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Welcome back! In the previous lesson we covered Section 123 (formerly 80C). But what if you have already used its ₹1,50,000 limit and still want to reduce your tax, or want tax benefits that fit different goals?
This lesson covers the deductions outside Section 123 (formerly 80C): the National Pension System (NPS), health insurance, home loan interest and education loan interest, with worked examples.
Limits and examples are filled in from the BullTimes tax engine for FY 2026-27 (Tax Year 2026-27). Apart from the employer's NPS contribution, these deductions apply only under the old regime.
NPS is a long-term, government-regulated retirement scheme. It is unusual because it offers a deduction on top of the Section 123 (formerly 80C) limit.
Example:
Priya's basic salary is ₹12,00,000 a year. Her EPF and ELSS already use the full ₹1,50,000. She puts ₹50,000 into her NPS Tier I account, and her employer contributes ₹60,000 (5% of her basic) to her NPS.
| Deduction | Amount |
|---|---|
| Section 123 (formerly 80C) (EPF and ELSS) | ₹1,50,000 |
| Section 124 (formerly 80CCD(1B)) (her own NPS) | ₹50,000 |
| Section 124 (formerly 80CCD(2)) (employer's NPS, within 10% of basic) | ₹60,000 |
| Total | ₹2,60,000 |
Under the old regime Priya deducts ₹2.6 lakh, not just ₹1,50,000. Under the new regime, only the employer's ₹60,000 would count.
Section 126 (formerly 80D) allows a deduction for health insurance premiums, in two separate buckets:
The two buckets are separate: room left in one cannot be used by the other. The most anyone can claim is ₹50,000 + ₹50,000, when both you and your parents are 60 or over.
Example:
Rajiv is 45. He pays ₹18,000 for his family's health insurance and ₹32,000 for his father's (aged 68). The family also has preventive check-ups costing ₹4,000.
| Bucket | Paid | Limit | Deduction |
|---|---|---|---|
| Self and family (premium + check-up) | ₹22,000 | ₹25,000 | ₹22,000 |
| Senior-citizen parent | ₹32,000 | ₹50,000 | ₹32,000 |
| Total | ₹54,000 |
The check-up uses room inside the self-and-family bucket, which is why it adds to the deduction here: that bucket had space left.
Interest on a home loan is deducted from "income from house property", not under Chapter VI-A.
Example:
Anjali lives in the flat she bought with a home loan. This year she paid ₹3,20,000 in interest and ₹1,80,000 in principal.
| Item | Paid | Deduction |
|---|---|---|
| Interest, Section 22 (formerly 24(b)) (self-occupied) | ₹3,20,000 | ₹2,00,000 |
| Principal, within Section 123 (formerly 80C) | ₹1,80,000 | up to ₹1,50,000, shared with her other Section 123 (formerly 80C) items |
The ₹1,20,000 of interest above the limit gives no deduction this year or later, because the flat is self-occupied.
Interest on a loan for higher education (for yourself, your spouse, your children, or a student you are the legal guardian of) is deductible.
Example:
Rohan is repaying the loan for his MBA. This year he paid ₹85,000 in interest and ₹1,20,000 in principal.
| Item | Paid | Deduction |
|---|---|---|
| Interest, Section 129 (formerly 80E) | ₹85,000 | ₹85,000 |
| Principal | ₹1,20,000 | None |
Under the old regime these deductions stack on top of Section 123 (formerly 80C): NPS adds up to ₹50,000, health insurance up to ₹50,000 + ₹50,000, home loan interest up to ₹2,00,000, and education loan interest without a cap. Whether claiming them makes the old regime come out lower than the new one depends on the total, so compare both on your own figures in the income tax calculator or My tax year.
This lesson is educational, not advice. Rules change; consult a qualified adviser about your own situation.