New Tax Regime: Deductions & Exemptions You Can Still Claim

Choosing the New Tax Regime? Know the Tax Benefits Still Available

The New Tax Regime under Section 115BAC offers simplified tax rates with limited deductions and exemptions.

Under the New Tax Regime, many commonly claimed tax benefits are not available, including:

❌ Deduction under Section 80C – LIC, PPF, ELSS, Tuition Fees, etc.
❌ Medical Insurance Premium under Section 80D
❌ House Rent Allowance (HRA) Exemption
❌ Leave Travel Allowance (LTA) Exemption
❌ Interest on Education Loan under Section 80E
❌ Donations under Section 80G
❌ Deduction for Interest on Self-Occupied Housing Loan under Section 24(b)
❌ Most other Chapter VI-A deductions

However, the New Tax Regime does not mean that every deduction or exemption is lost.

Tax Benefits Still Available Under the New Tax Regime

1. Standard Deduction – ₹75,000

Salaried employees and eligible pensioners can claim a standard deduction of up to ₹75,000 from salary income under the New Tax Regime.

No separate investment or expenditure proof is required for claiming this deduction.

2. Employer’s Contribution to NPS – Section 80CCD(2)

Contribution made by an employer to the employee’s National Pension System (NPS) account is eligible for deduction, subject to the prescribed limits.

Under the New Tax Regime, deduction under Section 80CCD(2) can be an important tax-planning benefit for salaried employees.

3. Deduction for Additional Employee Cost – Section 80JJAA

Eligible businesses can claim deduction under Section 80JJAA for additional employee cost, subject to fulfilment of the prescribed conditions.

This deduction may provide a significant tax benefit to growing businesses generating new employment.

4. Agniveer Corpus Fund – Section 80CCH

Eligible contributions relating to the Agniveer Corpus Fund can continue to qualify for deduction under Section 80CCH, subject to applicable provisions.

5. Gratuity Exemption – Section 10(10)

Eligible gratuity received by an employee continues to be exempt from tax, wholly or partly, subject to the conditions and monetary limits prescribed under the Income-tax Act.

6. Leave Encashment Exemption – Section 10(10AA)

Eligible leave encashment received at the time of retirement or otherwise, as applicable, may continue to qualify for exemption subject to prescribed conditions and limits.

7. Voluntary Retirement Scheme (VRS) Exemption – Section 10(10C)

Compensation received under an eligible Voluntary Retirement Scheme may qualify for exemption under Section 10(10C), subject to prescribed conditions.

8. Interest on Housing Loan for Let-Out Property

In the case of a let-out property, interest on borrowed capital may be considered while computing income from house property in accordance with Section 24(b).

However, the treatment of house property loss under the New Tax Regime is subject to specific restrictions.

Therefore, taxpayers having rental properties should carefully review the tax computation before filing their Income Tax Return.

9. Family Pension Deduction – Up to ₹25,000

Taxpayers receiving family pension can claim a deduction of:

One-third of the family pension received or ₹25,000, whichever is lower.

10. Gifts – ₹50,000 Threshold

Gifts received without consideration may not be taxable where the aggregate value does not exceed ₹50,000 during the financial year, subject to Section 56(2)(x).

Further, gifts received from specified relatives or on specified occasions may also be exempt, subject to applicable provisions.

Important: ₹50,000 is a threshold and not a general deduction from taxable income.

11. Allowance for Official Duties

Certain allowances granted to meet expenses wholly, necessarily and exclusively incurred in the performance of official duties may continue to receive tax treatment as specifically permitted under the New Tax Regime.

The eligibility depends on the nature of the allowance and applicable Income-tax Rules.

12. Perquisites and Facilities for Official Purposes

Certain facilities, reimbursements or benefits provided by an employer exclusively for official purposes may not be treated as taxable perquisites, subject to the applicable provisions and prescribed conditions.

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Old Tax Regime or New Tax Regime – Which Is Better?

There is no single tax regime that is best for every taxpayer.

The right choice depends on several factors, including:

• Salary and total taxable income
• HRA exemption eligibility
• Home loan interest
• Section 80C investments
• Medical insurance premium
• Employer’s NPS contribution
• Rental income
• Other eligible deductions and exemptions

A proper Old Tax Regime vs New Tax Regime comparison should be prepared before filing the Income Tax Return.

Plan Your Taxes Before You File

Choosing the correct tax regime can result in significant tax savings.

For professional assistance in Income Tax Planning, Tax Regime Comparison and Income Tax Return Filing, feel free to contact us.

CA Priya A. Boda

📞 9714088677
✉️ caansid@gmail.com

Disclaimer: This article is for general informational purposes only. Tax provisions are subject to amendments and individual facts and circumstances. Professional advice should be obtained before taking any tax position.