New Income Tax Bill 2025: Section 80C tax-saving deductions moved to clause 123. Details here | Mint
Source: Live Mint
The new income tax bill, 2025, has transferred section 80C tax saving deductions to clause 123, in Chapter VIII in it with an intention of bringing ease and decluttering the tax structure.
This has been detailed in the bill tabled by the Finance Minister of India in the Parliament on February 13, 2025. The reform aims to benefit the taxpayer because it makes them more aware of the tax-saving channels and enables them to make correct financial decisions.
What is new in the new income tax bill?
The newly tabled income tax bill, 2025, has made changes to several provisions, one of which is shifting section 80C tax-saving allowances to Clause 123, under chapter VIII. The bill will make the existing tax regime simpler, easier to understand and will be effective from April 1, 2026.
What is section 80C and why is it important?
Under the Income Tax Act, Section 80C allows deduction of certain investments and expenses up to ₹1.5 lakh every year for tax payers. This is significant for individual tax payers and Hindu Undivided Family (HUFs) members, as it lowers their taxable income due to pooling and, along with it, reduces the overall quantum of their tax payment.
What are the key deductions under Section 80C?
These deductions are addressed under Section 80C and cover primarily premiums paid on life insurance, National Pension System (NPS), Equity-Linked Saving Schemes (ELSS), investment in Public Provident Fund (PPF), and certain fixed deposits. These have the potential to encourage long-term saving and investing by the tax payers.
How does the new bill affect such deductions?
With the new income tax bill, Section 80C deductions will now fall under Clause 123 of Chapter VIII. It does not eliminate the deductions but categorizes them separately into categories that apply to the corresponding financial activities. For instance, contribution to provident fund and life insurance will fall under Clause 123 itself.
What are the other significant changes the new bill has brought?
The income tax bill has also removed over 300 redundant provisions of the current Income Tax Act, some of which were rarely applied. Apart from this, it simplifies much of the sections relating to deductions, exemptions, rebates, and capital gains such that they become simpler to understand and apply.
How can taxpayers prepare for these changes?
The taxpayers will need to become accustomed to the new rules and how the new rules would impact tax planning. Under the new rules, proper planning needs to be done, to optimize returns from tax benefits.
