Section 80C in New Tax Act 2025: Now Section 123
- Section 80C renumbered as Section 123 under the Income Tax Act 2025. Rs 1.5 lakh limit unchanged.
- All instruments continue: PPF, ELSS, life insurance, NSC, tuition fees, home loan principal, Sukanya Samriddhi, 5-year tax-saving FDs.
- Only available in the old regime. The new regime (Section 202) does not allow Section 123 deductions.
- Three sections merged into Section 123: old 80C, 80CCC, and parts of 80CCD have been consolidated.
If you invest in PPF, ELSS mutual funds, life insurance, or NSC to save tax, you have one question: does Section 80C still work under the new Income Tax Act 2025? The short answer is yes - your deductions continue with the same Rs 1.5 lakh limit. The old Section 80C is now Section 123 of the Income Tax Act 2025.
Section 80C → Section 123: What Changed
Under the new act (effective April 1, 2026), three previously separate deduction sections have been merged into Section 123:
What Qualifies Under New Section 123
15-year lock-in. EEE status preserved. Up to Rs 1.5 lakh per year qualifies.
Equity Linked Savings Scheme with a 3-year lock-in. Lowest lock-in among 80C / 123 options.
LIC and private insurers. Premium up to 10% of sum assured qualifies.
Both fully qualify. NSC interest is reinvested and also gets 80C / 123 benefit.
For up to 2 children, paid to any registered school or college in India. Donations and capitation fees do NOT qualify.
Principal portion of EMIs. Plus stamp duty and registration charges in the year of payment only.
Girl-child scheme contributions and Senior Citizens Savings Scheme. Both qualify.
What Stays Exactly the Same
- Rs 1,50,000 overall limit - the combined cap under Section 123 (old 80C + 80CCC + 80CCD(1)) remains Rs 1.5 lakh
- Additional Rs 50,000 NPS deduction - old Section 80CCD(1B) is preserved under new Section 124
- Old regime vs new regime rules - Section 123 deductions are available only under the old tax regime. Under the new regime (default since FY 2023-24), these deductions remain unavailable
- All eligible investments - PPF, ELSS, LIC, NSC, tuition fees, home loan principal - all continue to qualify
Complete Section Number Mapping
If you claim deductions under the old regime, your investments and amounts stay identical. Only the section number on the tax return changes. Tax software handles it automatically from FY 2026-27. If you are on the new regime, Section 123 was never available to you, just as Section 80C was not. No change.
Frequently Asked Questions
What is the new section number for 80C?
Section 80C is now Section 123 under the Income Tax Act 2025. The Rs 1.5 lakh deduction limit and all eligible investments remain the same.
Is PPF still tax-free under the new act?
Yes. PPF continues to enjoy EEE (Exempt-Exempt-Exempt) status under the new act. Contributions qualify under Section 123 and maturity proceeds remain tax-free under Section 11.
Can I claim 80C deduction under the new tax regime?
No. Section 123 (old 80C) deductions are only available under the old tax regime. The new tax regime (Section 202) does not allow these deductions.
What is the difference between Section 123 and Section 124?
Section 123 covers PPF, ELSS, LIC, NSC, and other savings (old 80C). Section 124 covers NPS contributions (old 80CCD), including the additional Rs 50,000 deduction beyond the Rs 1.5 lakh cap.
For the NPS-specific extension (additional Rs 50K), see Section 80CCD now Section 124. For health insurance, see Section 80D now Section 126. For home loan principal in detail, see home loan tax benefits 2025.
Disclaimer: This article provides general information about the Income Tax Act 2025 and is not tax advice. Consult a qualified Chartered Accountant for advice specific to your situation.
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