Section 123 — Deduction for life insurance premia, deferred annuity, contributions to provident fund, etc. Successor to s.80C, s.80CCC, s.80CCE of the 1961 Act.
A single sentence. An individual or a Hindu undivided family is allowed a deduction, in computing total income for the tax year, of the whole of the amount paid or deposited during that year, being the aggregate of the sums enumerated in Schedule XV, so far as that aggregate does not exceed Rs. 1,50,000, and subject to the conditions specified in that Schedule.
The section names no individual investment or premium. What qualifies, and on what conditions, is in Schedule XV; the section supplies only the class of assessee, the payment basis and the outer limit.
Why it is there
It gives a single capped deduction for a defined list of savings and insurance payments, rather than a separate deduction for each. Fixing the ceiling in the section and the qualifying items in a Schedule keeps the list amendable without touching the limit.
Who it applies to
An individual claiming the deduction for a tax year
A Hindu undivided family claiming the deduction for a tax year
The figures, and what each one turns on
Read the condition in the same row. A figure quoted without it is a wrong answer with a citation attached.
What
Figure
The condition on it
Where
Maximum deduction
Rs. 1,50,000
A ceiling on the aggregate of the sums enumerated in Schedule XV paid or deposited in the tax year, not an amount allowed as such
Section 123
What this means in practice
Rs. 1,50,000 is a ceiling on the aggregate, not an entitlement: the deduction is of the amount actually paid or deposited in the tax year, and only so much of it as does not exceed the ceiling. The deduction runs on payment or deposit during the year, so a liability incurred but not paid gives nothing. Every qualifying item and every condition attaching to it sits in Schedule XV, so an amount that is paid within the year and within the limit is still not deductible unless the Schedule covers it and its conditions are met.
An example
Illustrative only, and invented for this page. The figures are chosen to show the rule biting, not taken from any real matter.
An individual pays Rs. 1,10,000 of life insurance premia and deposits Rs. 70,000 in another sum enumerated in Schedule XV during the tax year, both satisfying the Schedule's conditions. The aggregate is Rs. 1,80,000, so the deduction is limited to Rs. 1,50,000 and the balance Rs. 30,000 is not carried anywhere. Had he paid only Rs. 90,000 in the year, the deduction would be Rs. 90,000 — the ceiling does not raise it.
Where you meet this section
You meet it in the deductions schedule of the return, in the declaration given to an employer for salary deduction purposes, and in any proceeding where the payment or the Schedule XV conditions have to be evidenced.
The words themselves
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 Rs. 150000
Section 123, Income-tax Act, 2025.
What people get wrong
Treating Rs. 1,50,000 as the deduction. It is a ceiling on the aggregate; the deduction is what was actually paid or deposited, up to that figure.
Claiming on an accrual basis. The section allows only the amount paid or deposited in the tax year.
Assuming any savings or insurance payment qualifies. Only the sums enumerated in Schedule XV qualify, and only subject to the conditions specified there.
Claiming it for a person outside the two classes named. The deduction is for an individual or a Hindu undivided family only.
What this replaced
The correspondence is the Income Tax Department’s own, from its comparison utility for the 1961 and 2025 Acts. A renumbering is the easy half; whether the words changed is the half that decides cases.
80C - Deduction in respect of life insurance premia, deferred annuity, contributions to provident fund, subscription to certain equity shares or debentures, etc.
80CCC - Deduction in respect of contribution to certain pension funds
80CCE - Limit on deductions under sections 80C, 80CCC and 80CCD
A circular binds the department, not you and not a court. Every one below was written under the 1961 Act; it reaches this section because the department’s own concordance carries the provision it names to this one.
Circular 1/2015 — Explanatory notes to the provisions of the finance no.2 act 2014 2015-01-21
Circular No. 574 — 493. Whether deduction is available in respect of premia paid on the life insurance policies on the lives of adult children, irres 1990-08-22
Circular No. 518 — 492. Whether the Karnataka Government Servants' monthly contributions under Karnataka State Employees' Group Insurance Scheme at a 1988-08-09
Circular No. 501 — 954. Deduction admissible for deposits made in National Savings Scheme to be allowed while computing income of employees for purpo 1988-01-20
Circular No. 498 — 499. Repayment of loans, etc., taken for purchase/construction of house - Whether deduction admissible under sub-clause (ii) of cl 1987-11-04
Circular No. 418 — 501. Subscriptions to National Savings Certificates (VI Issue/VII Issue) - Clarifications on certain issues regarding their eligib 1985-05-02
Circular No. 404 — 491. Special Frontier Force Group Insurance Scheme - Allowability of deduction of contributions made thereto under clause (a)(i) o 1985-01-15
Circular No. 405 — 501. Subscriptions to National Savings Certificates (VI Issue/VII Issue) - Clarifications on certain issues regarding their eligib 1985-01-15
Circular No. 337 — 489. Contributions made under the Maharashtra State Government Employees' Group Insurance Scheme, 1982 - Whether eligible for reli 1982-05-04
Circular No. 233 — 490. Contributions made under the Central Government Employees' Insurance Scheme - Whether eligible for relief under clause (a)(i) 1977-12-05
Circular No. 194 — 497. Contributions to family pension fund established under Employees' Provident Fund and Family Pension Fund Act -Whether covered 1976-03-20
A notification is made under a power the Act gives and, within that power, is law. These too were made under the 1961 Act and are placed here by the department’s concordance.
Notification No. 34 — Section 80C of the Income-tax Act, 1961 - Deductions - In respect of insurance premium, etc. - Notified plan u/s 80C(2)(xii) 2010-05-19
Notification No. 3 — Section 80C(2)(xv ) of the Income-tax Act, 1961 - Deduction in Respect of Subscription to National Housing Bank Term Deposit Schem 2009-01-05
Notification No. 293 — NABARD Rural Bonds of National Bank for Agriculture and Rural Development (NABARD) for an amount of rupees five thousand crore for 2007-12-31
Notification No. 289 — A notification under section 80C of the Income-tax Act, 1961 2007-12-13
Notification No. 002 — Public Deposit Scheme of Housing and Urban Development Corporation Ltd specified under section 80C 2007-01-11
Notification No. 227 — UTI-Retirement Benefit Pension Fund set up by the specified company referred to in clause (h) of section (2) of the Unit Trust of 2005-11-03
Notification No. 224 — Unit Linked Insurance Plan (formerly known as Dhanraksha-1989) of the Life Insurance Corporation Mutual Fund specified under secti 2005-11-03
Notification No. 223 — National Savings Certificates (VIII Issue) issued under the Government Savings Certificates Act specified under section 80C 2005-11-03
Notification No. 222 — Public Provident Fund specified under section 80C 2005-11-03
Notification No. 850E — Home Loan Account Scheme of the National Housing Bank established under section 3 of the National Housing Bank Act specified under 1989-10-25
Notification No. 111E — National Savings Certificates (VI Issue) and the National Savings Certificate (VII Issue) as securities specified under section 80 1983-02-28
Notification No. 2431 — Public Provident Fund established under the Public Provident Fund Scheme notified under section 80C 1968-07-02
Read this before you rely on it. Every decision below was decided under the Income-tax Act, 1961. It appears here because it is tagged to a 1961 provision that the department’s own mapping carries to section 123. That is an inference we have drawn, not a holding on the new section: where the words changed in the move, the reasoning may not survive. Treat this as the place to start looking, not as authority on the 2025 Act.
PPF calculator— the maturity value, and the deduction the contribution earns.
What this page does not tell you. It does not reproduce the section. Everything above was written from the section’s own text as the Income Tax Department publishes it — the text is here, and nothing here is advice on your facts. Where a figure matters, read the sub-section it comes from.
