How much of the ₹1.5 lakh savings deduction is left after EPF? (tax year 2026-27)

You open your payslip or Form 16 and see a line for provident fund. Every month a slice of salary goes into your EPF account. Before you buy anything else "to save tax", you want one number: how much of the savings deduction is still unused?

This article answers that for tax year 2026-27 onward, which is governed by the Income-tax Act, 2025. Returns for FY 2025-26 (AY 2026-27) and earlier years fall under the old Income-tax Act, 1961, where this deduction was section 80C. This article does not state the 1961 Act rules. We have two earlier guides on that old section, linked below. If your return is for an earlier year, have a CA confirm which rules apply.

The old names and the new ones

Many readers know this deduction as "80C", with a combined limit under "80CCE". The Income-tax Act, 2025 reorganises them. The official 1961-to-2025 mapping lists the old section 80C as now sitting in section 123 and Schedule XV of the 2025 Act. It lists the old section 80CCE (the combined limit) against section 123 as well.

So when someone says "80C" about tax year 2026-27, read it as section 123 plus Schedule XV.

For the old rules, read our guides on Section 80C deductions for AY 2026-27 and Section 80C deductions for AY 2025-26. Those cover returns under the 1961 Act. This article is about the new Act.

What section 123 says

Section 123 of the Income-tax Act, 2025 is short. An individual or a Hindu undivided family is allowed a deduction of the whole of the amount paid or deposited in the tax year. That amount is the total of the sums listed in Schedule XV, and the deduction cannot exceed ₹1,50,000. It is allowed while computing total income for that year, subject to the conditions in Schedule XV.

Three points follow from those words.

• One limit for the whole list. The ₹1.5 lakh is a single ceiling across every item in Schedule XV. EPF is only one of them.
• Paid in the tax year. The test is what you paid or deposited in the tax year, not what is promised for later.
• Individuals and HUFs only. A company or firm does not get this deduction.

We searched the Finance Act 2026 text for section 123 and Schedule XV and found no amendment to either. It does amend other parts of the 2025 Act, so a CA should still confirm the position when you file.

Where EPF sits in Schedule XV

Schedule XV lists the sums that count. Provident fund items are in paragraph 1:

• Paragraph 1(d): contribution by an individual to any provident fund to which the Provident Funds Act, 1925 applies.
• Paragraph 1(e): contribution to an account with a provident fund set up and notified by the Central Government, in the name of the individual, spouse or any child.
• Paragraph 1(f): contribution by an employee to a recognised provident fund.

Section 2(91) of the Income-tax Act, 2025 defines a "recognised provident fund". It includes a provident fund established under a scheme framed under the Employees' Provident Funds and Miscellaneous Provisions Act, 1952. That is the EPF scheme most salaried people are in.

The wording in paragraph 1(f) is "contribution by an employee". That is your own share, the amount deducted from your pay. The list does not mention the employer's matching contribution as a separate item. Do not count it against your ₹1.5 lakh unless a CA confirms it for your facts. Whether the employer's share is taxable or exempt is a different question under other provisions, and this article does not cover it.

Step by step: find the room left

Step 1. Find your own EPF contribution for the year. Look at your payslips or at the Form 16 salary details. Use the employee share, not the employer share. If your pay changed mid-year, add up each month.

Step 2. Subtract it from ₹1,50,000. The result is the room left under section 123.

Step 3. List what else you paid in the tax year from the Schedule XV items below, and check each one actually qualifies.

Step 4. Stop at the cap. Anything above ₹1,50,000 in total gets no extra deduction under section 123.

A worked example

The numbers below are made up to show the method. They are not a recommendation, and your payslip will differ.

Now suppose in the same tax year you also paid the following.

Together that is ₹70,000, and ₹60,000 + ₹70,000 = ₹1,30,000. The deduction is ₹1,30,000. Room still unused: ₹1,50,000 − ₹1,30,000 = ₹20,000.

If instead those two items had come to ₹1,00,000, the total would be ₹1,60,000. Only ₹1,50,000 is allowed, so ₹10,000 is wasted.

Two catches in this example:

• Life insurance has caps. Paragraph 2 of Schedule XV limits the premium that counts. For a policy issued on or after 1 April 2012 it is up to 10% of the actual capital sum assured. For a policy issued on or before 31 March 2012 it is up to 20%. If the policy is issued on or after 1 April 2013 and covers a person with a disability or severe disability, or a person with a specified disease or ailment, it is up to 15%. A premium above the cap is not counted.
• Tuition fees are narrow. Paragraph 1(q) covers tuition fees only, not development fees or donations, for full-time education of any two children, at a university, college, school or other educational institution in India.

What can fill the room: items listed in Schedule XV

Paragraph 1 of Schedule XV also lists the following. Many need a notification from the Central Government to be specific, so check that your product is the notified one.

• Deferred annuity contracts without a cash option (1(b)).
• Subscription to a security or deposit scheme notified by the Central Government, for a girl child (1(h)).
• Savings certificates under section 3(k) of the Government Savings Banks Act, 1873, as notified (1(i)).
• Unit-linked insurance plans of the kinds named in the paragraph (1(j) and 1(k)).
• Contribution to approved superannuation fund by an employee (1(g)).
• Repayment and other payments for purchase or construction of a house, subject to paragraph 3 (1(r)). Paragraph 3 includes stamp duty and registration fee, and excludes later renovation or repair.
• A term deposit of at least five years with a scheduled bank under a notified scheme (1(s)).
• Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (1(u)).
• A five-year term deposit under the Post Office Time Deposit Rules, 1981 (1(v)).
• Contribution to a notified pension scheme, up to 10% of salary for an employee, or up to 20% of gross total income for another individual (1(y)).
• Subscription to eligible issues of equity shares or debentures, and mutual fund units, approved by the Board (1(z)).

We have not opened the notifications behind the "as notified" items, so we do not say here which products qualify. Check the notification for the specific scheme.

Pension contributions: the separate ₹50,000

Section 124 of the Income-tax Act, 2025 gives a separate deduction of up to ₹50,000 for amounts paid into a pension scheme notified by the Central Government (section 124(3)). But there is a link to section 123:

• Section 124(5) says no deduction under sub-sections (3) and (4) is allowed for the amount on which a deduction has been claimed and allowed under section 123.
• Section 124(10) says the same in reverse: where an amount was allowed under section 124(3), no deduction for that same amount is allowed under section 123.

In short, one rupee cannot be claimed twice. Pension contributions also appear in paragraph 1(y) of Schedule XV, so decide where each rupee will be claimed.

Does the default tax regime allow this deduction?

Section 202 of the Income-tax Act, 2025 is the regime that the official mapping lists against the old section 115BAC. Its rate table starts at nil up to ₹4,00,000 and goes up to 30% above ₹24,00,000.

Section 202(1) applies by default: tax is computed under that table "unless the person exercises the option in the manner provided under sub-section (4)". Section 202(4) says that nothing in sub-section (1) applies to a person who exercises that option, in the prescribed manner, for a tax year. For a person with business or profession income, the option is exercised on or before the return due date under section 263(1), applies to later years once exercised, and can be withdrawn only once. For a person without such income, it is exercised along with the return of income. We have not seen the prescribed form or manner, so check it before you file.

Under section 202(2)(a)(xii), total income under the default regime is computed without any deduction under Chapter VIII, other than section 124(1) and 124(2), section 125(2) and section 146. Section 123 sits in Chapter VIII and is not in that list of exceptions.

So if you stay under section 202, section 123 is not available. If you opt out under section 202(4), section 202(2) does not apply and section 123 stays available, subject to the other provisions of the Act. We have not compared the two routes for any income level. Which is cheaper depends on your whole income, so check with a CA before you choose.

What not to do

• Do not treat ₹1.5 lakh as extra room above EPF. EPF uses part of the same limit.
• Do not count the employer's EPF share against the limit without checking.
• Do not buy a product in March just to fill the cap. Check the Schedule XV paragraph that covers it, and any notification it depends on.
• Do not claim the same payment in section 123 and section 124. Sections 124(5) and 124(10) stop it.
• Do not apply these rules to FY 2025-26. That year is under the 1961 Act.

What to do now

The deduction is for amounts paid or deposited in the tax year (section 123), so your payments must fall inside that year. We have not opened the filing due date for tax year 2026-27 here, so confirm it before you plan.

Have a CA review your facts before you act or file.

FAQs

Is the limit in section 123 still ₹1.5 lakh?
Yes. Section 123 of the Income-tax Act, 2025 says the deduction cannot exceed ₹1,50,000. We found no amendment to it in the Finance Act 2026 text.

Is "80C" the same as section 123?
The official mapping from the 1961 Act to the 2025 Act lists the old section 80C against section 123 and Schedule XV. The combined limit in the old 80CCE also maps to section 123.

Does my employer's EPF contribution use up the limit?
Paragraph 1(f) of Schedule XV speaks of contribution by an employee. The employer's share is not listed as a separate item. Ask a CA before counting it either way.

Can I claim NPS-type contributions here and under section 124?
Not for the same amount. Section 124(5) and section 124(10) block a double claim. Paragraph 1(y) of Schedule XV lists such contributions within the section 123 limit.

I file for FY 2025-26. Which rules apply?
The old Income-tax Act, 1961, where this deduction was section 80C. This article does not state those rules. See our two guides linked above and have a CA confirm.

Can I use section 123 if I stay in the default regime under section 202?
No. Section 202(2)(a)(xii) excludes Chapter VIII deductions, other than a few named ones, and section 123 is not among them. Section 202 is the default, and section 202(4) lets you opt out in the prescribed manner. Check with a CA which route suits you.

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