CHAPTER VIII — DEDUCTIONS TO BE MADE IN COMPUTING TOTAL INCOME

Section 115 — Deductions to be made in computing Total Income (general)

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Deductions to be made in computing total income.

115. (1) In computing the total income of an assessee, there shall be allowed from his gross total income, in accordance with and subject to the provisions of this Chapter, the deductions specified in sections 116 to 153.

(2) The aggregate amount of deductions under this Chapter shall not, in any case, exceed the gross total income of the assessee.

(3) The deductions under this Chapter (other than those under sections 124(2), 132, and a few specified) shall not be allowed to assessees opting for the simplified tax regime under section 202.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 80A of the 1961 Act — Deductions to be made in computing total income

Section 80A — General rule for deductions under Chapter VI-A: aggregate deductions cannot exceed gross total income; specific deductions allowed only as per the conditions of each section. Provisos for double-deduction prevention; deduction subject to claim in return of income.

BLOCK 3 : COMMENTARY

Section 115 is the gateway to Chapter VIII. The fundamental rule that deductions cannot exceed gross total income (i.e., Chapter VIII deductions cannot create or increase a loss) is preserved. The double-deduction-prevention rule (an item allowed under one section cannot also be allowed under another) is preserved.

New tax regime exclusion — sub-section (3). Section 202 of the new Act (formerly s. 115BAC) provides the simplified tax regime. Under this regime, most Chapter VIII deductions are unavailable. The exceptions: (a) employer NPS contribution under s. 124(2); (b) deduction under s. 132 to the extent of corporate / charitable contributions to political parties / electoral trusts; (c) deduction for certain expenditure on agricultural extension projects / skill development. The list is to be notified by the CBDT under section 202.

Compliance regime. Chapter VIII deductions require the assessee to (i) actually pay / invest the amount; (ii) claim the deduction in the return of income filed within the original due date (s. 263(1) of new Act, formerly s. 139(1)) — late returns lose Chapter VIII benefits. The Supreme Court in Wipro Ltd. v. CIT (2022) 446 ITR 1 (SC) and earlier in Goetze (India) Ltd. v. CIT (2006) 284 ITR 323 (SC) governs claim-in-return discipline.

Practical takeaways. (i) Annual regime decision: compute tax under both regimes; in many cases the deductions under sections 116-138 (for individuals — especially s. 80C / s. 80D / s. 80G / s. 80E / s. 24 interest) push the old regime ahead. (ii) Documentation: maintain investment receipts, premium receipts, donation receipts (with 80G certification), educational loan documents, and rent receipts (for HRA claim verification). (iii) Timely filing: deduction is conditional on filing return within s. 263(1) due date.

Sections 116 to 124 — Investment / Pension / Insurance Deductions (s. 80C, 80CCC, 80CCD, 80CCH series)

NEW ACT 2025

Section 116 — Deduction in respect of life insurance premia, contributions to provident fund, NSC, ELSS, principal repayment of housing loan, tuition fees, etc. (corresponding to old s. 80C). Aggregate cap of Rs 1.5 lakh.

Section 117 — Deduction for contribution to certain pension funds (corresponding to old s. 80CCC). Cap within the s. 116 / s. 124 / s. 132 aggregate cap of Rs 1.5 lakh / Rs 2 lakh.

Sections 118-123 — Specific savings-side deductions (Rajiv Gandhi Equity Savings Scheme, infrastructure bonds, etc., where these still survive).

Section 124 — Deduction for contribution to NPS (formerly s. 80CCD): (1) employee's own contribution — 10% of salary or Rs 1.5 lakh, whichever less, subject to overall s. 116 cap; (1B) additional Rs 50,000 for own contribution beyond s. 116 cap; (2) employer contribution — 14% of salary for Government / 10% otherwise (FA 2024 amendment to make 14% applicable for new tax regime preserved); (3) Agniveer Corpus Fund contribution by Central Government.

OLD ACT 1961

Section 80C — Aggregate Rs 1.5 lakh cap. Section 80CCC — Pension fund. Section 80CCD — NPS / Atal Pension Yojana. Section 80CCH — Agniveer Corpus Fund. Section 80CCE — Aggregate cap (s. 80C + 80CCC + 80CCD(1) = Rs 1.5 lakh).

COMMENTARY

Sections 116-124 of the new Act re-group the savings / insurance / pension deduction architecture. Section 116 is the bedrock individual / HUF deduction — the Rs 1.5 lakh aggregate cap (set in 2014) is preserved; the 25+ qualifying investment categories (LIC premium, PPF, EPF, NSC, ELSS, ULIP, principal repayment of housing loan, tuition fees, etc.) are preserved.

NPS — section 124. The three-tier structure of NPS deductions is preserved: (i) employee contribution — capped under s. 116 (within the Rs 1.5 lakh ceiling); (ii) additional Rs 50,000 — outside the s. 116 cap (the only sub-section actively used in tax planning); (iii) employer contribution — separately deductible up to 10% of salary (14% for Government employees and FA 2024 amendment for new regime).

Practical takeaways. (i) For salaried employees in old regime: utilise full s. 116 Rs 1.5 lakh + s. 124(1B) additional Rs 50,000 + s. 126 health insurance + s. 130 donations = considerable tax saving. (ii) For new regime opters: only employer NPS contribution under s. 124(2) is available — limited tax-saving room. (iii) Tuition fees: only for two children, only for full-time education in India; coaching / tuition / development fees outside the qualifying basket. (iv) Housing loan: principal repayment under s. 116; interest under s. 22 / s. 109(2). Both available concurrently in old regime.

Sections 125 to 138 — Other Personal Deductions (Health, Donations, Interest, Rent, Disability)

NEW ACT 2025

Section 126 — Health insurance (formerly s. 80D): Rs 25,000 (Rs 50,000 for senior citizens) — for self / family; additional Rs 25,000 / Rs 50,000 for parents.

Section 127 — Treatment of disabled dependants (formerly s. 80DD): Rs 75,000 / Rs 1.25 lakh for severe.

Section 128 — Medical treatment of specified diseases (formerly s. 80DDB): up to Rs 40,000 / Rs 1 lakh for senior citizens.

Section 129 — Educational loan interest (formerly s. 80E): no cap, available for 8 years from start of repayment.

Section 130 — Donations to specified funds / institutions (formerly s. 80G): 50%/100% deduction depending on category, with subscriptions to Notified institutions, PM Relief Fund, Defence Funds etc.

Section 131 — Donations for scientific research / rural development (formerly s. 80GGA).

Section 132 — Donations to political parties / electoral trusts by individual / HUF / firm / company (formerly s. 80GGB / 80GGC).

Section 133 — Rent paid by employee not having HRA (formerly s. 80GG): least of (i) Rs 5,000 per month, (ii) 25% of total income, (iii) actual rent less 10% of total income.

Section 134 — Royalty income to author (formerly s. 80QQB): up to Rs 3 lakh.

Section 135 — Royalty income to patent holder (formerly s. 80RRB): up to Rs 3 lakh.

Section 136 — Interest on savings bank account (formerly s. 80TTA / s. 80TTB): Rs 10,000 (Rs 50,000 for senior citizens).

Section 137 — Disability of self (formerly s. 80U): Rs 75,000 / Rs 1.25 lakh for severe.

Section 138 — Royalty / FTS deduction for non-residents (formerly s. 80LA where applicable).

OLD ACT 1961

Sections 80D, 80DD, 80DDB, 80E, 80G, 80GGA, 80GGB, 80GGC, 80GG, 80QQB, 80RRB, 80TTA, 80TTB, 80U, 80LA — Personal / individual / HUF deductions in Chapter VI-A.

COMMENTARY

Sections 125-138 of the new Act preserve the personal-deduction regime of the 1961 Act. Section 126 health insurance — Rs 25,000 / Rs 50,000 — and section 130 donations regime (50% / 100% with the FA 2017 introduction of pre-validation of donee 80G certificate, FA 2021 institutional registration through Form 10A, and FA 2023 limitations on donor-side compliance) are preserved.

Section 130 — donations. The pre-validation requirement (FA 2021) — the donee institution must be registered under section 124 (formerly 80G) and must furnish a quarterly statement of donations received in Form 10BD; the donor receives Form 10BE certificate; the donor's claim under s. 130 is contingent on Form 10BE. This compliance discipline carries forward.

Section 132 — political party / electoral trust donations. Available to companies / firms / individuals (with the FA 2017 restriction that cash donations are not deductible — only banking-channel / electoral-bond / electronic-mode contributions). Watch for legislative response to the 2024 Supreme Court ruling on electoral bonds.

Section 136 — savings interest. Rs 10,000 for non-senior; Rs 50,000 for senior citizens (FA 2018 introduction). Interest from savings bank accounts (not FDs) only. Senior-citizen Rs 50,000 also covers FD interest under s. 136 (corresponding to old s. 80TTB) — a distinct rule.

Practical takeaways. (i) For senior-citizen clients: leverage s. 126 Rs 50,000 health insurance + s. 128 Rs 1 lakh medical treatment + s. 136 Rs 50,000 interest = significant deduction stack. (ii) For corporate donors: ensure 80G donee is on the post-FA 2021 registered list; obtain Form 10BE before claiming. (iii) For employees claiming HRA — section 133 (formerly s. 80GG) is for those without HRA; verify employer's payslip carefully before opting. (iv) For royalty earners (authors, patentees) — sections 134-135 cap of Rs 3 lakh; track the foreign-exchange retention rule under s. 134 (90 days from receipt for foreign royalty).

Sections 139 to 153 — Income-linked Deductions (s. 80-IA series)

NEW ACT 2025

Section 140 — Industrial undertaking / infrastructure (formerly s. 80-IA): 100% / 30% / various phased holiday for power, ports, telecom, industrial parks etc.

Section 141 — SEZ developer (formerly s. 80-IAB).

Section 142 — Eligible startup (formerly s. 80-IAC): 100% deduction for any 3 consecutive years out of 10.

Section 143 — Industrial undertaking other than infrastructure (formerly s. 80-IB): various sectoral holidays.

Section 144 — Industrial undertaking in specified states (formerly s. 80-IC): hill state and north-east holidays.

Section 145 — Hotel / convention centre in specified area (formerly s. 80-ID).

Section 146 — North-eastern states industrial undertaking (formerly s. 80-IE).

Section 147 — Production of mineral oil (formerly s. 80-IB(9)).

Section 148 — Additional employee cost (formerly s. 80JJAA): 30% of additional employee cost for 3 years; widely available for most businesses (post-FA 2016 expansion); critical incentive for new manufacturing.

Section 149 — Offshore banking / IFSC unit income (formerly s. 80LA).

Section 150 — Inter-corporate dividend (formerly s. 80M): for domestic companies receiving dividend and distributing it onward.

Section 151 — Co-operative society income (formerly s. 80P).

Section 152 — Producer company income (formerly s. 80PA).

Section 153 — Royalty / FTS income from foreign companies (formerly s. 80LA / specified categories).

OLD ACT 1961

Sections 80-IA, 80-IAB, 80-IAC, 80-IB, 80-IC, 80-ID, 80-IE, 80JJAA, 80LA, 80M, 80P, 80PA, 80QQB, 80RRB — Income-linked tax holidays / deductions of Chapter VI-A.

COMMENTARY

Sections 139-153 of the new Act preserve the income-linked tax-holiday regime. Most provisions — 80-IA / IB / IC / ID / IE — had sunset clauses in the old Act; new undertakings post the sunset date have no entitlement. Grandfathering preserves benefits for existing undertakings. Practitioners must verify the date of commencement of operations to determine the applicable section and the unexpired holiday period.

Section 142 (formerly s. 80-IAC) — Eligible startup. Continues to be the principal incentive for DPIIT-recognised startups: 100% deduction of profits for any 3 consecutive years out of the first 10 years from incorporation. The FA 2023 sunset (eligible startups must be incorporated by 31 March 2024 — extended to 31 March 2025 by FA 2024) is preserved. Practitioners advising startups must verify DPIIT certificate and incorporation date.

Section 148 (formerly s. 80JJAA) — Additional employee cost. The most-used post-2016 incentive. 30% of additional employee cost (defined as cost of new employees with monthly emoluments up to Rs 25,000 for a minimum of 240 days in the year — 150 days for apparel / leather / footwear) is deductible for 3 years. Available across business types — manufacturing, IT, services, retail. Critical for new business hires.

Section 150 (formerly s. 80M) — Inter-corporate dividend. Post-FA 2020 (abolition of DDT), domestic companies receiving dividend and re-distributing it onward to shareholders are entitled to deduction equal to the onward dividend. This avoids cascading taxation. Without s. 150, the receiving company would pay tax on dividend received and again on dividend declared.

Section 151 (formerly s. 80P) — Co-operative societies. Various categories (banking, supply, marketing, processing, primary credit society etc.) entitled to specified deductions. Post-FA 2006, banking co-operatives (other than primary agricultural credit societies and primary co-operative agricultural and rural development banks) are excluded from the section. Section 151 of the new Act preserves these carve-outs.

Practical takeaways. (i) For startups: verify DPIIT recognition, incorporation date; opt under section 202 of new tax regime concurrently — Rs 25 lakh-Rs 100 crore turnover startups should run dual computations. (ii) For manufacturers: section 148 — track new-hire emoluments; ensure 240-day employment minimum. (iii) For corporate dividend recipients: section 150 mechanic crucial post-DDT abolition. (iv) For co-operative society clients: verify section 151 eligibility annually; banking co-operatives outside the carve-out are taxed at corporate rates.

Section 154 — Limitation on Total Deductions

BLOCK 1 : SECTION TEXT (NEW ACT, 2025)

Deduction not to exceed gross total income (residuary cap rule).

154. The aggregate amount of deductions under sections 116 to 153 shall not, in any case, exceed the gross total income of the assessee, and any unabsorbed deduction shall not be carried forward to any subsequent year.

BLOCK 2 : CORRESPONDING SECTION IN OLD ACT (1961)

Section 80A(2) of the 1961 Act

Section 80A(2) — The aggregate amount of deductions under Chapter VI-A shall not, in any case, exceed the gross total income of the assessee.

BLOCK 3 : COMMENTARY

Section 154 is the cap rule. Chapter VIII deductions are non-loss-creating: they reduce gross total income to zero at most. They never spill into negative — i.e., they cannot create a loss to carry forward. Where the deductions exceed gross total income, the excess is forfeited; it cannot be carried forward.

Practical implication. (i) For start-ups in early years: where section 142 / s. 148 deductions exceed business profit, the excess is lost. Plan timing of profit recognition to maximise utilisation. (ii) For HNI individuals: where investment-linked deductions (s. 116, s. 124, s. 126 etc.) exceed gross total income — uncommon, but possible in low-income years — the excess is lost; do not over-invest in the same year.

Chapter VIII — At a Glance

Practitioner notes

• Run dual computation (old vs new regime under s. 202) every year for individuals — old regime usually wins where Chapter VIII deductions are claimed.
• Section 130 (formerly 80G): obtain Form 10BE from donee institution; verify donee post-FA 2021 registration.
• Section 142 (formerly 80-IAC) startup: 3 consecutive years out of 10 from incorporation; DPIIT certificate mandatory.
• Section 148 (formerly 80JJAA): widely under-utilised — track new-employee emolument and 240-day rule.
• Section 150 (formerly 80M): essential for holding-company structures distributing dividend onward to investors.
• Section 263(1) timely-filing — non-negotiable for Chapter VIII claims; belated returns lose the deductions.