Saving income tax is a priority for most taxpayers in India and the Income Tax Act of India provides several avenues to reduce taxable income. Sections 80C, 80D and 80G offer some of the most effective and legal ways to reduce your tax burden.
If you are wondering how to maximize your tax savings in 2025, this guide is for you. Here is a step-by-step description:
- What do Sections 80C, 80D and 80G offer
- Best investment options to claim tax deductions
- Tips to optimize your tax planning for 2025
Let’s find out how you can save maximum income tax this year!
Understanding Sections 80C, 80D and 80G
Section 80C: Popular tax-saving investments
Section 80C allows taxpayers to claim a deduction of up to ₹1.5 lakh per financial year by investing in approved instruments. This is the most popular section for tax-saving investments.
Best Investment Options under Section 80C
Public Provident Fund (PPF)
- Lock-in period: 15 years
- Returns: ~7.1% (tax-free)
- Tax benefits: Full exemption on returns and maturity
Pro tip: PPF is ideal for investors who want to accumulate wealth over the long term.
Equity-linked Savings Scheme (ELSS)
- Lock-in period: 3 years (lowest among 80C options)
- Returns: 12-15% (market-linked)
- Tax benefits: Gains above ₹1 lakh will be taxed at 10% as LTCG
Pro tip: ELSS is suitable for investors who have a higher risk appetite and are looking for higher returns.
National Pension System (NPS)
- Lock-in period: Till retirement (partial withdrawals are allowed)
- Returns: 8-10% (market-linked)
- Tax benefits: Additional deduction of ₹50,000 under Section 80CCD(1B)
Pro tip: NPS is ideal for retirement planning with wealth creation for the long term.
Life insurance premium
- Lock-in period: Minimum 2 years
- Tax benefits: Premiums paid for self, spouse, and children are eligible for deduction.
Pro tip: Consider term insurance plans for high coverage at a low cost.
Tax-saving fixed deposits (FDs)
- Lock-in period: 5 years
- Returns: ~5-6% (taxable)
- Tax benefits: The principal amount is eligible for deduction under 80C.
Pro tip: Choose FDs only if you want guaranteed returns with minimal risk.
Total maximum deduction under Section 80C: ₹1,50,000
Section 80D: Health Insurance Premium
Section 80D allows taxpayers to claim a deduction for health insurance premiums paid for themselves, family, and their parents.
Deductions available under Section 80D:
- For self, spouse and children: Up to ₹25,000 (₹50,000 for senior citizens)
- For parents:
– Up to ₹25,000 (if parents are below 60 years of age)
– Up to ₹50,000 (if parents are senior citizens)
Additional deduction for preventive health check-up
Additional deduction of ₹5,000 for preventive health check-up is included in the ₹25,000/₹50,000 limit.
Pro tip: Choose a family floater policy to maximize tax benefits while ensuring comprehensive health coverage.
Overall maximum deduction under Section 80D: ₹1,00,000 (if both taxpayer and parents are senior citizens)
Section 80G: Donations to charitable organizations
Section 80G provides a deduction for donations made to specified charitable organizations. This deduction encourages philanthropy and supports social causes.
Types of charities eligible under 80G:
100% deduction (without limit):
- Prime Minister’s National Relief Fund (PMNRF)
- National Defence Fund
- Swachh Bharat Kosh
50% deduction (without limit):
- Jawaharlal Nehru Memorial Fund
- Prime Minister’s Drought Relief Fund
Donations with a limit of 10% of adjusted gross income:
- Educational and charitable institutions
- Local authorities for promoting family planning
Pro tip: Always keep the receipts and 80G certificate handy to claim the deduction.
Total maximum deduction under Section 80G: Varies depending on the type of donation
How to maximize tax savings under Section 80C, 80D and 80G
Use the full limit of ₹1.5 lakh under 80C
Choose a mix of safe and high-return investments to diversify your portfolio while maximizing tax benefits.
Buy adequate health insurance for yourself and parents
Claim deduction for health insurance premiums and preventive health checkups under Section 80D.
Make strategic charitable donations under 80G
Donate to recognized charitable institutions and claim a deduction while contributing to a good cause.
Invest in NPS for additional deduction
Avail an additional deduction of ₹50,000 under Section 80CCD(1B) by investing in NPS.
Plan your taxes before March 31, 2025
Make sure all your investments and donations are made before the end of the financial year to claim the deduction.
Final Thoughts: Save Wisely, Save More in 2025!
By effectively using Sections 80C, 80D, and 80G, you can save a substantial amount on taxes while securing your future. Whether it is investing in ELSS, buying health insurance,e or contributing to charity, these tax-saving avenues allow you to reduce taxable income and grow your wealth over time.
Pro tip: Plan your tax-saving strategy at the beginning of the financial year to make the most of these deductions.
