Deductions Allowed Under the New Tax Regime (FY 2025-26)
Last verified: June 2026, against the Income Tax Act and Budget 2025 provisions cited below. Figures apply to FY 2025-26 (AY 2026-27). General information, not personal tax advice.
A common myth is that the new tax regime allows no deductions. Not true — it disallows most of the popular ones (80C, 80D, HRA), but a useful handful survive. Knowing them helps you keep some tax breaks even on the default regime. Here is what you can still claim under the new regime for FY 2025-26.
Deductions you keep under the new regime
- Standard deduction of ₹75,000 for salaried and pensioners — see our standard deduction guide.
- Employer’s NPS contribution under Section 80CCD(2) — up to 14% of basic salary for private-sector employees. This is the single biggest tax break still available in the new regime.
- Family pension deduction of up to ₹25,000.
- Transport allowance for specially-abled employees, and certain allowances under Section 10(14) — see allowance exemptions.
- Employer contributions and certain retirement benefits (gratuity, leave encashment exemptions) that apply regardless of regime.
- Interest on a let-out property remains deductible against that rental income (though the loss cannot be set off against other heads).
What you lose under the new regime
The new regime does not allow 80C (PF/ELSS/insurance), 80D (health insurance), HRA exemption, 80CCD(1B) (the extra ₹50,000 NPS), 80E, 80G, 80TTA/80TTB, or self-occupied home-loan interest under Section 24(b). If you rely heavily on these, run the numbers on the old vs new comparison.
The 80CCD(2) lever most people miss
Because the employer’s NPS contribution (80CCD(2)) is allowed even under the new regime, asking your employer to route part of your CTC as an NPS contribution can reduce taxable salary without switching regimes. See NPS tax benefits.
Worked example: the value of employer NPS
An employee with a ₹20 lakh salary and ₹10 lakh basic pay asks her employer to route 14% of basic (₹1.4 lakh) into NPS under 80CCD(2). New-regime tax (FY 2026-27, after the ₹75,000 standard deduction):
- Without employer NPS: taxable ₹19.25 lakh → tax ≈ ₹1,92,400 including cess.
- With employer NPS: taxable ₹17.85 lakh → tax ≈ ₹1,63,280.
- Saving: about ₹29,100 a year, and the ₹1.4 lakh builds retirement savings.
Full list of what still works in the new regime
- Standard deduction of ₹75,000 for salary and pension; ₹25,000 for family pension.
- Employer contribution to NPS (80CCD(2)), up to 14% of basic.
- Agniveer Corpus Fund contributions (80CCH).
- Interest on a loan for a let-out property, set off against its rental income.
- Gratuity, leave encashment (up to ₹25 lakh) and VRS exemptions, plus transport allowance for specially-abled employees.
Use the income tax calculator to compare regimes with your numbers, and read old vs new regime for FY 2026-27.
What changes under the Income-tax Act, 2025
The Income-tax Act, 2025 replaced the 1961 Act from 1 April 2026. Returns for FY 2025-26 (AY 2026-27) are still filed under the old Act, old section numbers and old forms. From tax year 2026-27 onwards, section numbers and many form numbers change — for example, Form 16 becomes Form 130, Forms 15G/15H merge into Form 121, Form 26QB becomes part of Form 141 and Form 10E becomes Form 39. The underlying rules discussed here were largely carried over; only the references change.
FAQs
Is the new regime list the same for FY 2026-27?
Yes. Budget 2026 did not change the new-regime slabs or the deductions it allows.
Can I claim 80C under the new regime?
No. 80C is not available under the new regime. The main surviving breaks are the standard deduction and employer NPS (80CCD(2)).
Is HRA exempt under the new regime?
No, the HRA exemption is only available under the old regime.
What is the most valuable new-regime deduction?
The employer’s NPS contribution under 80CCD(2) — up to 14% of basic for private employees.
Does the standard deduction apply in the new regime?
Yes — ₹75,000 for salaried individuals and pensioners.