Deductions under Chapter VIII - Sections 122 to 154 | Comprehensive Tax Saving Guide

Key Takeaways

• Chapter VIII deductions (Sections 122 to 154 of the Income Tax Act, 2025) reduce taxable income and are available primarily under the old tax regime. (Previously Chapter VI-A deductions under Sections 80C to 80U of the Income Tax Act, 1961.)
• Section 123 + Schedule XV (previously Section 80C) offers up to Rs. 1,50,000 deduction for investments in PPF, ELSS, life insurance, home loan principal, etc.
• Under the new tax regime (Section 202), only Section 124 (employer's NPS contribution, previously Section 80CCD(2)) and Section 146 (new employment, previously Section 80JJAA) are available.
• Section 126 (previously Section 80D) allows up to Rs. 1,00,000 deduction for health insurance for self, family, and parents.
• Total deductions under Chapter VIII cannot exceed the Gross Total Income.

Section 123 + Schedule XV - The Primary Tax Saver (Limit: Rs. 1,50,000)

Section 123 read with Schedule XV of the Income Tax Act, 2025 (previously Section 80C) provides deduction up to Rs. 1,50,000 for investments and expenditures specified therein. Available to Individuals and HUFs.

| Investment/Expenditure | Key Details | |----------------------|-------------| | Public Provident Fund (PPF) | Max Rs. 1,50,000/year; 15-year lock-in; EEE status | | Employee Provident Fund (EPF) | Employee's contribution (12% of basic + DA) | | ELSS Mutual Funds | Shortest lock-in among Schedule XV options (3 years) | | Life Insurance Premium | Max 10% of sum assured (policies after 01.04.2012) | | NSC (National Savings Certificate) | 5-year lock-in; accrued interest reinvested also qualifies | | 5-Year Tax Saver FD | With scheduled bank or post office | | Sukanya Samriddhi Account | For girl child; EEE status | | Home Loan Principal Repayment | Including stamp duty and registration charges | | Tuition Fees | For up to 2 children; full-time education in India | | Senior Citizen Savings Scheme | For persons aged 60+ |

Combined limit: Sections 123 (including pension fund) + Section 124(1) (self NPS contribution) together cannot exceed Rs. 1,50,000.

Section 124 - National Pension System (previously Section 80CCD)

| Sub-Section | Deduction For | Limit | Regime Availability | |-------------|--------------|-------|-------------------| | 124(1) | Self-contribution to NPS | Included in Section 123 limit of Rs. 1,50,000 (max 10% of salary for employed / 20% of GTI for others) | Old regime only | | 124(1B) | Additional self-contribution to NPS | Rs. 50,000 over and above Section 123 limit | Old regime only | | 124(2) | Employer's contribution to NPS | 14% of salary (Basic + DA) | Both old and new regime |

This makes employer NPS contribution the most tax-efficient benefit under the new regime.

Section 126 - Health Insurance Premium (previously Section 80D)

| Category | Deduction Limit | |----------|----------------| | Self, spouse, dependent children (below 60) | Rs. 25,000 | | Self, spouse, dependent children (any member is 60+) | Rs. 50,000 | | Parents (below 60) | Rs. 25,000 | | Parents (60 or above) | Rs. 50,000 | | Maximum total deduction | Rs. 1,00,000 (if self and parents are all senior citizens) |

Includes: Medical insurance premium + preventive health check-up (up to Rs. 5,000 within overall limit) + medical expenditure for senior citizens without insurance.

Payment must be made by non-cash mode (cheque/online) except for preventive health check-up.

Other Important Deductions

| Section (2025 Act) | Previously | Nature | Limit | Who Can Claim | |--------------------|-----------|--------|-------|---------------| | 129 | 80E | Interest on education loan | No limit (full interest); 8 consecutive tax years from year of first repayment | Individual only | | 130 | 80EE | Interest on home loan (first-time buyers, loan ≤ Rs. 35L, property value ≤ Rs. 50L) | Rs. 50,000 (over and above Section 22) | Individual | | 131 | 80EEA | Interest on affordable housing loan (sanctioned between 01.04.2019 and 31.03.2022) | Rs. 1,50,000 | Individual | | 133 | 80G | Donations to approved funds/institutions | 50% or 100% of donation (with or without cap of 10% of adjusted GTI) | All assessees | | 134 | 80GG | Rent paid (when HRA not received) | Least of: Rs. 5,000/month, 25% of total income, rent paid minus 10% of total income | Individual not receiving HRA | | 153 | 80TTA/80TTB | Interest on savings account / all deposits (senior citizens) | Rs. 10,000 (non-senior) / Rs. 50,000 (senior citizens) | Individual/HUF | | 154 | 80U | Disability of assessee | Rs. 75,000 (disability 40%+) or Rs. 1,25,000 (severe disability 80%+) | Resident individual with disability | | 127 | 80DD | Maintenance of disabled dependent | Rs. 75,000 or Rs. 1,25,000 (severe disability) | Resident individual/HUF | | 128 | 80DDB | Medical treatment for specified diseases | Rs. 40,000 (Rs. 1,00,000 for senior citizens) | Resident individual/HUF |

Section 133 - Donations (previously Section 80G)

100% Deduction Without Limit

• National Defence Fund, PM National Relief Fund, National Foundation for Communal Harmony, Zila Sainik Board
• PM CARES Fund

50% Deduction Without Limit

• Jawaharlal Nehru Memorial Fund, PM Drought Relief Fund

100% Deduction With 10% of Adjusted GTI Limit

• Donations to approved scientific research associations, rural development programmes

50% Deduction With 10% of Adjusted GTI Limit

• Any approved charitable institution, temple, church, gurudwara (with Section 133 registration certificate)
• Cash donations exceeding Rs. 2,000 are NOT eligible

Landmark Judgement

Worked Example - Maximising Deductions (Old Regime)

Mr. Anil (age 45, salaried, old tax regime) wants to maximise his tax savings. His Gross Total Income is Rs. 18,00,000.

| Deduction | Investment/Expense | Amount (Rs.) | |-----------|-------------------|-------------| | Section 123 + Schedule XV | EPF (employee share) | 72,000 | | Section 123 + Schedule XV | PPF contribution | 50,000 | | Section 123 + Schedule XV | ELSS mutual fund | 20,000 | | Section 123 + Schedule XV | Tuition fees (2 children) | 40,000 | | Section 123 + Schedule XV | Home loan principal | 30,000 | | Section 123 Total (capped at 1,50,000) | | 1,50,000 | | Section 124(1B) | Additional NPS contribution | 50,000 | | Section 124(2) | Employer NPS (10% of Basic 6L + DA 1.2L) | 72,000 | | Section 126 | Health insurance (self + family) | 25,000 | | Section 126 | Health insurance (parents, 65 yrs) | 50,000 | | Section 126 Total | | 75,000 | | Section 129 | Education loan interest (son's MBA) | 1,20,000 | | Section 153 | Savings account interest | 10,000 | | Total Chapter VIII Deductions | | 4,77,000 |

Taxable Income = 18,00,000 - 4,77,000 = Rs. 13,23,000

This saves approximately Rs. 1,43,100 in tax (at 30% slab) compared to no deductions.

Expert Tip

Section Interconnect

• Also read: Chapter 3 - Income from Salaries (salary structure determines EPF, NPS, and standard deduction benefits)
• Also read: Chapter 7 - Income from Other Sources (Section 153 deductions apply to interest income taxed under this head)
• Also read: Chapter 4 - House Property (Section 123 + Schedule XV for home loan principal; Sections 130/131 for additional interest deduction)

Frequently Asked Questions

Q1: Can I claim both Section 123 + Schedule XV and Section 22 deduction for a home loan?

Yes. Section 123 + Schedule XV of the Income Tax Act, 2025 allows deduction for the principal repayment component of home loan EMI (up to Rs. 1,50,000). Section 22 allows deduction for the interest component (up to Rs. 2,00,000 for self-occupied property). These are separate deductions under different sections and can be claimed simultaneously.

Q2: Is Section 133 (donations) deduction available under the new tax regime?

No. Section 133 deduction for donations is NOT available under the new tax regime (Section 202 of the Income Tax Act, 2025). If you make substantial charitable donations, evaluate whether the old regime provides better overall tax savings. The only Chapter VIII deductions available under the new regime are Section 124(2) and Section 146.

Q3: Can I invest in PPF and ELSS in my spouse's name and claim Section 123 + Schedule XV deduction?

For PPF, yes - you can contribute to your spouse's PPF account and claim deduction under Section 123 + Schedule XV (but the contribution is counted within your Rs. 1,50,000 limit). For ELSS, the investment must be in your own name to claim the deduction - you cannot claim under Section 123 for ELSS units purchased in your spouse's name.

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