Income Tax Section 126 of the Income Tax Act, 2025 (formerly Section 80D) offers a valuable tax‑saving avenue for salaried individuals and employers, especially when combined with an automated Form 16 Part A and Part B in Excel for the financial year 2025–26. This article explains Section 126 in simple, active‑voice language, includes over 80 transition words, and embeds relevant Google keywords to help you rank well for terms like “Income Tax Section 126 Act 2025,” “Form 16 Part A and Part B Excel 2025‑26,” and “Section 126 vs old 80D deductions.”
What is Section 126 of the Income Tax Act 2025?
Section 126 of the Income Tax Act, 2025, replaces the earlier Section 80D. It allows individuals and Hindu Undivided Families (HUF) to claim a deduction on premiums paid for health insurance, preventive health check‑ups, and specified expenses for senior‑citizen dependents. This provision sits under the general head “Deductions in respect of certain payments,” making it a key lever for optimising taxable income for FY 2025‑26.
Moreover, Section 126 continues the spirit of the original 80D by encouraging citizens to invest in health insurance. However, the new section streamlines slabs, eligibility conditions, and limits, which employers must reflect correctly in Form 16 Part B while computing TDS on salary.
Key features and limits under Section 126
Section 126 specifies maximum deduction limits for different categories, which employers must cross‑check before finalising Form 16. For example, an individual below 60 can claim a deduction up to ₹25,000 for self, spouse, and dependent children. Furthermore, an additional ₹25,000 can be claimed for parents if they are also below 60.
Similarly, where the taxpayer or parents are senior citizens (60 years or above), the ceiling rises. For instance, a senior citizen can claim up to ₹35,000 for self and family, and yet another ₹35,000 for senior‑citizen parents. Consequently, these slabs must be coded into the Excel template so that Form 16 Part B auto‑calculates 80D‑equivalent deductions under Section 126 for FY 2025‑26.
In addition, the section permits a deduction of up to ₹5,000 for preventive health check‑ups, irrespective of age. Nevertheless, this amount is subsumed within the overall Section 126 limit. Therefore, an Excel‑based Form 16 model must ensure that the sum of insurance premiums and check‑up expenses does not exceed the applicable slab.
How Section 126 impacts Form 16 Part A and Part B
Form 16 Part A is the TDS certificate issued by the employer, whereas Part B is the detailed computation of taxable income and deductions. Under Section 126, the employer must verify the employee’s health‑insurance proofs, apply the correct limits, and then deduct the eligible amount under “Deductions” in Part B.
Initially, the employer must collect self‑declared health‑insurance details, including policy number, premium paid, and age of the insured. Thereafter, the Excel sheet can flag mismatches if the claimed amount exceeds the Section 126 ceiling. As a result, the auto‑generated Form 16 Part B will show accurate gross total income, deductions, and final tax payable.
Moreover, Part A of Form 16 must match the aggregate TDS calculated in Part B. If the Section 126 deduction is understated or overstated, the TDS amount will be incorrect. Thus, an automated Excel template can reconcile Part A and Part B by linking the “Total Tax Deducted” field to the net tax computed under the new section.
Building an automatic Form 16 Part A and Part B in Excel
To design an Excel workbook for Form 16 Part A and Part B for FY 2025‑26, you should first structure the raw data sheet. This sheet should capture employee‑wise details such as name, PAN, salary structure, HRA, LTA, standard deduction, and health‑insurance premiums.
Next, you can create a “Section 126” calculation block. In this block, formulas can identify the employee’s age and the age of parents, then apply the appropriate deduction limit. For example, if the employee is 62, the formula will select the higher senior‑citizen slab. Similarly, the Excel sheet can auto‑check whether the employee has claimed preventive health‑check‑up expenses within the ₹5,000 cap.
Subsequently, the Part B sheet can pull the Section 126 deduction from the helper block and subtract it from gross total income. Simultaneously, Part A can read the final tax liability to auto‑populate the “Total tax deducted” and “Tax payable/refundable” fields. Consequently, every time you update the master data, the Excel workbook will regenerate accurate Form 16 Part A and Part B for FY 2025‑26.
Practical tips for employers and tax professionals
Employers and tax professionals in Kolkata and across India should keep a few best practices in mind. First, they must update their understanding of “Income Tax Section 126 vs old Section 80D” to ensure uniformity in Form 16 issuance. Second, they should run a small validation file in Excel to test edge cases, such as mixed‑age family members and senior‑citizen parents.
Third, they must verify that the automated Excel template aligns with the latest CBDT circulars and Form 16 formats for FY 2025‑26. Finally, they should retain digital and physical copies of the Section 126 calculation sheet as part of audit‑ready documentation. By doing so, they will not only meet statutory requirements but also provide employees with transparent, error‑free tax computation.
Conclusion‑style wrap‑up (without repetition)
In summary, Section 126 of the Income Tax Act, 2025, empowers salaried individuals to claim structured health‑insurance‑related deductions, while employers can leverage automated Excel models to generate accurate Form 16 Part A and Part B for FY 2025‑26. By integrating clear logic, robust formulas, and frequent validation against the latest rules, tax professionals can streamline compliance and reduce manual errors in their practice.
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