Deductions and exemptions · Tax Year 2025-26
Deductions allowed in the new tax regime
The new regime allows very few deductions: the standard deduction, the family pension deduction, and your employer's NPS contribution. Section 80C, 80D, HRA and home loan interest on a self-occupied house are not available. See the full picture.
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In the new regime you can claim very few deductions. The main ones are the standard deduction (₹75,000) for salary or pension, the family pension deduction (lower of one-third and ₹25,000), and your employer's contribution to NPS under section 80CCD(2), up to 14% of salary. Section 80C, 80D, home loan interest on a self-occupied house and most others are not allowed.
The figures are for the tax year 2025-26 under the Income-tax Act, 1961, and are signed off in TaxCare's rules. For 2026-27, the first year of the Income-tax Act, 2025, the figures are carried forward provisionally and are not yet signed off against the Finance Act 2026.
What is allowed
Item | Limit on 2025-26 rules |
|---|---|
Standard deduction, salary or pension | ₹75,000 |
Family pension deduction | Lower of one-third of the pension and ₹25,000 |
Employer's NPS contribution, 80CCD(2) | Up to 14% of salary, for every kind of employer |
Transport allowance for a person with disability | ₹38,400 a year |
Salary exemptions such as gratuity and leave encashment on retirement or leaving | Same caps as in the old regime |
Agniveer Corpus Fund, 80CCH | Allowed, up to 46.2% of salary |
Among salary allowances, the new regime does not allow leave travel concession (10(5)), HRA (10(13A)) or most allowances under section 10(14). It keeps the duty-related allowances listed in rule 2BB(1)(a) to (c) and the transport allowance for a person with a disability.
What is not allowed
TaxCare's rules disallow these in the new regime:
- Section 80C, 80CCC, and employee's own 80CCD(1) contribution (the ₹1,50,000 group)
- Extra NPS under 80CCD(1B) (₹50,000)
- Health insurance under 80D, including for parents
- Education loan interest under 80E
- Donations under 80G
- Savings interest under 80TTA and 80TTB
- Home loan interest on a self-occupied house (up to ₹2,00,000 in the old regime)
- Set-off of house property loss against other income
- Most other Chapter VI-A deductions
HRA is an exemption on salary rather than a Chapter VI-A deduction, and it is not available in the new regime either.
How big is the difference?
The new regime has lower slabs and a rebate that gives zero tax up to ₹12,00,000 of taxable income. So for many salaried people the lost deductions do not matter. For someone with a large home loan, health insurance and NPS, the old regime can still win.
Example, salary ₹14,00,000 and ₹1,50,000 under 80C, on the 2025-26 rules:
- New regime: taxable ₹13,25,000, tax ₹81,900 with cess.
- Old regime: taxable ₹12,00,000, tax ₹1,79,400 with cess.
The workings are in old vs new tax regime.
Employer NPS: the useful one
Your employer's contribution to NPS is allowed in the new regime up to 14% of salary, whichever type of employer you have. In the old regime the share is 10% for most employers and 14% for the Central or State Government. This is one of the few ways to cut taxable income in the new regime, if your employer offers it through your salary structure. TaxCare caps the claim at the percentage of your salary as reported under section 17(1).
House property in the new regime
Interest on a self-occupied house gives no deduction, and a house property loss cannot be set off against salary or other income. Rent from a let-out property is still taxed, after the 30% standard deduction. See income from house property explained.
How TaxCare helps
TaxCare applies only the deductions each regime allows, so you do not claim 80C by mistake in the new regime. It then compares the two and shows the lower tax. Nothing is submitted until you approve the return. Try the income tax calculator.
This guide gives general information and is not professional tax advice.
Questions on this topic
Is the standard deduction allowed in the new regime?
Yes. It is ₹75,000 for salary or pension on the 2025-26 rules, against ₹50,000 in the old regime.
Can I claim 80C in the new regime?
No. Sections 80C, 80D, 80TTA and most Chapter VI-A deductions are not allowed.
Is employer NPS allowed in the new regime?
Yes. Your employer's contribution to your NPS account under section 80CCD(2) is allowed, up to 14% of salary.
Can I set off a house property loss in the new regime?
No. House property loss cannot be set off against other income in the new regime.
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