Deductions Under New Tax Regime (FY 2025-26): Complete List, Rebate, and Employer Benefits Explained

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by

Himanshu
in

Deductions Available Under the New Tax Regime (FY 2025-26, AY 2026-27)

The New Tax Regime under Section 115BAC has become the default tax regime from FY 2023-24 onwards. It offers lower tax rates but removes most exemptions and deductions available under the old regime.

Still, many taxpayers are confused about what deductions are allowed in the new regime and which benefits are only available through the employer. Let’s break it down in detail.

✅ Deductions Allowed Under the New Regime

Unlike the old tax system, the new regime allows only a few specific deductions. These are categorized into individual benefits and employer-linked benefits.

1. Deductions Available to Individuals

These are deductions you can directly claim in your ITR without depending on your employer:

  • Standard Deduction: ₹75,000 for salaried individuals and pensioners.
  • Family Pension Deduction: 1/3rd of family pension or maximum ₹15,000.
  • Agniveer Corpus Fund (Section 80CCH): Contribution by an individual (Agniveer) is fully deductible.

2. Deductions Available Only Through Employer (Company-Controlled)

These deductions depend on employer contributions and cannot be claimed on your own:

  • Employer’s Contribution to NPS (Section 80CCD(2))
    • Up to 10% of salary (Basic + DA) for private sector employees.
    • Up to 14% of salary for government employees.
  • Employer’s Contribution to EPF / Superannuation / NPS (Combined Limit)
    • Tax-free up to ₹7.5 lakh per year. Excess is taxable.
  • Transport & Conveyance Allowances (for specially-abled employees)

❌ Deductions Not Available in New Tax Regime

The following popular deductions are not allowed:

  • Section 80C (LIC, PPF, ELSS, NSC, etc.)
  • Section 80D (Health Insurance Premium)
  • Section 80E (Education Loan Interest)
  • Section 24(b) (Home Loan Interest on Self-Occupied Property)
  • HRA Exemption
  • LTA (Leave Travel Allowance)
  • Savings account interest deduction (80TTA/80TTB)

📊 Income Tax Slabs in New Regime (FY 2025-26)

Annual IncomeTax Rate
Up to ₹3,00,000Nil
₹3,00,001 – ₹7,00,0005% (but rebate makes effective tax Nil)
₹7,00,001 – ₹10,00,00010%
₹10,00,001 – ₹12,00,00015%
₹12,00,001 – ₹15,00,00020%
Above ₹15,00,00030%

🧾 Rebate Under Section 87A (Maximum Rebate)

  • Available for resident individuals.
  • Income up to ₹7,00,000 → Full rebate, no tax payable.
  • Maximum rebate = ₹25,000 under the new regime.
  • This means your effective tax liability becomes zero if your income is within ₹7 lakh (after deductions allowed).

📋 Comparison of Deductions: Old vs New Regime

Deduction/ExemptionOld RegimeNew Regime (Individual)New Regime (Employer Controlled)
Standard Deduction (Salary/Pension)₹50,000₹75,000–
80C (LIC, PPF, ELSS, etc.)✅❌–
80D (Medical Insurance)✅❌–
80E (Education Loan)✅❌–
24(b) Home Loan Interest (Self-occupied)✅❌–
HRA, LTA✅❌–
Family Pension Deduction✅✅ (up to ₹15,000)–
Employer’s NPS Contribution (80CCD(2))✅❌✅ (10% Private, 14% Govt)
Employer’s EPF/Superannuation/NPS (combined)✅❌✅ (Max ₹7.5 lakh)
Agniveer Corpus Fund (80CCH)–✅–

🔑 Key Takeaways

  • The new regime is simpler with fewer deductions.
  • Only 3 deductions are available to individuals: Standard Deduction, Family Pension Deduction, and Agniveer Corpus Fund.
  • Employer-linked deductions like NPS and EPF contributions are still available but depend on company policies.
  • The maximum rebate under Section 87A is ₹25,000, making income up to ₹7 lakh effectively tax-free.