The Income Tax Bill 2025 brings substantial reforms aimed at simplifying and modernizing the tax framework. As part of this overhaul, more than 300 obsolete provisions—including Sections 80C, 80CCA, and 80CCF—have been removed to streamline the list of allowable deductions. The eligible saving instruments for tax deductions are now clearly specified in Schedule XV under the newly introduced Section 123. These changes will take effect from April 1, 2026, requiring taxpayers to adjust their financial planning accordingly. This article provides a detailed analysis of the transition of Section 80C to Section 123 and its wider impact.
What is Section 80 of the Income Tax Act?
Section 80 of the Income Tax Act covers a range of deductions that enable taxpayers to reduce their taxable income. It includes various subsections such as 80C, 80D, and 80G, which provide deductions for investments, insurance premiums, medical expenses, charitable donations, and more. These provisions encourage savings, health security, and social welfare, while offering valuable tax relief. By claiming eligible deductions under Section 80, individuals and businesses can effectively lower their tax liability within the limits set by law.
Key Deductions under Section 80C
Section 80C allows taxpayers to claim deductions up to ₹1.5 lakh from their taxable income for specific investments and expenses. Some of the important deductions under this section include:
Employee Provident Fund (EPF)
Public Provident Fund (PPF)
National Savings Certificate (NSC)
Tax-saving Fixed Deposits (FDs)
Equity-Linked Savings Schemes (ELSS)
Life Insurance Premiums
Principal repayment of home loan
Tuition fees for children
Contributions to Sukanya Samriddhi Yojana (SSY)
These deductions help taxpayers lower their tax burden while promoting long-term savings and financial security.
Changes in Section 80C Provisions in the Income Tax Bill 2025
The Income Tax Bill 2025 restructures Section 80C to improve clarity and ease of use for taxpayers. Previously, eligible deductions were scattered across various subsections, making the rules complex and harder to navigate. The new bill consolidates these deductions into Schedule XV under Section 123, presenting a simplified and well-organized list of qualifying savings instruments. While the overall deduction limit of ₹1.5 lakh remains unchanged, this reorganization enhances transparency and helps taxpayers easily identify eligible investments. These changes aim to streamline tax-saving processes and promote better compliance.
Eligible Saving Instruments for Deductions Under Section 123 (Schedule XV)
Section 123 of the Income Tax Bill 2025, detailed in Schedule XV, specifies the savings instruments eligible for deductions. These instruments encourage long-term savings and financial security. The key eligible instruments include:
Life Insurance Premiums: Premiums paid for life insurance policies covering the taxpayer, spouse, or children.
Deferred Annuity Contract Payments: Payments under deferred annuity contracts (excluding immediate annuities).
Government Salary Deduction for Annuity: Up to 20% salary deductions for deferred annuity or provisions for spouse/children.
Employee Provident Fund (EPF): Employee contributions towards retirement savings.
Approved Superannuation Fund Contributions: Employee payments to approved superannuation funds.
Sukanya Samriddhi Yojana (SSY): Contributions for the taxpayer or their girl child’s savings.
National Savings Certificate (NSC): Subscriptions offering guaranteed returns and tax benefits.
Unit-Linked Insurance Plan (ULIP): Contributions combining insurance and market-linked investments.
Annuity Plan Contributions: Payments for annuity plans notified by the Central Government.
Equity-Linked Savings Scheme (ELSS): Investments in ELSS units providing market-linked returns with tax benefits.
National Housing Bank (NHB) Pension Fund Contributions: Deposits in NHB pension schemes promoting post-retirement security.
Tuition Fees: Fees for full-time education of up to two children (excluding donations or development fees).
Home Loan Principal Repayment: Payments toward principal on residential property loans generating taxable rental income.
Five-Year Fixed-Term Deposits: Fixed deposits with a minimum lock-in of five years.
NABARD Bonds: Investments in bonds issued by the National Bank for Agriculture and Rural Development.
Senior Citizen Savings Scheme (SCSS): Deposits under SCSS rules providing regular income to senior citizens.
Post Office Time Deposit: Five-year term deposits under Post Office rules with guaranteed returns.
National Pension System (NPS): Contributions to NPS or other government-approved pension schemes
About the Author
Priya
Priya is a skilled content writer specializing in business registration, tax laws, trademark regulations, and corporate compliance. Through his insightful and practical articles, he helps businesses confidently navigate complex legal and regulatory challenges with clear, actionable guidance
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