Section 80C Removed: Know What Happens to PPF & ELSS in New Tax Regime, Where Should You Invest Now?

New Tax Regime Benefits : Are you considering or have you already switched to the new income tax regime for the financial year 2025-26? If so, you need to update your old investment strategy immediately. The new tax regime is gaining popularity among individual taxpayers due to its lower rates and simplicity, but the biggest catch is that most of the deductions available under the old regime are eliminated. Therefore, understanding how wise it is to invest in popular options like the Public Provident Fund (PPF) and Equity Linked Savings Scheme (ELSS) is crucial for your future retirement fund.

The biggest attraction of the new tax regime is its tax slab rates, which are significantly lower than those under the old system. But in exchange for this benefit, the government has removed the annual exemption of ₹1.5 lakh under Section 80C from the new regime. This means that if you deposit money in PPF or ELSS, you will no longer be able to deduct that amount from your total taxable income. Experts believe that if your sole objective was to save tax, these schemes may lose some of their appeal under the new regime, but they remain a powerful and reliable option for long-term wealth creation.

The Public Provident Fund has always been one of the most trusted investment partners for Indian families. The good news for those adopting the new regime is that even though you may not receive the ₹1.5 lakh deduction under Section 80C at the time of investment, the annual interest earned and the maturity amount received after 15 years are still completely tax-free.

The compounding benefits of PPF help build a substantial corpus over the long term. If you’re planning for your retirement, continuing to contribute a maximum of ₹1.5 lakh annually is a smart decision, as this government scheme guarantees stability and security to your portfolio amid market fluctuations.

Equity Linked Savings Scheme (ELSS) is a unique category of mutual funds that comes with the shortest lock-in period of only 3 years. Despite not receiving the Section 80C benefit under the new tax regime, ELSS attracts investors because its historical returns have been much better than other savings schemes. Looking at the data of the last few years, many ELSS funds have delivered annualized returns (CAGR) of 17% to 19%.

Another major advantage of investing in ELSS is that long-term capital gains (LTCG) up to ₹1.25 lakh in a financial year are completely tax-free. If you are focused on capital appreciation, i.e., wealth maximization, ELSS remains a very powerful investment option even after ignoring tax exemptions.

If you have chosen the new tax regime, instead of stopping investments in these excellent schemes, re-evaluate your goals. Your investments should now be focused not on “saving taxes,” but on “getting rich” and achieving financial freedom. While the new regime offers simplicity, for future financial security, you will need to build a strong portfolio outside the scope of Section 80C.

The tax-free maturity of PPF and the high-return potential of ELSS are no less than a boon for investors. Experts say that the three-year lock-in period instills discipline in investors, which is crucial for accumulating substantial wealth over the long term.