Section 123
Section 123: life insurance, PF, PPF, tuition fees and other deductions
Section 123 is the Income-tax Act, 2025's version of the deduction most taxpayers still know as "80C" from the earlier 1961 Act. The section number has changed with the new Act, but the underlying idea hasn't: a combined deduction of up to ₹1,50,000 a year for a defined list of common savings and payments, which the Act sets out in full in Schedule XV rather than in the section text itself.
This explanation is AI-assisted and pending review by our CA/CS team. It is general information, not professional advice - always cross-check against the bare law text above or talk to our tax team for guidance specific to your situation.
What Section 123 says
"An individual or a Hindu undivided family, shall be allowed a deduction of the whole of the amount paid or deposited in the tax year, being the aggregate of the sums enumerated in Schedule XV, as does not exceed ₹1,50,000, while computing the total income for that year, subject to the conditions specified in that Schedule."
In other words, the section itself just sets the ₹1,50,000 ceiling and who can claim it (individuals and HUFs) - the actual list of qualifying payments lives in Schedule XV, which the section refers to.
What qualifies under Schedule XV
Schedule XV lists the payments and investments that count toward the Section 123 deduction, including:
- Life insurance premium (self, spouse or child for an individual; any member for an HUF)
- Sum paid under a deferred annuity contract, or salary deducted for a deferred annuity for a government employee
- Contribution to a statutory or recognised provident fund, or an approved superannuation fund
- Subscription to a Central Government-notified security/deposit scheme in the name of a girl child (the Sukanya Samriddhi-type scheme)
- Subscription to savings certificates notified under the Government Savings Banks Act, 1873
- Tuition fees (excluding development fees or donations) paid to a University, college, school or other educational institution in India, for full-time education of up to two children
- Payment for purchase or construction of a residential house property (i.e. home loan principal), subject to the conditions in paragraph 3 of the Schedule
- A five-year (or longer) term deposit with a scheduled bank under a Central Government-notified scheme
- Subscription to National Bank for Agriculture and Rural Development (NABARD) bonds
- Deposit under the Senior Citizen Savings Scheme Rules, 2004
- Five-year term deposit under the Post Office Time Deposit Rules, 1981
- Contribution by an individual to a pension fund or notified pension scheme, subject to the income-percentage caps in the Schedule
Conditions and limits
| Parameter | Detail |
|---|---|
| Overall ceiling | ₹1,50,000, aggregate of all Schedule XV items claimed for the year |
| Who can claim | Individuals and Hindu Undivided Families (HUFs) |
| Tuition fees cap | Full-time education of a maximum of two children, at an institution in India |
| Life insurance premium cap | Only a portion of the premium qualifies, capped at 10-20% of the actual capital sum assured depending on when the policy was issued (paragraph 2 of Schedule XV) |
How this relates to Section 124
Section 124 deals separately with contributions to a Central Government-notified pension scheme (NPS): the employer's contribution under Section 124(1), and an individual's own additional contribution of up to ₹50,000 under Section 124(3) - this ₹50,000 is over and above the Section 123 ceiling, and a taxpayer cannot claim the same amount as a deduction under both sections.
Frequently asked questions
Is Section 123 the same thing people used to call "80C"?
It covers the same broad idea - life insurance, PF, PPF-type schemes, tuition fees, home loan principal - up to a combined ₹1,50,000. But it is a different section number under the Income-tax Act, 2025, and the exact list of qualifying items is in Schedule XV of the new Act, so always check the current Schedule rather than assuming the old 80C list applies unchanged.
What is the maximum deduction under Section 123?
₹1,50,000 per tax year, as the aggregate of all qualifying payments listed in Schedule XV.
Can I claim tuition fees for more than two children?
No - Schedule XV caps the tuition fees deduction to full-time education of a maximum of two children.
Does the full life insurance premium qualify for deduction?
Not necessarily. Schedule XV paragraph 2 caps the eligible premium at 10-20% of the actual capital sum assured, depending on when the policy was issued, with a higher 15% cap for certain policies covering a person with disability or a specified illness.
Related sections
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Plan your Section 123 deductions with our tax teamLast updated 9 September 2026