Section 123 in New Tax Bill is the Section 80C of old act: Check details on deductions of SSY, NPS, EPF, ELSS, ULIP

The recently introduced Income Tax Bill (ITB), presented in parliament on February 13 by Finance Minister Nirmala Sitharaman, focuses primarily on consolidating dispersed tax provisions, simplifying and eliminating unnecessary laws rather than making significant changes in tax rates or structure. The current Income-tax Act, which dates back to 1961 and came into effect on 01.04.1962, has undergone approximately 65 amendments with over 4000 changes over the years through various Finance Acts.

According to the Income Tax Department, the new Bill aims to provide a straightforward, clear, and easily understandable framework, featuring more than 57 tables as opposed to the 18 tables present in the existing Income-tax Act, 1961. This shift towards a more tabulated format offers taxpayers a clearer insight into important details such as deductions, TDS/TCS rates, and exemptions in a more organized and accessible manner.

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In the latest income tax bill, a significant change has been made regarding deductions under section 80C of the Income-Tax Act, 1961. These deductions have been shifted to a new section, namely section 123. Despite this move, taxpayers can still avail a deduction of up to Rs 1.5 lakh in a tax year.

A comprehensive list of savings instruments eligible for deduction under the new section 123 can be found in Schedule XV.

Previously, the deductions under section 80C were scattered throughout the section. The Central Board of Direct Taxes (CBDT) has simplified this process by consolidating all eligible savings instruments into the proposed Schedule XV.

The reorganised system in the Income-Tax Bill 2025 aims to streamline the deduction process for taxpayers, enhancing transparency and efficiency.

List of Eligible Savings Instruments for Deduction

• These savings instruments listed in Schedule XV are eligible for deduction under Section 123.
• Premium paid for a life insurance policy
• Sum paid under a deferred annuity contract (excluding annuity plans)
• Sum deducted from government salary for securing deferred annuity or providing for spouse or children (up to 20% of salary)
• Employee contributions to employees' provident fund
• Employee contributions to approved superannuation fund
• Subscription to Central Government notified security or deposit scheme in the name of an individual or their girl child (e.g. Sukanya Samriddhi Yojana)
• Subscription to National Savings Certificate
• Payment towards a Unit-linked Insurance Plan
• Sum contributed towards an annuity plan offered by the Life Insurance Corporation or any other insurer approved by the Central Government
• Investment in units of an Equity-Linked Savings Scheme (ELSS)
• Deposits made towards a pension fund established by the National Housing Bank
• Payment of tuition fees for full-time education of up to two children at a University, college, school, or other educational institution in India (excluding any development fees, donations, or similar payments)
• Contribution towards the purchase or construction of a residential property generating taxable income under the category "Income from house property"
• Placement of funds in a term deposit for a minimum period of five years
• Subscription to bonds issued by the National Bank for Agriculture and Rural Development (NABARD)
• Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004
• Five-year term deposit in an account under the Post Office Time Deposit Rules, 1981
• Contribution made by an individual to a pension scheme notified by the Central Government (Eg. NPS)