Why Section 80C may be irrelevant for many ITR filers in AY 2026-27

Under Section 80C of the Income-tax Act, 1961, taxpayers can claim deductions up to ₹1.5 lakh against several tax-saving investments and expenses if they opt for the old tax regime. However, the introduction of new tax regime in 2020, and its further sweetening in Budget 2025, have made Section 80C redundant for a large number of taxpayers, especially those whose annual income is not above ₹12 lakh.

Yet many taxpayers continue to chase Section 80C investments, often overthinking about a deduction that may not be making sense for them now.

Why are we talking about this?

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Section 80C was an automatic “must-do” tax-saving move for everyone until the introduction of the new tax regime. The new regime is now the default tax regime and it doesn't allow 80C deductions. While you can opt for the old regime to claim this deduction, the higher rebate and lower slabs under the new regime make it more suitable for most taxpayers.

Section 80C allows deductions up to ₹1.5 lakh for eligible investments/payments. But this deduction is available only under the old tax regime.

Under the new regime, the government has widened the slabs for AY 2026-27 and raised the Section 87A rebate threshold to ₹12 lakh, with a maximum rebate of ₹60,000.

Salaried taxpayers also get a standard deduction of up to ₹75,000 in the new regime, which means salary income of up to ₹12.75 lakh can, in many simple cases, translate into zero tax because taxable income comes down to ₹12 lakh, where the rebate applies.

If you are still chasing Section 80C deductions, here are a few facts you should be aware of:

Many taxpayers are still in the old regime mode, thinking as if it is the default. But the fact is that the new regime is the default in which many deductions, including section 80C, section 80D, HRA and others are not available. If you want to opt for the old regime, you need make your choice clear in the ITR portal.

Taxpayers have always had the habit of buying a financial product for tax reasons first and only later ask whether it fits their goals, liquidity needs or return expectations. That is especially relevant for products with lock-ins such as 5-year tax-saving FDs, various life insurance products, PPF, or ELSS. However, these products are no longer relevant for tax-saving purposes under the new tax regime, yet they often get sold sold under the same “save tax” umbrella.

A deduction only reduces the taxable income. It doesn't give tax benefit equal to the full investment amount. For taxpayers under the old regime, the value of Section 80C deduction will depends on their slab.

Section 80C: Myth vs Reality

Why you may not need to chase 80C

For a large number of salaried taxpayers, the new regime has changed the calculation because of three combined factors:

• Lower slab rates

• Higher rebate threshold of ₹12 lakh

• ₹75,000 standard deduction

The above means if you previously bought a Section 80C product in March 2025 just to save tax while filing return for FY 2025-26, you may now discover that your tax liability is already heading to zero under the new regime. If your total income includes special-rate income such as certain capital gains, then you should be careful, because the 87A rebate in the new regime does not apply to them.

However, there are still situations in which Section 80C can still make sense for a taxpayer.

When 80C investments still matters

Investing under schemes eligible for Section 80C deduction may still be relevant in following cases.

• For taxpayers who opt for the old regime because they also claim other benefits like HRA, home-loan interest rules, and additional deductions.

• For taxpayers, whose Section 80C contribution is partly automatic or unavoidable, such as EPF contributions, school tuition fees, home-loan principal repayment, life insurance premiums, they already hold.

• Those using PPF, ELSS, NPS, Sukanya Samriddhi or similar products for actual long-term goals, not merely for tax reduction.