Answer

Advance tax, notices, deductions · Deductions 80C–80U

Section 123 (old 80C): ₹1.5L Deduction (All Instruments)

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  1. Facts

    The most widely claimed deduction in India. One limit of ₹1.5L covers 15+ instruments. Most people fill it with the wrong instruments, choosing low-return products over high-return ones. This is a ₹30,000–46,800 annual tax saving decision.

  2. Provisions and law

    • Sec 123 (old 80C)
    • Sec 123 (old 80CCC)
    • Sec 124 (old 80CCD(1))
    • Sec 80CCD(1B)

  3. Analysis

    All instruments under Sec 123, Income-tax Act 2025 (old Sec 80C) and their returns: ELSS mutual funds (market-linked, ~12-14% historical, 3-yr lock-in, best for wealth building) | PPF (7.1% tax-free, 15-yr lock-in, safest) | NPS (Sec 124 (old Sec 80CCD(1)), market-linked, 60% corpus available at retirement) | EPF (employer contribution) | Life insurance premium (term = efficient, endowment = inefficient) | ULIP (combines insurance + investment, high charges) | 5-year tax-saving FD (6-7%, taxable interest) | NSC (7.7%, taxable interest) | Home loan principal repayment (no separate investment needed) | Sukanya Samriddhi Yojana (girl child, 8.2%, EEE) | Senior Citizen Savings Scheme (8.2%, taxable interest) | Children's tuition fees (school fees, not coaching) | Stamp duty on property purchase (one-time, in purchase year). Most efficient Sec 123 (old Sec 80C) instrument: ELSS fund (Equity Linked Savings Scheme). Lock-in: 3 years.

  4. Conclusion

    1. Confirm old regime is selected (Sec 123 (old Sec 80C) not available in new regime)
    2. Calculate how much of ₹1.5L is already filled: EPF contribution (from payslip) + any existing LIC premium
    3. Remaining ₹1.5L gap, fill with most efficient instrument (ELSS for wealth builders, PPF for safety seekers)
    4. ELSS: Start SIP by April to spread across 12 months. Or lump sum before March 31.
    5. PPF: Deposit by April 5 each year for full year interest (PPF calculates interest on minimum balance 5th-end of month)
    6. Collect all Sec 123 (old Sec 80C) proofs: ELSS statement, PPF passbook, LIC receipt, EPF passbook, home loan repayment certificate

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