Income-tax Deductions under the Income-tax Act, 2025

Complete Section Mapping from Section 122 to 154

Tax deductions under the Income-tax Act, 2025 cover much more than familiar investments such as PPF or life insurance. Depending on the taxpayer and the applicable tax regime, deductions may be available for pension contributions, health insurance, education loans, donations, rent, employment generation, specified business income, interest income, royalty income and disability.

At the same time, the Income-tax Act, 2025 has reorganised and renumbered many provisions that taxpayers previously knew as Sections 80C to 80U of the Income-tax Act, 1961.

This article is designed as a master map of Chapter VIII. It explains where each major deduction is located under the Income-tax Act, 2025, identifies the corresponding provision under the Income-tax Act, 1961 wherever relevant, and indicates which deductions remain available under the default tax regime.

How Chapter VIII works

Chapter VIII contains deductions that are generally reduced from Gross Total Income while arriving at Total Income.

Section 122 lays down the common rules that apply before individual deduction sections are considered.

One of the most important rules is that the total Chapter VIII deduction cannot exceed Gross Total Income. A deduction can reduce Total Income to nil, but it cannot by itself create a negative Total Income that can be carried forward as a loss.

How the deductions are organised

Section 122 – General rules for deductions

Section 122 is the gateway provision for Chapter VIII. It broadly carries forward principles that were previously spread across provisions such as Sections 80A, 80AB, 80AC and 80B of the Income-tax Act, 1961.

Important rules include:

• deductions are made from Gross Total Income
• aggregate deductions cannot exceed Gross Total Income
• the same eligible income cannot generally receive a double deduction
• specified profit-linked deductions require timely filing of the return and a claim in the return
• certain inter-unit transactions must be considered at market value
• profit-linked deductions are generally calculated with reference to eligible net income included in Gross Total Income

Part B – Deductions in respect of certain payments

Sections 123 to 137 primarily deal with investments, contributions, medical expenses, loan interest, donations and rent.

Part C – Deductions in respect of certain incomes

Sections 138 to 152 are different from ordinary investment deductions. They generally apply where Gross Total Income itself contains profits or income from a specified undertaking, business, unit, dividend source or intellectual property.

Several of these are specialised business deductions and may contain commencement dates, sunset provisions, audit requirements and other detailed eligibility conditions.

Section 153 – Deduction for interest on deposits

Section 153 brings the principal interest-deduction rules for ordinary taxpayers and senior citizens into one provision.

In practical terms, Section 153 consolidates the familiar distinction taxpayers previously associated with Sections 80TTA and 80TTB under the Income-tax Act, 1961.

Section 154 – Deduction for a taxpayer with disability

Section 154 is the corresponding provision for the earlier Section 80U.

It applies to a resident individual who is personally certified as a person with disability.

Which deductions remain available under the default tax regime?

This is one of the most important changes to understand when using the Chapter VIII deduction table.

For taxpayers covered by the default regime under Section 202, most Chapter VIII deductions are not available.

The principal Chapter VIII deductions specifically preserved under Section 202 are:

• Section 124(1)/(2) – eligible employer contribution to a notified pension scheme such as NPS;
• Section 125(2) – Central Government contribution to the Agniveer Corpus Fund; and
• Section 146 – deduction for additional employee cost, where applicable.

In addition, a taxpayer having an eligible Unit in an International Financial Services Centre may continue to claim Section 147 under the specific exception contained in Section 202(5), subject to the conditions of Section 147.

Quick mapping: commonly searched old sections

Example: why section mapping and tax regime both matter

Suppose an individual has Gross Total Income of ₹10,00,000 in Tax Year 2026-27 and has:

• ₹1,50,000 of eligible Section 123 investments;
• ₹25,000 of eligible health insurance premium under Section 126;
• ₹40,000 of qualifying education-loan interest under Section 129; and
• ₹8,000 of eligible savings-account interest deduction under Section 153.

The potential deductions total ₹2,23,000.

If the taxpayer validly opts out of the default regime and satisfies all conditions, the relevant deductions may be considered while computing Total Income.

If the taxpayer remains under the default regime under Section 202, these deductions are generally not available.

This illustrates why taxpayers should not determine a deduction merely by checking the payment or investment. The tax year, applicable section and selected tax regime must all be checked together.

Common mistakes when applying deduction provisions

• Using old section numbers for Tax Year 2026-27: For income earned from 1 April 2026 onwards, the Income-tax Act, 2025 section numbers should be used.
• Treating AY 2026-27 as a 2025 Act year: AY 2026-27 relates to FY 2025-26 and continues under the Income-tax Act, 1961.
• Claiming deductions merely because an eligible payment was made: The selected tax regime must also permit the deduction.
• Assuming every section is relevant to individuals: Sections 138 to 150 contain several specialised deductions intended for businesses, undertakings, companies, IFSC units or co-operative entities.
• Ignoring historical eligibility windows: Sections 130, 131, 132 and several profit-linked deductions can continue for qualifying legacy arrangements but may not apply to a new transaction today.
• Claiming the same income or expenditure twice: Chapter VIII contains rules preventing duplicate deductions.
• Missing the return-filing condition: Certain Part C deductions depend on filing the return within the applicable due date.
• Ignoring documentation: Insurance receipts, investment proofs, loan certificates, medical certificates, donation records, audit reports and other prescribed evidence should be maintained depending on the deduction claimed.

Practical deduction checklist for Tax Year 2026-27

Before claiming a Chapter VIII deduction, verify:

1. Which Income-tax Act applies to the relevant income period?
2. What is the correct Income-tax Act, 2025 section number?
3. Is the taxpayer eligible for that deduction?
4. Is the deduction available under the selected tax regime?
5. Does the investment, payment or income satisfy the specific statutory conditions?
6. Is there a monetary, percentage, time-period or historical sanction-date limit?
7. Is any certificate, declaration, audit report or prescribed form required?
8. Has the same payment or income already been claimed under another provision?
9. Is timely filing of the return a condition?
10. Does the aggregate Chapter VIII deduction remain within Gross Total Income?

Conclusion

Chapter VIII of the Income-tax Act, 2025 creates a structured deduction framework running from Section 122 to Section 154.

Sections 123 to 137 largely cover payments and investments such as PPF, NPS, medical insurance, education-loan interest, housing loans, donations and rent. Sections 138 to 152 primarily deal with specified business profits and other eligible income. Section 153 deals with interest on deposits, while Section 154 provides a deduction to an eligible individual with disability.

For most individual taxpayers, however, the most important practical question is the tax regime. The default regime under Section 202 disallows most Chapter VIII deductions, while taxpayers who validly opt out may access the wider deduction framework subject to each section's conditions.

Taxpayers should therefore use the new section map together with the applicable tax year, tax regime, eligibility requirements and supporting documents before making a deduction claim.

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