With the introduction of the new income tax slab, Indian taxpayers have been given the choice of either of two taxation regimes: old and new. While the new regime provides lower rates of tax and easy filing, it removes some exemptions and deductions. This has created confusion among the taxpayers regarding the applicability of Section 80C of the Income Tax Act in the new tax regime.
What is Section 80C?
Section 80C of the Income Tax Act allows individuals and Hindu Undivided Families (HUFs) to claim deductions of up to ₹1.5 Lakh from their gross total income. This is a deduction for certain investments and expenses that helps lower the total tax burden.
Section 80C continues to be the go-to choice for salaried employees, business owners, and even taxpayers who are self-employed to keep taxable income down to ₹1.5 Lakh a year.
Some popular instruments eligible under Section 80C include:
- Life Insurance Premiums
- Employee Provident Fund (EPF)
- Public Provident Fund (PPF)
- National Savings Certificate (NSC)
- Equity Linked Savings Scheme (ELSS)
- Sukanya Samriddhi Yojana (SSY)
These instruments not only offer financial growth but also contribute to long-term savings and investment.
Subsections Under Section 80C and Their Benefits
- Section 80CCC – Pension Funds
- Deduction to contribution to pension plans like LIC’s Jeevan Suraksha
- The premium should be paid out of taxable income
- This also comes under the overall ₹1.5 Lakh limit of Section 80C
- Section 80CCD(1) – NPS Contributions (Employee or Self)
- Deduction of contributions to the National Pension System (NPS)
- Maximum 10% of Basic + DA for salaried employees
- A maximum of 20% of gross earnings for self-employed individuals
- Covered under the ₹1.5 lakh cover and Section 80C and Section 80CCC
- Section 80CCD(1B) – Additional ₹50,000 for NPS
- Beyond the ₹1.5 lakh threshold
- Special deduction for NPS contributions
- Extremely helpful for those considering long-term retirement planning
- Section 80CCD(2) – Employer’s Contribution to NPS
- Applicable only to salaried individuals
- Deduction is over and above all other limits
- Up to 10% of salary (14% for central government employees) is allowed as a deduction.
- Not available to self-employed individuals
Many insurance plans provided by trusted insurers, like Axis Max Life Insurance, qualify for deductions under Section 80C. These plans help you in securing your family’s future, along with reducing tax liability.
Tax Slab Comparison of Old and New Regimes
Before making any decision on a regime, it is essential to understand how tax rates vary for each regime.
Old Tax Regime:
- All deductions under Section 80C (including 80CCC and 80CCD) are allowed
- Can reduce taxable income significantly up to ₹2 lakh or more with Section 80CCD(1B)
Income Tax Slab under the old tax regime:
| Income Range | Tax Rate |
| Up to ₹2.5 Lakh | Nil |
| ₹2.5 Lakh – ₹5 Lakh | 5% |
| ₹5 Lakh – ₹10 Lakh | 20% |
| Above ₹10 Lakh | 30% |
New Tax Regime:
- Deductions under Section 80C, 80CCC, 80CCD(1), and 80CCD(1B) are not applicable.
- Only Section 80CCD(2) (employer’s contribution to NPS) is allowed
- Other common exemptions like HRA, LTA, and standard deduction are also removed
New Income Tax Slab:
| Income Range | Tax Rate |
| Up to ₹3 Lakh | Nil |
| ₹3 Lakh – ₹7 Lakh | 5% above ₹3 Lakh |
| ₹7 Lakh – ₹10 Lakh | ₹20,000 + 10% above ₹7 Lakh |
| ₹10 Lakh – ₹12 Lakh | ₹50,000 + 15% above ₹10 Lakh |
| ₹12 Lakh – ₹15 Lakh | ₹80,000 + 20% above ₹12 Lakh |
| Above ₹15 Lakh | ₹1,40,000 + 30% above ₹15 Lakh |
Who Should Choose the New Income Tax Slab?
The new income tax slab may be more beneficial for:
- Individuals with minimal or no investments in tax-saving instruments
- Salaried employees with no home loan or insurance payments
- Freelancers or gig workers with unpredictable income and no regular deductions
- Those who prefer the ease of filing without tracking multiple exemptions
In such cases, the lower tax rates might offer better savings than the deductions under Section 80C.
How to Decide Which Regime to Choose
Choosing the right tax regime is not a question of cutting tax to the absolute minimum; it’s a matter of making your decision suit your lifestyle and your long-term plans. Each regime suits a different type of taxpayer, so what might suit others may not suit you.
Ask yourself:
- Do you make frequent investments in Section 80C instruments?
- Do you pay EMIs on a home loan?
- Do you write premiums for life or health insurance?
- Are you okay with a more structured investment approach?
If your answer is yes to most, the old regime with Section 80C benefits could be the better choice. Otherwise, the new income tax slab might reduce your hassle and still save taxes.
Conclusion
Section 80C remains a useful tax-planning tool, but only if you opt for the old tax regime. The new income tax slab has introduced flexibility, but there is a need for more thinking. Your choice must take into consideration short-term gains over long-term monetary discipline. Opting for the right alternative can lead to effective tax management and a secure future.
