Big News: Government replaces Section 80C with Section 123 in New Income Tax Bill
In a major overhaul of tax-saving provisions, the Income-Tax Bill 2025 has abolished Section 80C and replaced it with Section 123. While the ₹1.5 lakh deduction limit remains unchanged, all eligible investments and savings instruments have now been streamlined under Schedule XV for better clarity and compliance.
🔹 When will this change take effect?
📅 April 1, 2026
Let’s explore what this means for taxpayers and how it affects tax planning.
📢 What Has Changed?
✅ Section 80C has been replaced by Section 123.
✅ The deduction limit remains ₹1.5 lakh per financial year.
✅ All eligible savings instruments are now listed in Schedule XV.
✅ The change simplifies tax filing and compliance for taxpayers.
📌 Why this change?
The previous 80C framework was scattered across multiple provisions, making it confusing for taxpayers. The new structure ensures better organization and transparency.
📋 Eligible Investments Under Section 123 (As per Schedule XV)
All tax-saving investments that previously qualified under Section 80C will now be considered under Section 123.
| Investment Type | Eligible for Deduction |
|---|---|
| Life Insurance Premium | ✅ Yes |
| Deferred Annuity (except annuity plans) | ✅ Yes |
| Salary deductions for deferred annuity (Govt. employees) | ✅ Yes |
| Employee Provident Fund (EPF) | ✅ Yes |
| Superannuation Fund Contributions | ✅ Yes |
| Sukanya Samriddhi Yojana (SSY) | ✅ Yes |
| National Savings Certificate (NSC) | ✅ Yes |
| Unit-linked Insurance Plans (ULIP) | ✅ Yes |
| LIC Annuity Plan & Govt-Notified Pension Plans | ✅ Yes |
| Equity-Linked Savings Scheme (ELSS) | ✅ Yes |
| NHB Pension Fund & Deposits | ✅ Yes |
| Tuition Fees (for two children) | ✅ Yes |
| Home Loan Principal Repayment | ✅ Yes |
| 5-Year Fixed Deposits (FDs) | ✅ Yes |
| NABARD Bonds | ✅ Yes |
| Senior Citizen Savings Scheme (SCSS) | ✅ Yes |
| 5-Year Post Office Time Deposits | ✅ Yes |
| National Pension Scheme (NPS) | ✅ Yes |
📌 No changes in the eligibility of investments, only a new section number has been assigned.
🚀 Why This Change Matters for Taxpayers
✅ Simplifies tax compliance – No need to navigate through complex sub-sections.
✅ Enhances transparency – A clearly defined Schedule XV for eligible deductions.
✅ Eases tax filing – The shift to Section 123 reduces confusion during return filing.
📢 What remains unchanged?
✔ The ₹1.5 lakh deduction limit continues.
✔ The same tax-saving investments are eligible under the new section.
🔎 Impact on Tax Planning:
- Salaried employees investing in EPF, NPS, and life insurance can continue their existing tax-saving strategies.
- Investors in ELSS, ULIPs, and fixed deposits need no changes in their approach.
- Home loan principal repayments remain tax-deductible.
⏳ What’s Next?
📅 Effective Date: April 1, 2026
🛑 Potential Revisions: The bill may undergo further refinements before implementation.
🚀 What should taxpayers do?
✔ Continue making tax-saving investments as usual.
✔ Stay updated on future changes before April 2026.
✔ Consult a tax expert for better financial planning.
🔎 Final Thoughts: No Major Changes, Just a New Section
📌 Key Takeaways:
✔ Section 80C is now Section 123 – but the deduction limit remains ₹1.5 lakh.
✔ Tax-saving investments stay the same – only the classification has changed.
✔ A more transparent and structured tax regime will make compliance easier.
🔎 Need Help Understanding the Changes?
💬 Drop your queries in the comments below! 🚀
CA Study Shop provides classes & books for CA CS CMA Students. We have partnered with more than 100 top faculties of country and provide excellent customer support which is evident from our 4.9/5 star rating on Google. Student can connect with us via any mode here.
Best of luck!
Stay Connected for more authentic updates.
Jai Hind,Vande Mataram
Team CA Study
