How Many Deductions Are Allowed in the New Tax Regime?

You just switched to the new tax regime hoping to save money. Now you are wondering which deductions you can still claim. Here is the blunt answer: the new tax regime allows only 6 major deductions, compared to over 70 under the old regime.

That tiny number shocks most taxpayers. The government designed the new regime to offer lower tax rates in exchange for fewer deductions. Whether this trade-off works for you depends entirely on how many deductions you were claiming before.

The 6 Deductions Allowed in the New Tax Regime

The new tax regime under Section 115BAC strips away most exemptions. But these deductions survived. Know them well — they are the only tax planning strategies available to you under this regime.

1. Standard Deduction of 75,000 rupees — Every salaried employee and pensioner gets this automatically. No investment needed. No proof required. The Budget 2024 raised this from 50,000 to 75,000 rupees.
2. Employer's NPS contribution (Section 80CCD(2)) — If your employer puts money into your National Pension System account, you can deduct up to 14% of your basic salary (central government employees) or 10% (everyone else). This is the single most powerful deduction in the new regime.
3. Agniveer Corpus Fund (Section 80CCH) — Agniveer defence recruits can deduct their contributions to the Agniveer Corpus Fund. This applies only to a small group of people.
4. Family pension deduction — If you receive a family pension (after a government employee's death), you can deduct 15,000 rupees or one-third of the pension, whichever is lower.
5. Transport allowance for disabled employees — Employees with specified disabilities can claim exemption on transport allowance for commuting to work.
6. Conveyance allowance for official duties — Money spent travelling for work (not commuting) remains exempt in the new regime.

That is the entire list. No 80C. No HRA. No home loan interest under Section 24. No medical insurance premium under 80D. All gone.

New Tax Regime Rates vs Old Regime: The Real Comparison

Lower rates are the trade. Here is what the new regime charges versus the old one for the financial year 2025-26.

The new regime clearly wins at lower tax rates for income up to 20 lakh rupees. Above that, the gap narrows. If you were claiming heavy deductions under 80C, 80D, HRA, and home loan interest, the old regime might still save you more.

When the New Regime Beats the Old Regime

The math is straightforward. If your total deductions under the old regime are less than 3.75 lakh rupees, the new regime likely saves you money. Here is why.

A person earning 15 lakh rupees with deductions of only 2 lakh rupees pays roughly 1.2 lakh rupees tax in the new regime versus about 1.5 lakh rupees in the old regime. The lower slab rates more than compensate for the lost deductions.

But someone with the same income claiming 5 lakh rupees in deductions (80C + HRA + home loan + 80D) pays less in the old regime. The deductions shrink their taxable income enough to offset the higher rates.

Your break-even point depends on your salary structure and investment habits. Run the numbers for your specific case on the Income Tax Department portal.

Tax Planning Strategies That Still Work in the New Regime

With only 6 deductions available, your options are limited but not zero. Focus here:

1. Maximise employer NPS contribution. Ask your employer to restructure your salary to route more money through NPS. The 80CCD(2) deduction is uncapped by the 1.5 lakh rupees limit that restricts 80C. If your employer contributes 14% of basic salary to NPS, that could be 1.5 to 3 lakh rupees in tax-free income.
2. Claim the full standard deduction. This happens automatically, but make sure your employer reflects it in your Form 16. Some payroll systems have errors.
3. Shift to tax-free income sources. Long-term capital gains up to 1.25 lakh rupees from equity are tax-free regardless of regime. Equity Linked Savings Schemes (ELSS) do not give you a deduction in the new regime, but their returns may still be tax-efficient.
4. Time your income recognition. If you have flexible income (bonuses, freelance payments), try to keep annual income under key slab boundaries. Staying under 12 lakh rupees means you pay just 10% on the highest slab.

Should You Switch Back to the Old Regime?

Salaried employees can switch between regimes every year. Business owners who choose the new regime can switch back only once. So the decision is reversible for most people.

Switch back to the old regime if you claim deductions above 3.75 lakh rupees. Stay in the new regime if your deductions are below that threshold or if you prefer simplicity over optimisation.

The government has made the new regime the default since FY 2023-24. They clearly want people here. Future budgets will likely make the new regime even more attractive by widening slabs or adding deductions. But today, with only 6 deductions, you need to plan carefully.

Frequently Asked Questions

Can I claim 80C deduction in the new tax regime?

No. Section 80C deductions — including PPF, ELSS, life insurance premiums, tuition fees, and home loan principal — are not available in the new tax regime. This is the biggest sacrifice most taxpayers make when switching.

Is the standard deduction available in the new tax regime?

Yes. The standard deduction of 75,000 rupees is available to all salaried employees and pensioners in the new regime. It was increased from 50,000 rupees in the Budget 2024.

Can I claim HRA exemption in the new tax regime?

No. House Rent Allowance exemption under Section 10(13A) is not available in the new regime. If rent is a major expense for you, calculate whether the HRA benefit in the old regime outweighs the lower rates in the new regime.