Section 80C Is Now Section 123: What Changed for FY 2026-27 (and What Didn't)

From 1 April 2026, the Income-tax Act, 2025 replaced the 1961 Act, and the best-known deduction in Indian tax got a new number: 80C is now Section 123. Your employer's investment declaration form will quote the new number, but very little about the deduction itself has changed. This article explains what's the same, what it saves in FY 2026-27, and when it doesn't help at all.

Short answer

Section 80C is now Section 123 of the Income-tax Act, 2025. The limit is still ₹1.5 lakh a year, the eligible investments are the same, and it is still available only in the old tax regime. In the old regime it saves up to ₹46,800 a year; in the new regime it isn't allowed, and salary up to ₹12.75 lakh is tax-free there anyway.

Old and new section numbers

For the full list, including salary TDS and Form 16, see Income-tax Act 2025: old vs new section numbers.

What counts under Section 123

The list of eligible items moved into Schedule XV of the new Act, which Section 123 refers to. The familiar items are all there, sharing one ₹1.5 lakh limit:

• Your own EPF contribution (already deducted from your salary)
• PPF and Sukanya Samriddhi deposits
• ELSS mutual funds (three-year lock-in)
• Life insurance premiums
• Home-loan principal repayment
• Tuition fees for up to two children
• National Savings Certificates and five-year tax-saving bank deposits

Check your payslip first: your EPF contribution may already use a large part of the limit.

How much Section 123 saves in the old regime

Tax in the old regime with and without the full ₹1.5 lakh, ₹50,000 standard deduction, no other deductions, including 4% cess:

At ₹6 lakh, the deduction brings taxable income down to ₹4 lakh, within the old regime's ₹5 lakh rebate limit, so tax falls to zero.

Does Section 123 help in the new regime?

No, the new regime doesn't allow it. And the comparison above hides an important point: in the new regime, the same salaries pay far less tax without any investments. At ₹6, 8 and 10 lakh the new regime tax is ₹0, and at ₹15 lakh it is ₹97,500, less than half the old regime's ₹2,10,600 even after the full ₹1.5 lakh deduction.

So Section 123 matters only if you are in the old regime, which usually makes sense only with several large deductions together, such as HRA, home-loan interest and NPS. See old vs new tax regime with a home loan and the tax saving tips for salaried employees.

What to do now

• Declarations for FY 2026-27 will quote Section 123. Submit proofs by your employer's deadline, usually January or February.
• Returns for FY 2025-26 still use 80C, because that year is governed by the 1961 Act.
• Invest for the goal, not the deduction. If the new regime suits you, PPF or ELSS may still be good investments, but they won't cut your tax.

Sources

• Income Tax Department: Section 123
• Income Tax Department: Section 202 (new regime)
• Income Tax Department: Section 156 (rebate)