Which deductions survive in the new regime? The 7 that still work and the 11 that don't
For FY 2025-26 the new tax regime under s.115BAC allows just seven meaningful deductions — standard deduction, employer NPS, family pension, let-out property interest, VRS, Agniveer and exempt employer PF — while disallowing 80C, 80D, HRA, LTA, 80G, 80E and more. Full table inside.
Harun Raaj
Chartered Accountant · Harun Raaj & Associates
In the new tax regime (s.115BAC, ITA 1961), only a handful of deductions survive for FY 2025-26: the ₹75,000 standard deduction, the employer's NPS contribution (s.80CCD(2)), family pension deduction (s.57(iia)), home-loan interest on a let-out property, VRS compensation (s.10(10C)), and the exempt employer PF contribution — while 80C, 80D, HRA, LTA, 80G, 80E, 80CCD(1B) and the rest of Chapter VI-A are gone. The trade-off is deliberate: the new regime compensates with lower slabs (0–4L / 4–8L / 8–12L / 12–16L / 16–20L / 20–24L / above 24L) and a ₹60,000 Section 87A rebate, so the "lost" deductions are often worth less than the slab advantage. The mistake is carrying old-regime expectations — "I get 80C, so the old regime is better" — into a decision that the new regime's math already settled.
Staleness alert: Articles that list HRA, LTA, or 80D as available in the new regime, or that present the new regime as a slight variant of the old, are wrong for every year since the regime began. s.115BAC(2) permits a short, specific list; everything else under Chapter VI-A and the specified s.10 exemptions is disallowed.
The 7 deductions that survive
Two of the seven are worth spelling out because they are misused the most:
- s.80CCD(2) is the employer's contribution, not yours. The deduction is for NPS contributed by the employer to the employee's account, capped at 10% of basic + DA for private employers (14% for central government). The employee's own NPS contribution under s.80CCD(1) and the extra ₹50,000 under s.80CCD(1B) are not allowed in the new regime.
- s.24(b) survives only for a let-out property. Interest on a self-occupied home loan is a popular old-regime deduction and is gone in the new regime. The distinction is whether the house is let out (income computed, interest deductible) or self-occupied (no income, no deduction).
The 11 that don't survive
The pattern is mechanical: s.115BAC(1) disallows every deduction under Chapter VI-A and every specified s.10 exemption; s.115BAC(2) then re-allows the short list in the surviving table. If a deduction is not in s.115BAC(2), it is not available in the new regime — no matter how intuitive it feels.
Worked example: Amit's employer NPS contribution
Persona: Amit, private-sector salaried employee, new regime, FY 2025-26.
Facts:
- Basic + DA ₹5,00,000 per annum
- Employer contributes ₹50,000 per annum to his NPS tier-I account (10% of basic+DA — within the s.80CCD(2) cap)
Step 1 — Confirm the deduction survives. The employer's contribution is deductible under s.80CCD(2), which s.115BAC(2) expressly permits in the new regime. ₹50,000 ≤ 10% of ₹5,00,000, so the full amount is deductible.
Step 2 — Value of the deduction. At a 20% marginal slab, ₹50,000 × 20% = ₹10,000 of tax saved. At 30%, ₹15,000.
Step 3 — The asymmetry to note. If Amit instead made the same ₹50,000 NPS contribution himself (s.80CCD(1B)), the new regime would not allow it — that is the employee-side contribution that died with the regime. The identical ₹50,000 is deductible only when the employer pays it.
What changed FY 2025-26: before/after diff
The deduction list itself did not change for FY 2025-26 — Finance Act 2025 kept s.115BAC(2) intact. What changed is the arithmetic around it: the wider slabs and larger rebate make the "lost" deductions costlier to give up in the old regime, pushing the balance further toward the new regime. The practical effect of "7 survive, 11 don't" is bigger this year than last, not because the list moved but because the alternative got better.
Frequently asked questions
1. Is 80C available in the new regime?
No. LIC premiums, PPF, ELSS, and the employee's EPF contribution under s.80C are disallowed in the new regime. Only the employer-side NPS contribution under s.80CCD(2) survives.2. Can I claim home-loan interest in the new regime?
Only on a let-out property. Interest on a self-occupied home loan under s.24(b) is not deductible in the new regime; interest on a let-out property is allowed as a deduction from house-property income.3. Is my employer's NPS contribution taxed in the new regime?
No — it is deductible. The employer's contribution under s.80CCD(2) is allowed (up to 10% of basic+DA for private employers, 14% for central government). Your own contribution under 80CCD(1)/(1B) is not.4. Does HRA exemption work in the new regime?
No. HRA exemption under s.10(13A) is available only in the old regime. The new regime trades it for the ₹75,000 standard deduction and lower slabs.5. Is the family pension deduction available in the new regime?
Yes — ₹25,000 under s.57(iia). Family pension deduction is a deduction from "income from other sources," not a Chapter VI-A deduction, so it survives in the new regime.6. My employer contributes to EPF — is that affected?
No. The employer's EPF contribution up to 12% of salary is exempt as a perquisite under s.17(2)(viia) in both regimes (with an aggregate cap of ₹7,50,000 per year on exempt employer PF/NPS/superannuation contributions).---
Last verified: 2026-08-05 (FY 2025-26 / AY 2026-27)
Sources: s.115BAC(1) and s.115BAC(2), Income-tax Act, 1961 (Chapter VI-A and specified s.10 exemptions disallowed; permitted list re-allowed); s.16(ia) (standard deduction ₹75,000); s.80CCD(2) (employer NPS, 10%/14% caps); s.57(iia) (family pension ₹25,000); s.24(b) (let-out vs self-occupied); s.10(10C) (VRS, ₹5,00,000); s.10(13A), s.10(5), s.10(14) (disallowed exemptions); s.17(2)(viia) (employer PF exemption). For a deduction-by-deduction regime comparison at your salary, run the Old vs New Regime Calculator or book a consultation at harunraaj.com.
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