Sections 125 explained: this guide covers what it means, who it applies to, the step-by-step process, documents required, fees, due dates and penalties in India — so you can stay compliant with confidence and avoid costly mistakes.
Four deductions in Chapter VIII are tied to specific schemes or sanction windows. Section 125 gives a deduction for contributions to the Agniveer Corpus Fund. Sections 130 and 131 give limited deductions for interest on housing loans sanctioned in stated periods, and section 132 gives a deduction for interest on an electric vehicle loan sanctioned in a stated period. This article reads the four sections as per the Income-tax Act, 2025 as amended by the Finance Act, 2026; later amendments, rules and notifications should be checked. For planning your deductions, see our tax planning advisory.
Section 125 allows an Agniveer the whole of the amount paid or deposited in the Agniveer Corpus Fund, and the whole of the Central Government's contribution. Section 130 allows interest on a housing loan up to Rs. 50,000 (loan sanctioned between 1 April 2016 and 31 March 2017). Section 131 allows up to Rs. 1,50,000 (loan sanctioned between 1 April 2019 and 31 March 2022), for an individual not eligible under section 130. Section 132 allows up to Rs. 1,50,000 of electric vehicle loan interest (loan sanctioned between 1 April 2019 and 31 March 2023). Each bars a second deduction for the same interest.
How these sections sit in Chapter VIII
Chapter VIII allows deductions from gross total income "as per and subject to" its provisions, with the aggregate not exceeding gross total income (section 122); see the live note on section 122. The other deductions in this stretch of the Chapter are covered in the live notes on section 124 (NPS), section 126 (health insurance), section 127, section 128, section 129 (education loan interest) and section 133 (donations).
Section 125: Agnipath Scheme contribution
Who and what
- Sub-section (1). An assessee, being an individual who has enrolled in the Agnipath Scheme and subscribes to the Agniveer Corpus Fund on or after the 1st November, 2022, is allowed a deduction, in computing total income, of the whole of the amount paid or deposited in his account in the Fund during the tax year.
- Sub-section (2). Where the Central Government makes any contribution to the assessee's account in the Fund, the assessee is allowed a deduction of the whole of the amount so contributed.
Meanings in sub-section (3)
- "Agnipath Scheme" means the scheme for enrolment in the Indian Armed Forces introduced by a letter of the Government of India in the Ministry of Defence dated 29th December, 2022. (The Act prints the letter's reference number; it is not repeated here.)
- "Agniveer Corpus Fund" means a fund in which the consolidated contributions of all the Agniveers and the matching contributions of the Central Government, along with interest on both, are held.
Example (invented). Rohit, an enrolled Agniveer, has Rs. 30,000 deducted and paid into his account in the Fund in a tax year, and the Central Government contributes a matching Rs. 30,000. Under sub-section (1) he is allowed Rs. 30,000 and under sub-section (2) a further Rs. 30,000 in computing his total income, subject to the overall limit in section 122(2).
Section 130: interest on loan for residential house property (first window)
An individual is allowed a deduction of interest payable on a loan taken by him from a financial institution for the acquisition of a residential house property, as per the section.
| Item | What the Act prints |
|---|---|
| Ceiling (sub-section (2)) | Not to exceed Rs. 50,000; allowed for the tax year beginning on 1 April 2016 and subsequent tax years |
| Condition (a) | Loan sanctioned by the financial institution during 1 April 2016 to 31 March 2017 |
| Condition (b) | Amount of loan sanctioned does not exceed thirty-five lakh rupees |
| Condition (c) | Value of the residential house property does not exceed fifty lakh rupees |
| Condition (d) | The assessee does not own any residential house property on the date of sanction |
| Sub-section (4) | No deduction for the same interest under any other provision for the same or any other tax year |
"Financial institution" means a banking company to which the Banking Regulation Act, 1949 applies, or any bank or banking institution referred to in section 51 of that Act, or a housing finance company. A "housing finance company" is a public company formed or registered in India with the main object of providing long-term finance for construction or purchase of houses in India for residential purposes. The Banking Regulation Act, 1949 is another law; check it.
Section 131: interest on loan for certain house property (second window)
An individual not eligible to claim a deduction under section 130 is allowed a deduction of interest payable on a loan from a financial institution for acquisition of a residential house property, subject to a maximum of Rs. 1,50,000 in a tax year, for the tax year beginning on 1 April 2019 and subsequent tax years, on fulfilment of these conditions:
| Condition | Text |
|---|---|
| (a) | Loan sanctioned by the financial institution during 1 April 2019 to 31 March 2022 |
| (b) | The stamp duty value of the residential house property does not exceed forty-five lakh rupees |
| (c) | The assessee does not own any residential house property on the date of sanction |
Sub-section (3) bars any other deduction for the same interest in the same or any other tax year; "financial institution" is as in section 130(5)(a).
Section 132: interest on loan for an electric vehicle
An individual is allowed a deduction of interest payable on a loan from a financial institution for the purchase of an electric vehicle:
- the loan must be sanctioned during 1 April 2019 to 31 March 2023 (sub-section (2));
- the deduction must not exceed Rs. 1,50,000 and is allowed for the tax year beginning on 1 April 2019 and subsequent tax years (sub-section (3));
- no deduction for the same interest under any other provision (sub-section (4)).
Meanings (sub-section (5)). "Electric vehicle" means a vehicle powered exclusively by an electric motor, whose traction energy is supplied exclusively by a traction battery installed in the vehicle and that has an electric regenerative braking system which during braking converts vehicle kinetic energy into electrical energy. "Financial institution" is a banking company to which the Banking Regulation Act, 1949 applies, or a bank or banking institution under section 51 of that Act, and includes a non-banking financial company.
Worked examples
Housing loan under section 130 (invented). Lata was sanctioned a loan of Rs. 30,00,000 in the permitted window for a house worth Rs. 45,00,000 and owns no other house. Interest payable in a tax year is Rs. 2,10,000. The deduction under section 130 is limited to Rs. 50,000.
Housing loan under section 131 (invented). Mohan is not eligible under section 130. His loan was sanctioned in the section 131 window, the stamp duty value of the house is Rs. 40,00,000 and he owned no other house. Interest payable for the year is Rs. 1,80,000. The deduction is limited to Rs. 1,50,000.
Electric vehicle (invented). Nisha's electric vehicle loan was sanctioned in the section 132 window. Interest payable for the year is Rs. 40,000, below the ceiling of Rs. 1,50,000, so the whole Rs. 40,000 is deductible.
Comparison
| Point | Section 130 | Section 131 | Section 132 |
|---|---|---|---|
| Purpose of loan | Residential house property | Residential house property | Electric vehicle |
| Ceiling | Rs. 50,000 | Rs. 1,50,000 a tax year | Rs. 1,50,000 |
| Sanction period | 1 April 2016 to 31 March 2017 | 1 April 2019 to 31 March 2022 | 1 April 2019 to 31 March 2023 |
| Loan size / value test | Loan up to thirty-five lakh rupees; house value up to fifty lakh rupees | Stamp duty value up to forty-five lakh rupees | None stated |
| Other house | Must own no residential house on sanction date | Same | None stated |
The periods above are those printed in the Act; the Act prints no later sanction window for any of the three deductions.
Need help claiming loan interest deductions?
Whether a loan falls in a sanction window, and which of sections 130 or 131 applies, depends on dates and values on the loan papers. Our tax planning advisory team can help you check these before you claim.
Key takeaways
- Section 125 allows the whole of an Agniveer's contribution to the Fund and the whole of the Central Government's contribution.
- Section 130 caps the deduction at Rs. 50,000 and needs a loan sanctioned from 1 April 2016 to 31 March 2017.
- Section 131 caps it at Rs. 1,50,000 a tax year for loans sanctioned from 1 April 2019 to 31 March 2022, for those not eligible under section 130.
- Section 132 caps electric vehicle loan interest at Rs. 1,50,000, for loans sanctioned from 1 April 2019 to 31 March 2023.
- Each of sections 130 to 132 bars a second deduction for the same interest.
Read next
- Sections 135–137: donations to scientific research, rural development and political parties
- Sections 138–139: infrastructure undertakings and SEZ developers
- Section 129: education loan interest
- Income-tax Act 2025 Chapter VIII
Disclaimer: Based on the Income-tax Act, 2025 (30 of 2025) as amended by the Finance Act, 2026, as consulted on 2 October 2026. It explains the words of the Act only; the Income-tax Rules, 2026, notifications, circulars, later amendments and the way the tax authorities and courts apply these provisions should be checked. This article is general information, not legal advice; check the official text before acting.