Published 26 October 2026
Most people know section 80C as “the Rs 1.5 lakh deduction”. The difficulty lies in the detail. The Rs 1.5 lakh is shared with two other provisions. Some items count only up to a fraction of the sum assured. Others are taken back if a policy lapses or a house is sold too soon. And none of it is available under the new tax regime. From 1 April 2026 the whole list has also moved, from a section of the Income-tax Act, 1961 into a Schedule of the Income-tax Act, 2025. This guide sets out what qualifies, the cap, the conditions that reverse a deduction, and the proof that supports a claim.
Which Act governs which year
Financial year 2025-26 (assessment year 2026-27) and earlier. The Income-tax Act, 1961 applies. The deduction is section 80C, with section 80CCC (pension fund annuity plans), section 80CCD(1) (own contribution to the National Pension System) and the aggregate cap in section 80CCE.
Tax year 2026-27 onwards. The Income-tax Act, 2025 applies. Section 123 allows the deduction for the sums “enumerated in Schedule XV”, up to Rs 1,50,000, “subject to the conditions specified in that Schedule”. Schedule XV holds the list (paragraph 1), the insurance limits (paragraph 2), the housing rules (paragraph 3) and the reversal rules (paragraphs 4 and 5).
Earlier years stay under the 1961 Act by section 536(2) of the 2025 Act.
| Item | 1961 Act | 2025 Act |
|---|---|---|
| List of qualifying sums | s.80C(2) | Schedule XV, para 1 |
| Pension fund annuity plan | s.80CCC | Schedule XV, para 1(x) |
| Own NPS contribution | s.80CCD(1) | Schedule XV, para 1(y) |
| Rs 1,50,000 cap | s.80C(1) and s.80CCE | s.123 |
| Insurance premium limits | s.80C(3), (3A) | Schedule XV, para 2 |
| Reversal of deduction | s.80C(5), (6), (6A) | Schedule XV, paras 4 and 5 |
Who can claim
Only an individual or a Hindu undivided family. For an individual, life insurance, the Public Provident Fund and the unit-linked insurance plans may be in the name of the individual, the spouse or any child. For an HUF, they may be in the name of any member (section 80C(4)(a); Schedule XV, para 1(a), 1(e), 1(j) and 1(k)). Tuition fees are allowed only to an individual, for “any two children” (section 80C(4)(c); para 1(q)).
What qualifies
Section 80C(2) lists twenty-five clauses. Schedule XV, paragraph 1 carries them, with the two pension items folded in. In groups:
- Insurance and annuities. Life insurance premium; a deferred annuity contract without a cash option; sums deducted from a Government employee’s salary for a deferred annuity, up to one-fifth (20 per cent) of salary; notified annuity plans of the Life Insurance Corporation or another insurer; and contributions to a pension fund annuity plan under section 80CCC.
- Provident funds. Contributions to a fund under the Provident Funds Act, 1925; to a provident fund set up and notified by the Central Government, of which the Public Provident Fund is the best known; an employee’s own contribution to a recognised provident fund; and contributions to an approved superannuation fund.
- Small savings and deposits. Notified Government securities and deposit schemes, including those in the name of a girl child where the scheme so provides; notified savings certificates; a five-year term deposit with a scheduled bank under a notified scheme; deposits under the Senior Citizens Savings Scheme Rules, 2004; and a five-year time deposit under the Post Office Time Deposit Rules, 1981.
- Market-linked products. The Unit-linked Insurance Plan, 1971 and notified LIC Mutual Fund plans; units of a mutual fund under a notified plan (the Equity Linked Savings Scheme); notified mutual fund pension funds; and subscriptions to eligible issues of infrastructure capital approved by the Board.
- Housing. Repayment of a housing loan taken from specified lenders, instalments to a development authority, housing board, company or co-operative society, and stamp duty, registration fee and transfer expenses. Interest is not included. Interest falls under section 24(b), covered in Home-Loan Interest: Section 24(b) and the Rs 2 Lakh Cap.
- Tuition fees paid to a university, college, school or other educational institution in India for full-time education, “excluding any payment towards any development fees or donation or payment of similar nature”.
- Others. Notified NABARD bonds, National Housing Bank schemes and housing deposit schemes; a Central Government employee’s contribution to the additional account under section 20(3) of the Pension Fund Regulatory and Development Authority Act, 2013, for a fixed period of at least three years; and the individual’s own contribution to the National Pension System, within the limits in NPS: Sections 80CCD(1), (1B) and (2).
Housing payments exclude the admission fee and share cost of a society, repairs or additions after completion or occupation, and any amount deductible under section 24 (section 80C(2)(xviii); para 3(b)).
Section 80C does not require the sum to be paid out of taxable income; it speaks of sums “paid or deposited in the previous year”. Section 80CCC does contain that condition (“out of his income chargeable to tax”), and so does paragraph 1(x) of Schedule XV (“contribution made from income chargeable to tax”).
The Rs 1,50,000 cap
Section 80C(1) caps the deduction at Rs 1,50,000. Section 80CCE then caps “the aggregate amount of deductions under section 80C, section 80CCC and sub-section (1) of section 80CCD” at the same Rs 1,50,000. Under the 2025 Act no separate aggregate rule is needed: section 123 applies the Rs 1,50,000 cap to every sum in Schedule XV, and Schedule XV now includes the pension fund annuity plan and the own NPS contribution.
Two NPS deductions sit outside the cap: the additional Rs 50,000 under section 80CCD(1B) (section 124(3) of the 2025 Act) and the employer’s contribution under section 80CCD(2) (section 124(1)). The ITR-1 validation rules for AY 2026-27, published by the Directorate of Income Tax (Systems), reject a return in which the sum of 80C, 80CCC and 80CCD(1) exceeds Rs 1,50,000 under the old regime.
Life insurance: the premium counts only up to a share of the sum assured
A premium counts only up to a percentage of the “actual capital sum assured”:
| Policy issued | Limit | 1961 Act | 2025 Act |
|---|---|---|---|
| On or before 31 March 2012 | 20 per cent | s.80C(3) | Sch. XV, para 2(1)(a) |
| On or after 1 April 2012 | 10 per cent | s.80C(3A) | para 2(1)(b) |
| On or after 1 April 2013, on the life of a person with disability or with a specified disease | 15 per cent | proviso to s.80C(3A) | para 2(1)(c) |
The “actual capital sum assured” is the minimum amount assured at any time during the term, ignoring premiums to be returned and bonuses.
When the deduction is taken back
Section 80C(5) reverses the deduction in three cases. Where any of them occurs, no deduction is allowed for that year’s payment, and the deductions already allowed in earlier years “shall be deemed to be the income of the assessee” of the year of the event:
- A life policy ends early. The policy is terminated, or lapses for non-payment without revival, within two years of commencement for a single-premium policy, or before premiums have been paid for two years in any other case.
- A unit-linked plan ends early. Participation ends before contributions have been paid for five years.
- The house is sold too soon. The house property is transferred “before the expiry of five years from the end of the financial year in which possession of such property is obtained”, or any sum paid is received back by refund or otherwise.
Section 80C(6) does the same for shares or debentures in an eligible issue sold within three years. Section 80C(6A) taxes a withdrawal from a Senior Citizens Savings Scheme account or a five-year post office time deposit within five years of deposit. Interest already taxed, and sums received by a nominee or legal heir on death, are left out.
Schedule XV carries these rules. Paragraph 4 has the Table for insurance, unit-linked plans, the house (five years “from the end of the tax year in which possession of such property is obtained”) and eligible shares. Paragraph 5 has the deposit withdrawals.
A deduction allowed before 1 April 2026 and reversed by an event after it is caught by section 536(2)(h) of the 2025 Act, as substituted by the Finance Act, 2026. The sum is “deemed to be the income of such subsequent tax year” and taxed under the same head as under the 1961 Act. A house bought with a deduction in FY 2023-24 and sold in tax year 2027-28, inside the five years, is therefore still caught.
ELSS: the three years come from the scheme, not the Act
The Act contains no reversal rule for mutual fund units under clause (xiii) of section 80C(2) or paragraph 1(m) of Schedule XV. The three-year lock-in on Equity Linked Savings Scheme units is a term of the scheme itself, the Equity Linked Saving Scheme, 2005, notified by the Central Government on 3 November 2005. That scheme requires the investment to be kept for at least three years from allotment. The one exception is the holder’s death, when the nominee or legal heir may withdraw after one year from allotment. Gains on redemption are taxed as capital gains, covered in Capital Gains on Listed Shares and Equity Funds.
The new regime allows none of it
Section 115BAC(2)(i) of the 1961 Act computes total income without “any of the provisions of Chapter VI-A other than the provisions of sub-section (2) of section 80CCD or sub-section (2) of section 80CCH or section 80JJAA”. Section 202(2)(a)(xii) of the 2025 Act excludes “Chapter VIII other than the provisions of section 124(1) and 124(2), or 125(2) or 146”. Section 123 is in Chapter VIII and is not saved. Every item in this guide is therefore lost under the new regime.
An individual without business income leaves the new regime only in a return filed by the due date: section 115BAC(6) refers to “the return of income to be furnished under sub-section (1) of section 139”, and section 202(4)(b) to the return “under section 263(1)”. On those words, a belated return cannot claim section 80C. The choice is explained in Old or New Regime: The Choice for Employees.
Proof: what the employer asks for, and what the return needs
An employer deducting tax on salary may allow section 80C in the monthly deduction only on evidence. Up to FY 2025-26, rule 26C of the Income-tax Rules, 1962 requires it in Form No. 12BB. From tax year 2026-27, rule 205 of the Income-tax Rules, 2026 requires Form No. 124, which asks for “Evidence of investment or expenditure” for a “Deduction under Chapter VIII”. A payment not shown to the employer in time can still be claimed in the return, on the same evidence. See HRA Exemption and Form 12BB.
What to have ready
- Premium receipts for each life policy, with the issue date and sum assured. These come from the insurer, and they test the 10, 15 or 20 per cent limit.
- Provident fund statements: the PPF passbook, and the salary slip or Form 16 for the employee’s own EPF contribution.
- Fee receipts from the school or college, showing tuition separately from development fees and donations.
- The home-loan certificate splitting principal and interest, and the stamp duty and registration receipts. The possession date comes from the builder’s letter or the deed.
- Statements or certificates for ELSS units, the five-year deposit, NSC, Sukanya Samriddhi, the Senior Citizens Savings Scheme and NPS, each showing the date of payment.
- The Form 16 (Form No. 130 from tax year 2026-27), to see what the employer has already allowed.
After filing
A mistake in the claim can be corrected in a revised return within the time in section 139(5) of the 1961 Act or section 263(5) of the 2025 Act. See Belated and Revised Returns. An updated return cannot add a deduction. Under the proviso to section 139(8A), and section 263(6)(c) of the 2025 Act, it is not allowed where it decreases the tax liability or creates or increases a refund. A claim the Centralised Processing Centre does not accept appears as an adjustment in the intimation; see The Intimation under Section 143(1).
In order
- Fix the Act: section 80C, 80CCC and 80CCD(1) for FY 2025-26 and earlier; section 123 and Schedule XV from tax year 2026-27.
- Confirm the old regime will be chosen, in a return filed by the due date.
- List each payment made within the year, and check it against the qualifying list and the person in whose name it stands.
- Apply the sum-assured limit to each life premium, and the two-child and tuition-only limits to school fees.
- Add up section 80C, 80CCC and 80CCD(1) and stop at Rs 1,50,000.
- Check for any event that reverses an earlier deduction: a lapsed policy, an early exit from a ULIP, or a house sold within five years of the end of the year of possession.
- Give the employer the evidence in Form 12BB (Form No. 124 from tax year 2026-27), and claim anything missed in the return.
The next guide, NPS: Sections 80CCD(1), (1B) and (2), deals with the three pension deductions, one of which survives the new regime.