1. Chapter VIII: Old Regime Only
All deductions under Chapter VIII of ITA 2025 (equivalent to Chapter VI-A of ITA 1961) are available ONLY under the old tax regime. If you choose the new regime, you cannot claim any of these deductions — except the standard deduction Rs 75,000 and employer NPS contribution under Section 132, which are outside Chapter VIII.
2. Section 123 (80C) — Rs 1.5 Lakh Basket
The most-used deduction — a basket of eligible investments and payments, subject to an overall limit of Rs 1.5 lakh:
- ELSS mutual funds (3-year lock-in, best returns)
- PPF contributions (15-year, EEE — fully tax-free)
- Life insurance premium (for self, spouse, children)
- NPS Tier-I contribution
- NSC (National Savings Certificate)
- Tax-saving bank FD (5-year lock-in)
- Sukanya Samriddhi Yojana deposits
- Home loan principal repayment
- Stamp duty and registration on property purchase
- Tuition fees for children (up to 2 children)
- EPF employee contribution
- ULIP premium
3. Key Deductions Beyond Section 123
| Section | Deduction | Limit |
|---|---|---|
| Section 125(1B) | NPS Tier-I extra deduction | Rs 50,000 (over Section 123) |
| Section 126 (80D) | Health insurance premium (self/family) | Rs 25,000 (Rs 50,000 senior) |
| Section 126 (80D parents) | Health insurance for senior citizen parents | Additional Rs 50,000 |
| Section 129 (80E) | Education loan interest (higher education) | Full interest, 8 years |
| Section 130 (80EEB) | Electric vehicle loan interest | Rs 1,50,000 |
| Section 131 (80G) | Donations to approved funds | 50%/100% with/without limit |
| Section 135 (80GG) | Rent paid (no HRA, self-employed) | Lowest of 3 criteria |
| Section 127 (80DD) | Disabled dependent | Rs 75,000/Rs 1,25,000 |
| Section 128 (80DDB) | Medical treatment specified disease | Rs 40,000/Rs 1,00,000 senior |
4. Section 129 (80E): Education Loan Interest
Full interest on education loan (for higher education — graduation and above) is deductible — no monetary cap. The deduction is available for 8 consecutive years starting from the year of first interest repayment. Applicable to loans for self, spouse, children, and any student for whom the taxpayer is a legal guardian. Principal repayment is NOT deductible (only interest).
5. Section 135 (80GG): Rent Deduction Without HRA
Self-employed professionals and employees who do not receive HRA can claim rent deduction under Section 135 — the lowest of: (a) rent paid minus 10% of total income; (b) 25% of total income; (c) Rs 5,000 per month. This is particularly useful for freelancers and consultants who pay rent but have no HRA component in their income.
6. Which Is Better: Old or New Regime?
Old regime is better if total Chapter VIII deductions + home loan interest + HRA exceed Rs 3.75 lakh (the break-even point for income above Rs 15L). Below that threshold, the new regime lower slab rates win. Use the IT Portal regime comparison tool before deciding.
7. Why TaxClue
Maximising Chapter VIII deductions requires planning at the start of the Tax Year — not at ITR filing time. TaxClue provides annual tax planning, deduction optimisation, and ITR filing. Contact us under ITA 2025.