially after year 7.
Retirement corpus with lowest cost
NPS has the lowest fund management cost in India (~0.09%). Equity allocation up to 75% till age 50, then auto-glides to debt. Locked until 60 — treat it as retirement money only.
Risk-averse / short horizon
Tax-Saver FD. 5-year lock-in, capital safe. But interest is fully taxed, so net return for a 30% slab investor is ~5% — barely beats inflation.
Do NOT make these mistakes
- Buying expensive traditional insurance (LIC, endowment) just for 80C — returns are 4-5%, insurance cover is inadequate
- Ignoring employer EPF as "just automatic" — you may already be hitting ₹1.5L from EPF alone
- Claiming 80C on the new regime — it is not allowed. Switching regimes? Recompute first
Recommended mix for ₹1.5L annual 80C
- ₹50,000 in 2 ELSS funds (equity exposure)
- ₹50,000 in PPF (debt stability, tax-free)
- ₹50,000 from EPF (automatic, no action needed)
Plus ₹50,000 extra in NPS Tier-I under Section 80CCD(1B) — a separate ₹50k deduction on top of 80C.
Model your tax savings: Old Regime Calculator · plan your PPF with our PPF Calculator.