TaxSaral

Section 123 · was Section 80CCC in the 1961 Act

Pension Fund Premium

Deduction for premium paid toward any annuity plan of LIC or other insurer for receiving pension. In the IT Act 2025 this deduction (formerly Section 80CCC) forms part of Section 123 itself and shares its overall ₹1.5L limit.

Who it applies to: Individuals who pay premiums for pension/annuity plans from LIC or other approved insurers.

Key points

  • This deduction counts within the ₹1.5L limit of Section 123 — it does not give an extra ₹1.5L.
  • Pension received from such annuity plans is taxable as salary in the year of receipt.
  • Surrender of the policy or maturity amount is taxable — only the pension annuity itself is the intended outcome.
  • Not available under the default (new) regime.

Worked example

LIC pension plan premium contributing to ₹1.5L limit

Sunder pays ₹60,000/year premium for an LIC Jeevan Shanti pension plan. He also contributes ₹1,10,000 to EPF.

EPF contribution:       ₹1,10,000
LIC pension premium:    ₹60,000
Total eligible:         ₹1,70,000

Cap under Section 123: ₹1,50,000
Deduction allowed:     ₹1,50,000

(The pension premium is part of Section 123 and shares the same ₹1.5L limit — no additional benefit)

Result: Sunder gets ₹1.5L deduction, not ₹2.1L. His LIC pension plan is counted toward the 80C bucket, not separately. He should verify whether redirecting the LIC premium to Section 124 (NPS — which gives a separate ₹50,000) would be more tax efficient.

Related sections

Not sure how Section 123 applies to you? Ask a question or browse all sections.

Section references are based on the Income Tax Act 2025 (Tax Year 2026-27). Examples are illustrative; verify with a Chartered Accountant before filing.