Section 125 — Agnipath Scheme | ITA 2025

Section 125 — AGNIVEER CORPUS FUND DEDUCTION (1961 s. 80CCH SUCCESSOR)

Section 125 is the substantive equivalent of 1961 s. 80CCH (FA 2023 introduction). Individual enrolled in the Agnipath Scheme on/after 1-Nov-2022 and contributing to the Agniveer Corpus Fund is allowed deduction of own contribution. The Govt's matching contribution is FIRST INCLUDED in salary (taxable) AND THEN DEDUCTED u/s 125 — net effect: tax-neutral. Available IN BOTH OLD AND NEW REGIMES.

Statutory text — Income-tax Act, 2025

Marginal note — Deduction in respect of contribution to Agnipath Scheme

(1) An assessee, being an individual who has enrolled in the Agnipath Scheme a nd subscribes to the Agniveer Corpus Fund on or after the 1st November, 2022, shall be allowed a deduction in the computation of his total income, of the whole of the amount paid or deposited in his account in the said Fund during the tax year.

(2) Where the Central Government makes any contribution to the account of an assessee in the Fund referred to in sub-section (1), the assessee shall be allowed a deduction in the computation of his total income of the whole of the amount so contributed.

(3) For the purposes of this section,—

(a) “Agnipath Scheme” means the scheme for enrolment in the Indian Armed Forces introduced vide letter No. 1(23)2022/D(Pay/Services), dated the 29th December, 2022, of the Government of India in the Ministry of Defence;

(b) “Agniveer Corpus Fund” means a fund in which consolidated contri- butions of all the Agniveers and matching contributions of the Central Government along with interest on both these contributions are held.

Corresponding provision — 1961 regime

INCOME-TAX ACT, 2025	INCOME-TAX ACT, 1961
INCOME-TAX ACT, 2025 — s. 125	INCOME-TAX ACT, 1961 — s. 80CCH
Agniveer Corpus Fund deduction	1961 s. 80CCH(1)
Govt matching contribution included + deducted	1961 s. 80CCH(2)
Available in new regime	FA 2023 — same

ARCHITECTURE — TAX NEUTRALITY

The Agnipath Scheme (4-year armed-forces tour) requires: (a) Agniveer's monthly contribution (~30% of pay) → Agniveer Corpus Fund; (b) Govt's matching contribution (1:1) → same Fund. Tax treatment: (i) Govt matching is included in the Agniveer's SALARY income (s. 17 perquisite); (ii) Same amount is then DEDUCTED u/s 125 → effective NIL tax on Govt portion; (iii) Agniveer's own contribution → deduction u/s 125. On exit (post 4 years), corpus payout is exempt u/s 13(33) [1961 s. 10(12C) successor].

CROSS-REFERENCES

Section 13(33) — Exit-payout exemption.
Section 17(1) — Salary inclusion of Govt matching.
Agnipath Scheme — Ministry of Defence.

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