The government currently offers eight major small savings schemes that qualify for tax deductions under Section 80C of the Income Tax Act. According to reports from Mint, eligible schemes include Public Provident Fund (PPF), Sukanya Samriddhi Yojana (SSY), National Savings Certificate (NSC), Senior Citizens Savings Scheme (SCSS), and 5-year Post Office Time Deposit. These schemes offer government-backed safety, assured returns, and competitive interest rates while allowing investors to claim deductions up to ₹1.5 lakh under the old tax regime. Additionally, ELSS funds qualify as equity-oriented mutual funds that offer market-linked returns with the shortest lock-in period of three years among Section 80C investment options.
Several small savings schemes do not qualify for Section 80C tax deductions despite offering government-backed safety and attractive returns. As reported by Mint, Kisan Vikas Patra (KVP), The Post Office Monthly Income Scheme, 1-year, 2-year and 3-year Post Office Time Deposits, and Post Office Recurring Deposit (RD) are not eligible for the deduction benefit. While these schemes provide government-backed safety and returns, the money invested cannot be claimed as a deduction under Section 80C. However, premiums paid for life insurance policies covering yourself, your spouse, or your children qualify for deduction under Section 80C, subject to applicable conditions under the Income Tax Act.
The government has maintained unchanged interest rates for small savings schemes during the first quarter of FY 2026-27 (April 1 to June 30, 2026) and the July-September quarter of FY 2026-27. According to Mint, the ministry announced that rates would remain unchanged from those notified for the fourth quarter of FY 2025-26. Current interest rates include Sukanya Samriddhi Yojana (SSY) at 8.2%, Public Provident Fund (PPF) at 7.1%, and National Savings Certificate (NSC) at 7.7%. The last major revision in these rates occurred in the January-March quarter of FY 2023-24. The NSC interest rate has remained unchanged at 7.7% since April 1, 2025, with the government often keeping rates unchanged even when there is a change in G-sec yields.
Section 80C provides a deduction against total income, allowing taxpayers to reduce their taxable income up to ₹1.5 lakh. As reported by Mint, the deduction is subtracted from your income before tax is calculated, not from the tax amount itself. The benefit is available only under the old tax regime, with taxpayers opting for the new tax regime not eligible for this deduction. When combined with other provisions, the National Pension System (NPS) offers additional tax benefits under Section 80CCD(1B) with an additional deduction of up to ₹50,000, taking the maximum combined deduction to ₹2 lakh under the old tax regime. The combined deduction limit under Sections 80C, 80CCC, and 80CCD(1) is ₹1.5 lakh, with the additional deduction under Section 80CCD(1B) available only under the old tax regime.
