Deductions Available in New Tax Regime India for FY 2025-26
The new tax regime under Section 115BAC has now become the default tax regime for individual taxpayers in India. For FY 2024-25 relevant to AY 2025-26, many taxpayers still ask one core question: What deductions are actually available in the new tax regime?
This guide gives you a clear, updated, and practical breakdown of deductions available in the new tax regime India, especially for salaried employees, pensioners, and families. You will also find examples, a comparison with the old regime, and guidance on when the new regime makes sense.
What Is the New Tax Regime and Why It Matters in FY 2025-26
The new tax regime offers lower slab rates but removes most popular exemptions and deductions. From FY 2023-24 onwards, it is the default regime, meaning your income is taxed under this system unless you explicitly opt for the old regime.
For FY 2024-25 (AY 2025-26), the slabs under the new regime are:
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹6,00,000 | 5% |
| ₹6,00,001 to ₹9,00,000 | 10% |
| ₹9,00,001 to ₹12,00,000 | 15% |
| ₹12,00,001 to ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
In addition, rebate under Section 87A ensures zero tax if total income does not exceed ₹7,00,000 under the new regime.
Source: Income Tax Department
Deductions Available in New Tax Regime India (At a Glance)
BLUF: The new tax regime allows very limited deductions, but a few important ones can still significantly reduce your taxable income.
New Tax Regime Deductions List FY 2025-26
The following deductions are explicitly allowed under Section 115BAC:
- Standard Deduction of ₹50,000
- Employer NPS contribution under Section 80CCD(2)
- Family pension deduction
- Deduction for agniveer corpus fund under Section 80CCH
- Leave encashment at retirement
- Gratuity exemption
- Compensation on voluntary retirement
- Certain allowances for disabled employees
Let us break each one down in detail.
Standard Deduction ₹50,000 in New Tax Regime
One of the most searched topics is whether the standard deduction ₹50,000 is available in the new tax regime.
✅ Yes, Standard Deduction Is Allowed
From FY 2023-24 onwards, the government extended the standard deduction of ₹50,000 to taxpayers opting for the new tax regime.
- Available to salaried employees and pensioners
- Automatically reduced from gross salary
- No conditions or investment proof required
Example
If your gross salary is ₹10,00,000, your taxable salary becomes ₹9,50,000 after standard deduction.
Source: CBDT Notification
Section 80CCD(2) Deduction in New Tax Regime (Employer NPS)
The biggest tax-saving deduction still available under the new regime is employer contribution to NPS.
What Is Section 80CCD(2)?
Section 80CCD(2) allows a deduction for employer contribution to the National Pension System (NPS).
Employer NPS Contribution Deduction New Tax Regime
- Allowed under both old and new regimes
- Maximum deduction:
- Up to 10% of salary for private sector employees
- Up to 14% of salary for Central and State Government employees
- Salary = Basic + Dearness Allowance
This deduction is over and above the ₹50,000 standard deduction.
Example
Basic + DA = ₹8,00,000
Employer NPS contribution (10%) = ₹80,000
This ₹80,000 is fully deductible under the new tax regime.
Source: Income Tax Act Section 80CCD
Deductions Allowed in New Tax Regime for Salaried Employees
Many salaried taxpayers assume there are no deductions at all under the new regime. That is not true.
Deductions Allowed for Salaried Employees
Under FY 2025-26, salaried employees can claim:
- Standard deduction ₹50,000
- Employer NPS contribution under Section 80CCD(2)
- Gratuity exemption under Section 10(10)
- Leave encashment exemption at retirement
- Voluntary retirement compensation exemption under Section 10(10C)
However, common exemptions like HRA, LTA, professional tax, and Section 80C investments are not allowed.
Family Pension Deduction in New Tax Regime
Another lesser-known but important deduction is available for family pension recipients.
How Family Pension Is Taxed
Family pension is taxed under Income from Other Sources. Under the new tax regime:
- Deduction allowed: ₹15,000 or 33% of pension, whichever is lower
Example
Annual family pension = ₹3,00,000
33% = ₹99,000
Deduction allowed = ₹15,000
Taxable family pension = ₹2,85,000
This deduction is allowed even in the new tax regime.
Source: Income Tax Department FAQ
Deductions Not Allowed in New Tax Regime (Important)
To avoid mistakes while filing your return, note that the following popular deductions are not available:
- Section 80C (PF, LIC, ELSS, PPF)
- Section 80D (medical insurance)
- Section 80E (education loan interest)
- Section 80G (donations)
- HRA exemption
- LTA exemption
- Home loan interest under Section 24(b) for self-occupied property
This is why a new tax regime vs old regime deductions comparison becomes crucial.
New Tax Regime vs Old Regime Deductions Comparison
Key Difference at a Glance
| Particulars | Old Regime | New Regime |
|---|---|---|
| Standard deduction | ₹50,000 | ₹50,000 |
| Section 80C | Up to ₹1,50,000 | Not allowed |
| Section 80D | Allowed | Not allowed |
| Employer NPS (80CCD(2)) | Allowed | Allowed |
| HRA, LTA | Allowed | Not allowed |
| Tax slabs | Higher | Lower |
Which Regime Is Better?
- New regime suits taxpayers with:
- Limited investments
- Higher employer NPS contribution
- Income up to ₹7,00,000
- Old regime suits taxpayers with:
- Full use of Section 80C and 80D
- Home loan interest
- High HRA claims
Tax Saving Options Under New Tax Regime India
Although investment-linked deductions are limited, some smart planning options still exist.
Practical Tax Saving Tips
- Negotiate higher employer NPS contribution
- Use standard deduction fully
- Ensure correct family pension deduction
- Claim retirement-related exemptions properly
- Use Section 87A rebate if income is within ₹7,00,000
Unlike the old regime, tax saving under the new regime focuses more on salary structuring rather than personal investments.
Common Questions Indian Taxpayers Ask About New Regime Deductions
Can I claim Section 80C and 80CCD(2) together?
No. Section 80C is not allowed, but Section 80CCD(2) is allowed because it is an employer contribution.
Is professional tax allowed as a deduction?
No. Professional tax deduction is not available under the new tax regime.
Can pensioners opt for the new regime?
Yes. Pensioners can claim standard deduction ₹50,000 and family pension deduction, where applicable.
Final Thoughts: Should You Choose the New Tax Regime?
The deductions available in the new tax regime are fewer, but they are simple and predictable. For FY 2025-26, the combination of lower tax slabs, standard deduction ₹50,000, employer NPS contribution deduction under Section 80CCD(2), and rebate up to ₹7,00,000 makes the new regime attractive for many Indian taxpayers.
Before filing your return, always do a new tax regime vs old regime deductions comparison using your actual salary structure. Choosing the right regime can save you tens of thousands of rupees legally.
If you want more updates on new tax regime deductions list FY 2025-26 and practical tax-saving strategies for India, stay connected with our Indian Tax Blog.
This content is AI Generated, use for reference only.
