Chapter VIII - Deductions to be Made in Computing Total Income
Section 125
Section 125: deduction for contribution to the Agnipath Scheme
Section 125 covers contributions to the Agniveer Corpus Fund by an individual enrolled in the Agnipath Scheme and by the Central Government. The two deductions have different treatment under the default new tax regime: Section 202(2)(a)(xii) excludes the individual's own contribution under Section 125(1), but expressly preserves the Central Government contribution under Section 125(2).
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This article is for general information. Refer to the Income-tax Act, 2025 as amended by the Finance Act, 2026 and the Taxation and Other Laws (Amendment) Act, 2026 for the official provisions. If you need professional advice for your situation, contact Bizeneed.
Statutory text
Bare law
(1) An assessee, being an individual who has enrolled in the Agnipath Scheme and subscribes to the Agniveer Corpus Fund on or after the 1st November, 2022, shall be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited in his account in the said Fund during the tax year.
(2) Where the Central Government makes any contribution to the account of an assessee in the Fund referred to in sub-section (1), the assessee shall be allowed a deduction in the computation of his total income of the whole of the amount so contributed.
(3) For the purposes of this section,— (a) “Agnipath Scheme” means the scheme for enrolment in the Indian Armed Forces introduced vide letter No. 1(23)2022/D(Pay/Services), dated the 29th December, 2022, of the Government of India in the Ministry of Defence; (b) “Agniveer Corpus Fund” means a fund in which consolidated contributions of all the Agniveers and matching contributions of the Central Government along with interest on both these contributions are held.
Introduction
An eligible Agnipath enrollee may deduct their payments into the Agniveer Corpus Fund and the Central Government's contributions to their account. Section 125 states the qualifying enrolment date and defines the scheme and fund.
Key takeaways
Agniveer contribution
An individual enrolled in the Agnipath Scheme who subscribes to the Agniveer Corpus Fund may deduct the whole of the amount paid or deposited in that account during the tax year.
Government contribution
The Central Government’s contribution to that individual’s account is separately deductible under this section.
Deduction for the individual's own contribution
Section 125(1) allows an enrolled Agniveer who subscribes to the Fund on or after 1 November 2022 to deduct the whole amount paid or deposited in their account during the tax year, when this deduction is available under the applicable tax regime. It is excluded if tax is computed under Section 202(1).
Deduction for the Central Government's contribution
Where the Central Government makes any contribution to the assessee's account in the Fund, Section 125(2) allows deduction of the whole amount contributed. Section 202(2)(a)(xii) expressly preserves this sub-section (2) deduction even when the individual is taxed under the default new regime.
Key definitions
"Agnipath Scheme" means the scheme for enrolment in the Indian Armed Forces introduced vide letter No. 1(23)2022/D(Pay/Services), dated 29 December 2022, of the Government of India, Ministry of Defence.
"Agniveer Corpus Fund" means a fund in which the consolidated contributions of all Agniveers, matching contributions of the Central Government, and interest on both these contributions, are held.
Two contribution streams
Track the individual's own contribution under subsection (1) separately from Central Government contributions under subsection (2). Both relate to the eligible person's account in the statutory Fund.
Step-by-step flow for applying Section 125
- 1
Is the individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after 1 November 2022?
- No: Section 125 does not apply.
- Yes: Go to the next step.
- 2
Separate the two contribution streams
Sub-section (1) covers the individual's own payments into the Fund account; sub-section (2) covers the Central Government's contributions to that account.
- 3
Is tax computed under the default Section 202(1) regime?
- Yes: As explained above, only the Central Government contribution under sub-section (2) is deductible.
- No: Both the own contribution and the Government contribution are deductible in full.
Practical checklist
Do
- Verify enrolment in the defined Agnipath Scheme and the Fund subscription date.
- Reconcile individual and government contributions to the Fund account for the tax year.
Avoid
- Do not treat contributions to an unrelated retirement fund as eligible under this section.
- Do not omit the statutory enrolment and subscription conditions.
Illustrative example
Worked example: an Agniveer's two contribution streams
Hypothetical facts (illustration only, not a real taxpayer): An Agniveer enrolled under the Agnipath Scheme pays ₹1,20,000 into his Agniveer Corpus Fund account during the tax year, and the Central Government contributes ₹1,20,000 to the same account. Both amounts are assumed for illustration; the Act does not fix them.
Own contribution
₹1,20,000 is deductible under Section 125(1) where that deduction is available under his tax regime.
Government contribution
₹1,20,000 is deductible under Section 125(2).
Regime check
Under the default Section 202(1) regime, only the sub-section (2) deduction is preserved.
Outcome
- Outside the default regime: total deduction ₹2,40,000.
- Under Section 202(1): deduction ₹1,20,000 (Government contribution only).
- Section 125 sets no rupee ceiling on either stream.
Glossary
- Agnipath Scheme
- The Armed Forces enrolment scheme identified in subsection (3)(a).
- Agniveer Corpus Fund
- The fund holding Agniveer and matching Central Government contributions, with interest, as defined in subsection (3)(b).
Frequently asked questions
Who can claim the Section 125 deduction?
An individual enrolled in the Agnipath Scheme who subscribes to the Agniveer Corpus Fund on or after 1 November 2022.
Is the deduction limited to a specific amount?
Section 125 itself sets no rupee ceiling: it covers the whole eligible amount. The individual's own-contribution deduction under sub-section (1) is unavailable under the default new regime, while the Central Government contribution under sub-section (2) remains available.
Does the deduction cover the Government's matching contribution too?
Yes - Section 125(2) separately allows a deduction for the whole of any amount the Central Government contributes to the assessee's account in the Fund.
Need help applying this provision to your situation?
Get help claiming your Agniveer Corpus Fund deductionLast updated 9 October 2026