Income Tax Bill 2025: New Taxation Changes Include Clause 123 Deductions 80C – What is New for Taxpayers

The Union Budget 2025 has drastically transformed the country’s taxation policy, especially the way it considers taxpayers’ claims for deductions. In the recently discussed changes to the Income Tax Bill 2025, Finance Minister Nirmala Sitharaman stated that Section 80C deductions that have been popular over the years will now be included under the new clause named Clause 123. The main goal of these changes is to enhance compliance with tax laws without removing any existing benefits.

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What Is Clause 123 in the New Income Tax Bill?

Clause 123 refers to a new addition that took over Section 80C in the Income Tax Act. It still allows for certain deductions up to ₹1.5 lakh on items such as:

• Contributions to Public Provident Fund (PPF).
• Investment in Employee Provident Fund (EPF).
• Life Insurance Premium Payments.
• Equity Investments through Mutual Funds (ELSS).
• National Savings Certificate purchases (NSC).
• Fixed Deposits in Banks & Post Offices for 5 Years.
• Five-year bank and post office fixed deposits.
• Home Loan Principal Repayments.

The 123 Clause is likely to be implemented in April 2025. However, the tax-saving benefits are likely to remain unchanged even after the migration from the 80C Section.

What is the purpose behind changing Section 80C to Clause 123?

Clause 123 was introduced by the government as a part of an evolving strategy towards simplification of the tax structure in India. The main points behind this change are:

• Eliminate Confusion: The renumbering suits the new income tax framework.
• Increase Rate of Compliance: Increased clarity fosters the new taxpayers to make use of the available deductions.
• Greater Ease in Filing: Greater ease in filing returns and paying taxes.

In as much as Nutan Charcha commendably puts forth arguments in favour of tax reforms, it appears many taxpayers believe the new provisions should have reasonably amended the deduction cap from ₹1.5 lakhs, which sadly remains the same.

What Do Taxpayers Take Away From This?

1. Zero. If under Section 80C you were enjoying deductions, now under Clause 123, you can keep enjoying the same benefits but with no additions and no changes to the rules.
2. Ensure Rethink Tax Strategy: Although the number of the section changed, your tax-saving schemes do not change.
3. Date to Note: When submitting ITR for 2025-26, the appropriate section for reference is now Clause 123 instead of 80C.
4. Seek help from financial professionals: If you are in doubt.