New Income Tax Bill: Section 80C tax-saving deductions now under clause 123

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Finance minister Nirmala Sitharaman on February 13 tabled the new Income Tax Bill in the Lok Sabha and taxpayers, as expected, will have to brace for several changes.

It will be sometime before it becomes that law as the bill is headed for a select committee. “A select committee shall be constituted on the income tax bill, which will submit its report on the first day of the next session,” the minister said. As per the current plan, it will come into force from April 1, 2026.

The bill does not propose any changes to income-tax rates or slabs or to the capital gains tax regime but it attempts to simplify the language to make compliance easier.

Section 80C deductions now move to Clause 123

Most taxpayers are familiar with ‘Section 80C’ deductions, available to those who choose the old tax regime. Investment in equity-linked saving schemes (ELSS), public provident fund (PPF), life insurance premium, National Pension System (NPS) tax-saver deposits and more are covered in this section.

Multiple instruments are eligible for deductions under 80C with the limit capped at Rs 1.5 lakh.

In the new Bill, such deductions will be housed under section, or clause, 123.

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“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, but not exceeding one lakh fifty thousand rupees, while computing the total income for that year, subject to the conditions specified in that Schedule,” the bill says.

“This section 123 in the new Income Tax Bill will correspond with section 80C in the present Income tax Act, 1961. It is to be read with Schedule XV, which forms part of the Bill and provides detailed explanations of the line-wise items (tax-saver avenues) under section 80C,” said Mayank Mohanka, Founder-director, TaxAaram.com, a tax consultancy firm.

The new I-T Bill is 622-pages long with 536 sections. The Income Tax Act has 298 sections across 823 pages.

For every section in the I-T Act, there is a corresponding section in the new bill, except the redundant ones which have been done away with.

“The Income Tax Act, 1961, for example, has section 80, along with sections 80C, 80D, 80E and so on. So the last section in the current I-T Act, viewed purely from a numerical perspective, is 298. But now, there will be re-numbering, and as a result, the number of sections (or clauses) could go up to over 500, but overall there is simplification,” said Ajay Rotti, Founder, Tax Compaas.