Section 123 (Old Section 80C): Eligible Investments Now Under Schedule XV

Section 80C has been the single most-searched, most-discussed provision of the Income Tax Act for a generation. Life insurance agents pitch it every February. Bank branches put up posters about it every March. It is, without exaggeration, the provision most Indian taxpayers actually know by number rather than by description. From Tax Year 2026-27, that number is gone. The provision itself survives — under Section 123 of the Income Tax Act, 2025 — but the list of what qualifies has moved out of the section text entirely and into Schedule XV.

This piece is about what that specific move actually means, separated from the parts that are unchanged.

What hasn't changed: the limit

The aggregate deduction limit remains ₹1,50,000 per Tax Year. This is confirmed, not an assumption carried forward casually — the overall ceiling on how much a taxpayer can claim under Section 123 across all qualifying investments and payments combined has not been revised in the transition to the new Act. If you were structuring your tax-saving investments around the ₹1.5 lakh ceiling under old Section 80C, that planning number doesn't need to change.

It's worth being precise here because deduction limits are exactly the kind of figure that gets misquoted in year-one commentary about a new law. We'd rather state plainly what's confirmed than round up or assume a number moved just because the section did.

What's changed: where the list lives

Under the 1961 Act, Section 80C itself spelled out — across a long run of sub-clauses — every category of investment or payment eligible for the deduction: life insurance premium, PPF contributions, ELSS mutual fund investments, principal repayment on a home loan, tuition fees for up to two children, five-year tax-saving fixed deposits, NSC, Sukanya Samriddhi Yojana deposits, and a fairly long tail of others. Anyone reading Section 80C in the bare Act text was reading the entire eligibility list embedded directly in the section.

Under Section 123 of the new Act, that list doesn't live in the section anymore. Section 123 states the deduction and the ₹1,50,000 ceiling; the actual catalogue of what qualifies sits in Schedule XV. The instruments themselves are the familiar ones — PPF, ELSS, life insurance premium, home loan principal repayment, children's tuition fees, five-year tax-saving bank deposits, NSC, Sukanya Samriddhi, and the rest of the list that's carried forward largely intact from old 80C. What's different is purely structural: you now have to look at a schedule at the back of the Act rather than at the section itself to see the full list.

Why this structural change is worth understanding, not just noting

Here's the part with practical weight. Schedules in a tax statute are, in general legislative practice, more straightforward for the government to amend or update than the substantive body of a section — a schedule can sometimes be modified through notification or a more contained legislative process without reopening the section's core text. We want to flag this as the general pattern behind why lawmakers structure statutes this way, rather than assert with certainty exactly how amendments to Schedule XV specifically will be processed going forward, because that procedural detail hadn't been tested or confirmed in practice at the time of writing. If it plays out the way schedules typically do, it means the list of eligible 80C-equivalent investments could, in principle, be added to or adjusted somewhat more easily in future years than it could when it was locked into Section 80C's own text. Whether that flexibility actually gets used, and how often, remains to be seen.

For a taxpayer today, the practical takeaway is simpler: don't assume the Schedule XV list is permanently frozen at whatever it says on 1 April 2026. Check it each year the way you'd have checked for Finance Act amendments to old 80C.

Still only available under the old regime

This is the point most likely to catch someone out, and it isn't new to the 2025 Act — it's carried forward from how 80C always worked. Section 123 deductions, including everything listed in Schedule XV, are available only if you're filing under the old tax regime. If you've opted for the new concessional regime — Section 202 of the Income Tax Act, 2025, the successor to old Section 115BAC — none of the Schedule XV investments reduce your taxable income. The new regime trades away most itemised deductions, including this one, in exchange for lower slab rates applied to a wider base.

This means the regime choice itself, not just the investment choice, is what determines whether Section 123 is relevant to you at all. A salaried employee who's been defaulting into the new regime because the lower rates work out better for their income level gets no benefit from maxing out PPF or ELSS purely for tax purposes — though there may still be good non-tax reasons to hold those instruments.

A note on how Schedule XV interacts with other limits

One thing that gets lost when people talk about "the 80C list" as a single undifferentiated basket is that several of the individual instruments inside it carry their own internal sub-limits, separate from the overall ₹1,50,000 ceiling. Life insurance premium, for instance, has historically been capped for deduction purposes at a percentage of the sum assured for certain policies — a rule that existed to stop taxpayers using a token policy with a huge premium purely to soak up deduction space. Where Schedule XV carries these instrument-specific conditions forward from the old sub-clauses of Section 80C, they'll still apply even though the overall Section 123 ceiling is a single number. We'd encourage anyone doing serious tax planning around Schedule XV investments — rather than just topping up an existing PPF account — to have the specific instrument's conditions checked against the schedule text itself, not assumed to carry over unchanged just because the broad category name is familiar.

There's also a practical filing point worth flagging. Because the deduction now formally references a schedule rather than being self-contained within its own section, tax software and return-filing utilities will need their input forms updated to reference "Schedule XV" line items correctly. If you're filing your own return using older desktop software or a utility that hasn't been updated for Tax Year 2026-27, check that it correctly labels these entries — a mislabelled or generically-named investment field is an easy way to end up with a mismatch between what you claim and what shows up in your AIS.

A worked example

Take a salaried professional in Jayapatna, Kalahandi, earning ₹9,00,000 a year, filing under the old regime for Tax Year 2026-27. Over the year they pay ₹60,000 towards their home loan principal, contribute ₹50,000 to PPF, and pay a life insurance premium of ₹25,000. That totals ₹1,35,000 — under the ₹1,50,000 ceiling, so the full amount is deductible under Section 123, referencing the relevant entries in Schedule XV for each category. Had they instead chosen the new regime under Section 202 for the same year, none of these three payments would have reduced their taxable salary, regardless of how much they'd invested, because Section 123 simply doesn't apply inside that regime.

The arithmetic of the deduction hasn't changed from what this same taxpayer would have worked out under old Section 80C a year earlier. What's changed is that they'd now cite Section 123 and Schedule XV on their return rather than Section 80C — and that they'd need to actually locate Schedule XV, rather than Section 123 itself, to double-check which of their specific expenses still qualify.

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