New Tax Regime 2025: 3 Section 80C Investments That Still Deliver Value

India’s tax system is changing, and many investors are wondering what happens to their tax-saving options—especially those under Section 80C. With the New Tax Regime 2025 now the default for FY 2025–26, most traditional 80C deductions are no longer available. But that doesn’t mean all 80C investments are useless. In fact, three key 80C options still offer great value under the New Tax Regime 2025—not just for saving tax, but also for building wealth, planning for retirement, and securing your financial future. This guide breaks down these smart choices to help you invest wisely in today’s changing tax landscape..

Understanding the New Tax Regime vs. Old Tax Regime Context

Before we explore the specific investments, let’s briefly recap the current tax scenario in India. For FY 2025-26, the new tax regime has been made the default choice for taxpayers. It comes with revised, often lower, tax slabs and a significant benefit: zero tax liability for incomes up to ₹12 lakh. For salaried individuals, this threshold is even more attractive at ₹12.75 lakh, thanks to the reintroduction of a ₹75,000 standard deduction under this regime.

The most significant change, however, lies in its approach to deductions. The new regime is designed to be simpler, which means it largely does away with the array of deductions and exemptions that taxpayers have traditionally relied upon, including the popular Section 80C, which allowed deductions of up to ₹1.5 lakh for various investments.

Also Read :- ULIPs: Understanding the Charges and Their Impact

Key Differences: New Tax Regime (Default) vs. Old Tax Regime (Optional)

Feature	New Tax Regime (FY 2025-26 Default)	Old Tax Regime (Optional)
Default Choice	Yes	No (must be explicitly opted for)
Tax Slabs	Lower tax rates, more slabs	Higher tax rates, fewer slabs
Income Tax-Free Limit	Up to ₹12 lakh (₹12.75 lakh for salaried with standard deduction)	Up to ₹5 lakh (with Section 87A rebate for income up to ₹7 lakh)
Section 80C Deductions	Not available (mostly)	Available (up to ₹1.5 lakh for specified investments)
Other Deductions	Most HRA, LTA, 80D, 24b (home loan interest) not available	All traditional deductions like HRA, LTA, 80D, 24b, etc., available
Standard Deduction (Salaried)	₹75,000 (re-introduced)	₹50,000 (available)
Primary Benefit	Lower tax rates, simplified filing	Tax savings via deductions/exemptions

Under the old tax regime, taxpayers could significantly reduce their taxable income by investing in instruments like Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), National Savings Certificates (NSC), tax-saving Fixed Deposits, and more, all under Section 80C. While these deductions offered substantial tax savings, the new regime’s lower tax rates are often designed to offset the benefit of these deductions for many taxpayers, particularly those earning below ₹15-20 lakh annually. This shift prompts a re-evaluation of how we approach our investments, moving beyond mere tax benefits.

3 Section 80C Investments That Still Deliver Value

Even with the restrictions in the new tax regime, some investments previously popular for Section 80C deductions retain their fundamental appeal. They offer benefits that extend beyond tax savings, making them valuable additions to your portfolio.

1. Public Provident Fund (PPF) – The Wealth Preservation Champion

For decades, the Public Provident Fund (PPF) has been a cornerstone of tax-saving investments in India. While its Section 80C deduction might be off the table for those choosing the new regime, PPF’s core strengths ensure it remains a highly valuable long-term investment option.

Why PPF Still Makes Sense:

PPF continues to offer consistent value through its unique “EEE” (Exempt-Exempt-Exempt) structure. This means:

• Exempt (E) at Contribution: While not applicable for deduction in the new regime, the old regime still allows it.
• Exempt (E) on Interest Earned: The interest you earn on your PPF account is completely tax-free.
• Exempt (E) at Maturity/Withdrawal: The entire corpus you receive upon maturity or through partial withdrawals is also tax-free.

Currently, PPF offers a guaranteed annual interest rate of 7.1% for Q2 FY 2025-26, which is reviewed quarterly by the government.

Key Benefits that Endure:

• Guaranteed Returns: Being a government-backed scheme, PPF offers sovereign guarantee on your capital and returns, making it one of the safest investment avenues in India.
• Tax-Free Growth: The compounding interest accumulates tax-free, significantly boosting your final corpus. This is a powerful advantage over taxable fixed-income options.
• Long-Term Wealth Building: With a 15-year lock-in period, PPF instills financial discipline for long-term wealth accumulation. It also offers partial withdrawal options after six years, providing some liquidity.
• Compounding Power: The tax-free compounding over 15 years, coupled with regular contributions, can create a substantial retirement or long-term corpus.

Value Proposition in 2025:

Even without the upfront Section 80C deduction benefit in the new regime, PPF’s tax-free returns of 7.1% are superior to most other fixed-income investments once you consider their post-tax implications. For instance, if you are in the 30% tax bracket, a taxable fixed deposit would need to yield over 10% (approximately 7.1% / (1 – 0.30)) to match PPF’s effective post-tax returns. This “tax efficiency on returns” makes PPF a champion for wealth preservation.

Also Read :- PPF Taxation Under the New Regime (FY 2025-26)

2. National Pension System (NPS) – The Retirement Planning Powerhouse

The National Pension System (NPS) holds a unique position among Section 80C investments because it continues to offer specific tax benefits even under the new tax regime, making it an indispensable tool for retirement planning.

Why NPS Retains Its Appeal:

NPS is primarily designed to help individuals save for retirement, and its structure ensures it remains attractive:

Tax Benefits That Survive the New Regime:

The key advantage of NPS under the new regime lies in:

• Employer Contributions (Section 80CCD(2)): This is the standout feature. Contributions made by your employer to your NPS account are deductible from your taxable income. For government employees, this limit is up to 14% of their salary (basic + dearness allowance), and crucially, for private sector employees, this limit has been enhanced from 10% to 14% of salary (basic + DA) under the new regime in the Finance Act 2024. This is a significant tax-saving avenue that remains untouched.
• No Monetary Limit for Employer Contributions: Unlike other deductions, employer contributions under Section 80CCD(2) do not have a fixed monetary ceiling of ₹1.5 lakh, making it highly beneficial for high-income earners.
• Tax Efficiency on Maturity: Up to 60% of the maturity corpus from NPS is tax-free upon withdrawal, making it highly efficient from a tax perspective during retirement.

Enhanced Benefits in 2025:

The Finance Act 2024’s increase in the employer contribution limit from 10% to 14% for private sector employees is a game-changer. This means salaried professionals can now save even more for retirement in a tax-efficient manner without foregoing the lower tax rates of the new regime. It effectively allows for higher tax-free retirement savings, making NPS particularly attractive.

Value Beyond Tax Benefits:

Even if you look beyond the tax advantages, NPS offers compelling investment characteristics:

• Professional Management: Your contributions are managed by Pension Fund Managers (PFMs) regulated by the PFRDA (Pension Fund Regulatory and Development Authority). You can choose from various asset classes (Equity, Corporate Bonds, Government Securities) based on your risk appetite.
• Low Costs: NPS is renowned for having one of the lowest expense ratios in the industry, meaning more of your money goes towards investments rather than fees.
• Retirement Discipline: The long-term lock-in (until age 60) ensures disciplined savings for your retirement, preventing premature withdrawals and fostering a robust retirement corpus.

3. Equity Linked Savings Scheme (ELSS) – The Growth Accelerator

Equity Linked Savings Schemes (ELSS) have long been favored for their dual benefit of tax savings and equity exposure. While the Section 80C deduction for ELSS is not available in the new tax regime, its fundamental appeal as a wealth-generating investment remains intact.

Why ELSS Continues to Deliver:

ELSS funds are diversified equity mutual funds, and their primary function is to invest in the stock market. Over long periods, equity investments have historically delivered superior returns compared to traditional fixed-income options.

Compelling Investment Characteristics:

• Superior Returns Potential: Historically, ELSS funds have delivered average annual returns of 12-15% or even higher over long investment horizons (e.g., 5-10 years), significantly outperforming fixed-income instruments. This potential for capital appreciation is their main draw.
• Shortest Lock-in Among Tax Savers: Among all Section 80C options, ELSS funds have the shortest lock-in period of just three years. This makes them more liquid compared to PPF (15 years) or NSC (5 years), allowing investors access to their funds relatively sooner.
• Professional Management: Your investments are managed by experienced fund managers who make strategic investment decisions across a diversified portfolio of stocks, saving you the hassle of direct stock picking.
• SIP Flexibility: You can invest in ELSS funds through Systematic Investment Plans (SIPs) with amounts as low as ₹500 per month, making equity investing accessible and disciplined.

Value Proposition Without Tax Benefits:

ELSS funds’ primary appeal in the new regime lies solely in their potential for long-term wealth creation through equity exposure. The mandatory 3-year lock-in, which was once seen purely as a tax-saving requirement, now acts as an inherent benefit. It prevents investors from making emotional, short-term decisions during market volatility, forcing them to stay invested and potentially reap better long-term outcomes. Many financial experts now advocate for ELSS as an excellent introductory product for conservative investors seeking to build exposure to equity markets, leveraging its disciplined approach.

Behavioral Finance Advantage:

Industry data consistently shows that a significant portion of mutual fund investors, sometimes as high as 50%, do not stay invested beyond two years. ELSS’s built-in lock-in period directly addresses this behavioral gap. By requiring a minimum three-year holding, it encourages investors to ride out short-term market fluctuations, which often leads to better long-term returns compared to frequent buying and selling based on emotions.

Also Read :- NPS vs ELSS: Simplifying Your Tax-Saving Choices

Strategic Considerations for 2025

The choice between the new and old tax regimes, and consequently, your investment strategy, depends heavily on your individual financial situation and the amount of deductions you’re eligible for.

When to Choose the Old Regime:

The old tax regime might still be more beneficial if your total eligible deductions (including Section 80C, 80D for health insurance, HRA, LTA, home loan interest, etc.) exceed certain thresholds. Here are some approximate income levels where the old regime might still be advantageous if you have significant deductions:

Annual Income	Approx. Deductions Needed for Old Regime Benefit
₹7.5 lakh	Above ₹2 lakh
₹18 lakh	Above ₹5.59 lakh
₹25 lakh	Above ₹6.08 lakh

Note: These are indicative thresholds. Actual benefit depends on a mix of all available deductions.

Investment Strategy Recommendations:

For New Regime Adopters:

• Maximize Employer NPS Contributions: This is arguably the most significant surviving tax benefit related to Section 80C-like deductions. Ensure your employer contributes the maximum allowed (up to 14% of Basic + DA) to your NPS account.
• Consider PPF for Tax-Free Long-Term Growth: Despite losing the upfront deduction, PPF’s EEE status and guaranteed, tax-free returns make it an excellent choice for a safe, long-term wealth accumulation vehicle.
• Use ELSS for Equity Exposure with Discipline: Treat ELSS primarily as an equity investment for wealth creation. Its 3-year lock-in period provides inherent discipline, preventing impulsive withdrawals during market volatility.

For Old Regime Continuers:

• Fully Utilize the ₹1.5 Lakh Section 80C Limit: Continue to leverage the ₹1.5 lakh deduction by investing in a mix of PPF, ELSS, NSC, or tax-saving FDs, based on your risk appetite and financial goals.
• Balance Safety and Growth: Allocate funds between safer options like PPF (for capital preservation and guaranteed returns) and growth-oriented options like ELSS (for higher return potential).
• Add NPS for Additional Benefits: Don’t forget the additional ₹50,000 deduction available under Section 80CCD(1B) for self-contributions to NPS, over and above the ₹1.5 lakh limit.

Looking Ahead: The Evolution of Tax-Saving Investments

The shift towards the new tax regime signals a broader trend in India: a move away from tax-driven investing towards merit-based investment decisions. This evolution is potentially beneficial for investors as it encourages them to focus on the fundamental qualities of an investment – its return potential, risk profile, liquidity, and alignment with financial goals – rather than solely on the tax benefits it provides.

The three investments highlighted – PPF, NPS, and ELSS – continue to deliver substantial value precisely because they address core financial needs: PPF for wealth preservation and guaranteed tax-free growth, NPS for structured retirement planning with unique tax advantages, and ELSS for accelerated growth through equity exposure. Their intrinsic merits and long-term benefits ensure they remain highly relevant regardless of tax regime changes. This progressive approach encourages a more holistic view of personal finance.

Conclusion

While the new tax regime for FY 2025-26 has indeed reshaped the landscape of tax-saving investments by largely restricting Section 80C deductions, it certainly doesn’t render all traditional options obsolete. Public Provident Fund (PPF), National Pension System (NPS), and Equity Linked Savings Schemes (ELSS) continue to offer compelling value propositions for Indian investors.

PPF stands out for its unmatched tax-free growth and safety, making it ideal for long-term wealth preservation. NPS remains crucial for retirement planning, offering the unique advantage of deductible employer contributions (now up to 14%) even under the new regime. ELSS, though losing its direct deduction benefit, continues to provide superior long-term wealth creation potential through equity exposure, with its mandatory lock-in acting as a beneficial behavioural discipline.

The key takeaway for investors is to evaluate these options based on their fundamental merits, aligning them with individual financial goals, risk tolerance, and investment horizon, rather than solely on their tax-saving capabilities. As India’s tax system continues to evolve towards simplification, investors who focus on the intrinsic value and long-term benefits of their investments will be best positioned for enduring financial success.

FAQs (Frequently Asked Question)

1. Is Section 80C deduction available under the new tax regime for FY 2025-26?
   No, most traditional Section 80C deductions are not available under the new tax regime for FY 2025-26, which is now the default option.
2. Which Section 80C investments still offer value in the new tax regime?
   Public Provident Fund (PPF), National Pension System (NPS), and Equity Linked Savings Schemes (ELSS) continue to offer significant value.
3. What is the main benefit of PPF in the new tax regime?
   PPF’s main benefit is its “EEE” (Exempt-Exempt-Exempt) status, meaning interest earned and maturity proceeds are completely tax-free, making its 7.1% interest highly attractive post-tax.
4. Are there any tax benefits for NPS under the new tax regime?
   Yes, employer contributions to NPS under Section 80CCD(2) (up to 14% of salary) remain deductible under the new tax regime.
5. Why is ELSS still a good investment option even without 80C deduction in the new regime?
   ELSS is valuable for its potential to generate superior long-term returns through equity exposure and its mandatory 3-year lock-in period which promotes investment discipline.
6. For whom might the old tax regime still be beneficial in FY 2025-26?
   The old tax regime might be beneficial for individuals with substantial eligible deductions (e.g., above ₹2 lakh for ₹7.5 lakh income, or above ₹5.59 lakh for ₹18 lakh income).
7. Has the employer contribution limit to NPS changed for private sector employees in 2025?
   Yes, the Finance Act 2024 increased the employer contribution limit for private sector employees from 10% to 14% of salary (basic + DA) under the new regime.