Deduction for life insurance premia, deferred annuity, contributions to provident fund, etc.
[Section-123 as per the Income Tax Act, 2025 (this Act) w.e.f. 1st April, 2026.]
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.
FAQs on Section 123 of Income Tax Act 2025
Who is eligible to claim deduction under Section 123 of the Income Tax Act, 2025?
An individual or a Hindu Undivided Family (HUF) is eligible to claim the deduction.
From which date is Section 123 effective?
Section 123 is effective from 1st April, 2026.
What is the maximum deduction allowed under Section 123?
The maximum deduction allowed is ₹1,50,000 in a tax year.
Is the deduction under Section 123 available for any amount paid or only specific contributions?
The deduction is available only for specified sums as enumerated in Schedule XV.
Can an individual claim deduction under Section 123 for payments made for family members?
Yes, subject to the conditions mentioned in Schedule XV.
Does the deduction limit of ₹1,50,000 include multiple eligible investments or is it per investment?
The limit of ₹1,50,000 is for the aggregate of all eligible payments under Schedule XV.
Is the deduction under Section 123 applicable to salaried and self-employed individuals?
Yes, both salaried and self-employed individuals can claim the deduction, provided they meet the eligibility conditions.
Are contributions to Public Provident Fund (PPF) covered under Section 123?
Yes, if PPF is listed in Schedule XV, it would be eligible for deduction under this section.
Can a person claim this deduction even if no taxable income exists?
No, the deduction applies while computing total income; it is relevant only if there is taxable income.
Is this deduction available under both the old and new tax regimes?
The applicability depends on the structure of the tax regimes under the Income Tax Act, 2025.
Are premiums paid for life insurance policies eligible for deduction under Section 123?
Yes, life insurance premia are included, subject to the conditions in Schedule XV.
Is there any condition regarding the mode of payment for claiming deduction under Section 123?
Yes, payments may need to be made through banking channels or as specified in Schedule XV.
Can deduction be claimed for contributions made in respect of a spouse or children?
Yes, if allowed under Schedule XV and subject to the conditions specified therein.
Are all kinds of annuity policies eligible under this section?
Only deferred annuity policies as specified in Schedule XV are eligible.
Can deduction under Section 123 be claimed every year?
Yes, it can be claimed every tax year subject to the ₹1,50,000 limit and other conditions.
Is any documentary proof required to claim the deduction?
Yes, taxpayers must retain proof of payment or deposit to support the claim, if required during assessment.
Are contributions to pension funds covered under Section 123?
They may be, if such funds are specifically mentioned in Schedule XV.
Does the limit of ₹1,50,000 include employer’s contribution to provident fund?
No, the deduction is for the taxpayer’s own payments or deposits, unless otherwise stated in Schedule XV.
Can NRIs claim deduction under Section 123?
Yes, if they qualify as individuals under the Act and comply with the conditions of Schedule XV.
What happens if the taxpayer exceeds the ₹1,50,000 limit?
Only up to ₹1,50,000 will be allowed as deduction; the excess amount will not be deductible.
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