TaxSaral
Section 128Deductionswas Section 80CCC in IT Act 1961

Pension Fund Premium

Deduction for premium paid toward any annuity plan of LIC or other insurer for receiving pension. The deduction is included within the overall ₹1.5L limit of Section 123.

Who this 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

1

LIC pension plan premium contributing to ₹1.5L limit

Scenario

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

Calculation

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

(Section 128 premium is absorbed within 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 127 (NPS — which gives a separate ₹50,000) would be more tax efficient.

Related Sections

Section 123Investments & Insurance Premium (₹1.5L limit)
Section 127Additional NPS Contribution (₹50,000)

Still have questions about Section 128?

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