Income Taxpayers Alert! Section 80C is going to change from April 1

From April 1, 2026, India will shift to the Income Tax Act, 2025, replacing the six-decade-old Income Tax Act, 1961. While the new law does not significantly change tax rates or deduction limits, it reorganises the entire legislation, leading to the renumbering of several familiar provisions. One of the biggest changes for salaried taxpayers is that Section 80C will become Section 123, although the deduction benefit of up to ₹1.5 lakh will continue.

Tax experts say the change is structural rather than financial, but taxpayers will need to understand the new section numbers carefully, as the renumbering may affect return filing, documentation, and interpretation of notices once the new law comes into force.

Section 80C moved to Section 123 in new Act

Under the Income Tax Act, 1961, Section 80C has been the most commonly used deduction provision, allowing taxpayers to reduce taxable income by investing in specified instruments. These include Public Provident Fund (PPF), life insurance premiums, National Savings Certificate (NSC), Equity Linked Savings Scheme (ELSS), Sukanya Samriddhi Yojana, five-year tax-saving fixed deposits, pension schemes, tuition fees, and repayment of home loan principal.

In the Income Tax Act, 2025, these deductions will now fall under Section 123, but the overall deduction limit of ₹1.5 lakh in a tax year will remain unchanged. All eligible investments are now listed in Schedule XV, instead of being spread across multiple clauses in the earlier law.

The Central Board of Direct Taxes (CBDT) has said the new format keeps the deduction limit in the main section while shifting the detailed list of eligible instruments to a schedule, making the provision easier to read and interpret.

Why Section 80C matters for salaried taxpayers

Section 80C has traditionally been the backbone of tax planning for individuals following the old tax regime. Because the deduction directly reduces taxable income, it helps lower the final tax liability.

The combined deduction limit of ₹1.5 lakh under Sections 80C, 80CCC, and 80CCD(1) is expected to continue, along with the additional ₹50,000 deduction for NPS under Section 80CCD(1B). These deductions remain relevant for taxpayers who choose the old regime, even after the new law takes effect.

Since many taxpayers are familiar with Section 80C by name, the shift to Section 123 is expected to cause confusion initially, especially during the first year of filing under the new Act.

Law rewritten, not tax benefits

The government has clarified that the Income Tax Act, 2025 is intended to simplify the law rather than change the tax system. The earlier Act had more than 800 sections across multiple chapters, while the new Act reorganises provisions into fewer sections with clearer language and logical grouping.

At the same time, the Income Tax Rules, 1962 have been replaced by Income Tax Rules, 2026, which contain fewer rules and a more streamlined structure. Because of this large-scale restructuring, many familiar provisions such as Sections 80C, 80D, 54, 54F and 80G will continue in substance, but their numbering and wording may change.

Comparison utility launched to avoid confusion

To help taxpayers during the transition, the Income Tax Department has introduced a new online comparison utility that allows users to view provisions of the old and new laws side-by-side before filing returns.

The tool helps taxpayers match old sections with the new ones, reducing the risk of errors while claiming deductions or responding to notices. This is particularly useful because the same benefit may exist in the new law but under a different section number, such as Section 80C becoming Section 123.

What taxpayers should remember

The new Income Tax Act will apply only to income earned from April 1, 2026 onwards. Returns for FY 2025-26 will still be filed under the Income Tax Act, 1961, meaning Section 80C will continue for the current filing cycle.

However, once the new law takes effect, taxpayers must refer to Section 123 instead of Section 80C, even though the deduction limit, eligible investments, and overall tax benefit remain the same. Experts advise taxpayers to familiarise themselves with the new numbering system in advance, as the restructuring of sections is one of the biggest changes in the new tax law, even though the actual tax savings rules remain largely unchanged.