Deductions from Total Income under the Income Tax Act 2025: Sections 122 to 154 Explained

Chapter VIII of the Income Tax Act 2025 (sections 122 to 154) lists the deductions you subtract from gross total income to reach total income. Section 122(2) caps the sum of all of them at gross total income. Whether you can claim most of them depends on the regime: under the default regime in section 202(1), only a handful of Chapter VIII deductions survive.

This is an overview, not a section-by-section guide. It shows how the chapter is organised, the common limits, the general rules in section 122, and who can use what. All figures come from the Act as amended by the Finance Act, 2026, for tax year 2026-27. Last reviewed on 10 November 2026. This is information, not tax advice.

What is a deduction from total income under the 2025 Act?

Gross total income is your total income computed under the Act before any Chapter VIII deduction (section 122(10)). A deduction in this chapter is an amount subtracted from that figure, as per and subject to the provisions of the chapter (section 122(1)). What remains is your total income, on which tax is computed.

Deductions in this chapter are different from the expenses and allowances inside each head of income (for example, business expenses). They apply after the heads are added up.

How is Chapter VIII organised?

Part A opens with the general rules (section 122). Part B starts at section 123 and Part C at section 138, as the headings in the Act show. Part D (section 153) and Part E (section 154) are one section each.

What are the main deductions and their limits?

Section	What it covers	Limit stated in the section
123	Life insurance premia, provident fund etc. listed in Schedule XV (individual or HUF)	Rs 1,50,000 in aggregate
124	Employer contribution to notified Central Government pension scheme; own contribution (including for a minor)	Employer: 14% of salary (Central or State Government employer) or 10% (other employer; 14% where the income is taxed under section 202(1)). Own contribution: Rs 50,000
125	Agnipath Scheme (Agniveer Corpus Fund)	Whole amount paid, plus Central Government contribution
126	Health insurance premia, preventive check-up, medical expenditure	Insurance: Rs 25,000 for self and family and Rs 25,000 for parents; Rs 50,000 where the insured is a senior citizen; preventive check-up Rs 5,000 within these. Medical expenditure: Rs 50,000 each for self/family and parents, with conditions
127	Maintenance of a dependant with disability	Rs 75,000; Rs 1,25,000 for severe disability
128	Medical treatment of prescribed diseases	Lower of actual payment or Rs 40,000; Rs 1,00,000 for a senior citizen
129	Interest on higher education loan	No amount cap in the section; initial tax year plus seven more, or until fully paid
130	Interest on loan for residential house (loan sanctioned 1 Apr 2016 to 31 Mar 2017)	Rs 50,000; loan up to Rs 35 lakh, house value up to Rs 50 lakh, no other house owned at sanction
131	Interest on loan for residential house (loan sanctioned 1 Apr 2019 to 31 Mar 2022)	Rs 1,50,000; stamp duty value up to Rs 45 lakh, no other house owned at sanction
132	Interest on electric vehicle loan (sanctioned 1 Apr 2019 to 31 Mar 2023)	Rs 1,50,000
134	Rent paid for own residence	Rent above 10% of total income, up to Rs 5,000 a month or 25% of total income, whichever is less
153	Interest on deposits with banks, co-operative banks, post office	Rs 10,000 (savings account, non-senior individual or HUF); Rs 50,000 (senior citizen, any deposit)
154	Resident individual with disability	Rs 75,000; Rs 1,25,000 for severe disability

Sections 133, 135, 136 and 137 cover donations and political contributions. Sections 138 to 152 cover profit-linked deductions for specified undertakings, special economic zones, co-operative societies, royalty and similar incomes. These carry their own conditions, so read the section before relying on them.

What are the common conditions for donation deductions?

• Money only, non-cash above Rs 2,000. Section 133(4) allows the deduction only for a donation made as a sum of money, and section 133(5) requires a mode other than cash for any donation over Rs 2,000.
• Ceiling for some donees. Where the donations covered by section 133(2) (for example to approved charitable institutions or the Government for a charitable purpose) together exceed 10% of adjusted gross total income, the excess is ignored. Adjusted gross total income is gross total income less income not taxable and less amounts deducted under other sections of the chapter (section 133(7)(a)).
• Religious purpose excluded. "Charitable purpose" does not include a purpose that is wholly or substantially religious (section 133(7)(b)).
• Payee reporting. For donations to institutions under section 133(1)(b)(ii), the claim is allowed on the basis of information the institution furnishes to the prescribed authority, subject to verification (section 133(6)).
• No second claim. A sum allowed under section 133 cannot qualify under any other provision for the same or any other tax year (section 133(3)). Section 135 (scientific or social science research) has the same rule in its sub-section (5), and denies the deduction if gross total income includes business or profession income (section 135(2)(a)).
• Political contributions. Section 136 allows an Indian company, and section 137 allows other persons, a deduction for contributions made other than by cash to a registered political party or an electoral trust (section 137 excludes local authorities and artificial juridical persons wholly or partly funded by the Government).

Do these deductions apply under the default regime?

Mostly no. Section 202(1) sets slab rates for individuals, HUFs, AOPs (other than co-operative societies), BOIs and certain artificial juridical persons, unless the person opts out under section 202(4). Section 202(2)(a)(xii) says total income under this regime is computed without any deduction under Chapter VIII other than section 124(1), 124(2), 125(2) and 146.

So under the default regime you can still claim the employer's pension contribution under section 124(1) and (2), the Central Government's contribution under section 125(2), and the additional employee cost deduction under section 146 (which applies to business income of an assessee to whom section 63 applies). Section 123, 126, 134, 153 and the others in the table are not available there.

A person with business or profession income must exercise the section 202(4) option on or before the return due date under section 263(1). Once exercised it applies to later years, and it can be withdrawn only once (section 202(4)(a)). A person without business income exercises it along with the return (section 202(4)(b)).

What general rules in section 122 apply to every deduction?

• Overall cap (122(2)): the aggregate of deductions under the chapter cannot exceed gross total income.
• AOP and BOI shares (122(3)): where a deduction under section 133, 135, 137, 138, 141, 142 or 143 is admissible to an association of persons or body of individuals, the same deduction is not given again on a member's share of income.
• No double claim on profits (122(4)): profits claimed as a deduction under Part C cannot be deducted again under any other provision of the Act for that tax year, and the deduction cannot exceed those profits.
• File on time (122(5)): Part C deductions are not allowed if you fail to file the return by the due date in section 263(1) or fail to claim the deduction in that return.
• Transfers at market value (122(6) and (7)): goods or services moved between the eligible undertaking and your other business are priced at market value for computing the deductible profit.
• Specified business (122(8)): if a Part C deduction is allowed for a specified business referred to in section 46(11)(d), no deduction under section 46 is allowed for that business for the same or any other tax year.
• Income computed first (122(9)): the deduction is worked out on the income as computed under the Act before Chapter VIII deductions.

Worked example 1: stacking deductions (tax year 2026-27)

Assumptions: Meena is a resident individual who has opted out under section 202(4). Her gross total income is Rs 12,00,000. She paid Rs 1,80,000 into items listed in Schedule XV, Rs 50,000 into a notified pension scheme in her own account, a Rs 25,000 health insurance premium for herself, and a Rs 50,000 health insurance premium for her senior citizen mother. Assume each payment meets the conditions of its section.

Step	Working	Amount (Rs)
Section 123	Paid 1,80,000, capped at 1,50,000	1,50,000
Section 124(3)	Own pension contribution, limit 50,000 (this amount is not also claimed under section 123)	50,000
Section 126(2)(a)	Self health premium, limit 25,000	25,000
Section 126(2)(b), (8)(a)	Senior citizen parent, limit 50,000	50,000
Total deductions	1,50,000 + 50,000 + 25,000 + 50,000	2,75,000
Total income	12,00,000 - 2,75,000	9,25,000

The same Rs 50,000 pension amount cannot be claimed under both section 124(3) and section 123 (section 124(5) and (10)).

Worked example 2: the section 122(2) cap

Assumptions: Ravi, a resident individual who has opted out under section 202(4), has gross total income of Rs 2,00,000 for tax year 2026-27. His eligible deductions add up to Rs 2,30,000.

1. Aggregate eligible deductions: Rs 2,30,000.
2. Gross total income: Rs 2,00,000.
3. Deductions allowed: lower of the two, Rs 2,00,000 (section 122(2)).
4. Total income: 2,00,000 - 2,00,000 = Rs 0. The extra Rs 30,000 is not allowed or carried forward under this chapter's text.

Worked example 3: lump-sum health premium and deposit interest

Premium for several years. A resident individual pays Rs 60,000 in 2026-27 for a three-year health insurance policy covering herself, and the policy stays in force for all three years. Under section 126(8)(b) the deduction in each relevant tax year is 1/3 of the amount: 60,000 / 3 = Rs 20,000 a year for 2026-27, 2027-28 and 2028-29. Each year's Rs 20,000 is within the Rs 25,000 limit of section 126(2)(a).

Deposit interest. Ravi (not a senior citizen) earns Rs 14,000 of savings account interest. Deduction under section 153(2)(a) is the whole interest up to Rs 10,000, so Rs 10,000 is allowed. His father, a senior citizen, earns Rs 70,000 across savings and fixed deposits with a bank. Under section 153(2)(b) the deduction is capped at Rs 50,000.

Real-life scenarios

Salaried employee on the default regime. Sunita works for a private company that contributes to her notified pension account. She has not opted out under section 202(4). Her income is taxed under section 202(1), so under section 124(2) the 10% limit in section 124(1)(b) is read as 14%. She can claim the employer's contribution up to 14% of salary, but her own insurance premium and rent get no deduction, because section 123, 126 and 134 are excluded by section 202(2)(a)(xii). "Salary" here includes dearness allowance only where the terms of employment so provide, and excludes other allowances and perquisites (section 124(13)(b)).

Rent deduction. Arjun, who has opted out under section 202(4), pays rent for his own residence. Section 134(4) denies the deduction if he, his spouse or his minor child owns residential accommodation at the place where he ordinarily resides or works. If none of the blocks in section 134(4) applies, the amount is the rent exceeding 10% of total income, subject to the monthly and 25% limits in section 134(2). Total income here is the figure before this deduction (section 134(5)). The section also says further conditions by area may be prescribed, so check the rules before claiming.

Disability. Kavita, a resident individual, holds a medical authority's certificate of disability. She furnishes it, in the prescribed form and manner, with her return under section 263 and claims Rs 75,000 under section 154. If the certificate says the disability needs reassessment after a stated period, she must obtain a new certificate for years after it expires (section 154(2)(b)).

Common mistakes

1. Claiming old-style deductions without opting out. Under the default regime in section 202(1) only sections 124(1), 124(2), 125(2) and 146 survive from this chapter.
2. Double-counting the pension contribution. A deduction under section 124(3) cannot be repeated under section 123 for the same amount.
3. Ignoring the section 122(2) cap. The total of deductions cannot exceed gross total income.
4. Missing the return due date for Part C deductions. Section 122(5) denies them if the return is not filed by the section 263(1) due date or the claim is not made in it.
5. Paying health premium in cash. Section 126(9) requires a mode other than cash, except for preventive health check-up.
6. Claiming sunset deductions without checking the sanction dates. Sections 130, 131 and 132 apply only to loans sanctioned in the windows stated in them.

Quick reference

Question	Answer	Source
Overall cap on deductions	Gross total income	Section 122(2)
Deductions available in the default regime	Sections 124(1), 124(2), 125(2), 146	Section 202(2)(a)(xii)
Return condition for Part C deductions	File by due date and claim in the return	Section 122(5), 263(1)
Health premium payment mode	Non-cash (cash allowed for preventive check-up)	Section 126(9)
Disability certificate	Furnish with return; renew if it expires	Section 154(2)

Where this is in the Act

• Section 122: general rules, cap, return condition, definition of gross total income
• Sections 123 to 137: Part B, deductions in respect of certain payments (Schedule XV for section 123)
• Sections 138 to 152: Part C, deductions in respect of certain incomes
• Section 153: Part D, interest on deposits
• Section 154: Part E, person with disability
• Section 202(1), (2)(a)(xii), (4): which deductions the default regime allows, and how to opt out

For deductions under the salary head, see our guide to standard deduction and other deductions.

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