List of Deductions Allowed in New Tax Regime in
Section 115BAC of Income Tax Act
There are certain Deductions Allowed in New Tax Regime in FY 2024-25 (AY 2025-26) and FY 2025-26 (AY 2026-27)
Comparison of exemption/deductions available under the old tax regime and new tax regime of Section 115BAC
Here’s the updated table incorporating the additional list, with changes highlighted:
| Particulars | Old tax regime | New tax regime |
|---|---|---|
| Standard Deduction [Section 16(ia)] | Available Upto Rs 50000 | Available Upto Rs 75000 |
| Leave Travel concession [Section 10(5)] | Available | Not Available |
| House Rent Allowance [Section 10(13A)] | Available | Not Available |
| Children Education Allowance [Section 10(14)] | Available | Not Available |
| Hostel Expenditure Allowance [Section 10(14)] | Available | Not Available |
| Official and personal allowances (other than those as may be prescribed) [Section 10(14)] | Available | Not Available |
| Allowances to MPs/MLAs [Section 10(17)] | Available | Not Available |
| Entertainment Allowance [Section 16((ii)] | Available | Not Available |
| Professional Tax [Section 16(iii)] | Available | Not Available |
| Interest on housing loan for self-occupied house property [Section 24(b)] | Available | Not Available |
| Deduction for Health Insurance Premium [Section 80D] | Available | Not Available |
| Deduction under Sections 80C to 80U other than specified under Section 80CCD(2), and Section 80CCH(2) [Chapter VI-A] | Available | Not Available |
| Set-off of any loss under the head “Income from house property” with any other head of income | Available | Not Available |
| Exemptions or deductions for allowances or perquisites provided under any other law for the time being in force | Available | Not Available |
Income not Taxable in New Tax Regime
- Transport allowance if provided to specially-abled persons.
- A conveyance allowance was received as compensation for the expenditure incurred as a part of the employment.
- Allowance is received to meet the expenses of tour, transfer, or travel.
- Daily allowance received in order to meet the ordinary expenses due to his absence from the place of duty.
- Perquisites received for official purposes.
- Exemption on voluntary retirement under section 10(10C), leave encashment u/s 10(10AA) and gratuity under section 10(10).
- Gifts received upto Rs.50,000 in relevant Assessment Year.
List of other Deductions Allowed in New Tax Regime
A) National Pension Scheme (NPS) -u/s 80CCD(2)
B) Contribution to Agniveer Corpus Fund u/s 80CCH(2)
Here is the detailed explanations on above deductions
A) Deduction for National Pension Scheme (NPS)-u/s 80CCD(2)
This is allowed in Section 80CCD(2) of income tax Act It’s an important part of understanding tax benefits related to the National Pension Scheme (NPS). Here’s a breakdown:
What is Section 80CCD(2)?
Section 80CCD(2) of the Income Tax Act deals with deductions for contributions made by your employer to your National Pension Scheme (NPS) account. This is a separate benefit in addition to the deductions you can claim for your own contributions to NPS under Section 80CCD(1).
Key Points about 80CCD(2):
- Employer’s Contribution: This deduction is specifically for the amount your employer contributes to your NPS account.It’s a part of your compensation package but is directly deposited into your NPS account.
- For Salaried Individuals: This deduction is only available to salaried employees. Self-employed individuals cannot claim deductions under 80CCD(2).
- Limit: The maximum amount you can claim under this section is:
- 14% of your salary (basic + dearness allowance) for government employees or Private Employes
How it Works:
- Your Employer Contributes: Your employer makes regular contributions to your NPS account.
- Tax Deduction: At the time of filing your income tax return, you can claim a deduction under Section 80CCD(2) for the amount contributed by your employer, up to the limits mentioned above.
- Reduced Taxable Income: This deduction reduces your taxable income, which in turn lowers your income tax liability.
Scenario:
- Employee: Priya
- Financial Year (FY): 2024-25 (AY 2025-26)
- Salary (Basic + DA): ₹10,00,000 per annum
- Employer: A private company (non-government)
- Priya’s Contribution to NPS (80CCD(1)): ₹50,000
- Employer’s Contribution to NPS (80CCD(2)): ₹1,50,000 (15% of salary)
- Priya opts for the New Tax Regime (Section 115BAC).
- Total Income (Before Deductions): ₹12,00,000
Calculations:
80CCD(1) – Employee’s Contribution:
- Under the new tax regime, Priya cannot claim a deduction for her own contribution of ₹50,000 if New Tax Regime is opted.
80CCD(2) – Employer’s Contribution:
- For AY 2025-26 (FY 2024-25), the employer’s contribution limit under 80CCD(2) in the new tax regime is 14% of salary.
- Employer contribution limit = 14% of 10,00,000 = 1,40,000
- Employers actual contribution = 1,50,000
- Therefore Priya can only claim 1,40,000 rupees as a deduction. The extra 10,000 rupees can not be claimed.
Total Taxable Income:
- Total income (before deductions): ₹12,00,000
- Deduction 80CCD(2): 1,40,000
- Taxable income: ₹12,00,000 – 1,40,000 = 10,60,000
Tax Calculation:
- Priya’s tax will be calculated based on the new tax regime slabs for ₹10,60,000.
Key Change:
- Even though the employer contributed 15%, Priya can only claim up to the legal limit of 14% of her salary, which is 1,40,000 rupees.
- By understanding and utilizing Section 80CCD(2), you can significantly reduce your tax burden and build a secure retirement corpus through NPS.
B) Contribution to Agniveer Corpus Fund u/s 80CCH(2)
Section 80CCH(2) of the Income Tax Act deals with deductions for contributions made to the Agniveer Corpus Fund. Here’s a breakdown:
You are absolutely correct. My apologies for the oversight. Thank you for providing the accurate text of Section 80CCH. Let’s correct the explanation:
Section 80CCH: Deduction in respect of contribution to Agnipath Scheme
This section deals with deductions for contributions related to the Agniveer Corpus Fund under the Agnipath Scheme. Here’s a precise breakdown based on the provided text:
80CCH(1): Agniveer’s Own Contribution:
- If an individual enrolled in the Agnipath Scheme contributes to the Agniveer Corpus Fund on or after November 1, 2022, they can deduct the entire amount they contributed from their total income in Old Tax regime but this is not allowed in New Tax Regime u/s 115BAC.
- This means a 100% deduction of the Agniveer’s personal contribution in Old Tax regime
80CCH(2): Central Government’s Contribution:
- If the Central Government makes a contribution to the Agniveer’s account in the Agniveer Corpus Fund, the Agniveer can also deduct the entire amount of the government’s contribution from their total income in Old / New Tax Regime
- This means a 100% deduction of the government contribution Old / New Tax Regime
Key Definitions (Explanation):
- Agnipath Scheme: Refers to the scheme for enrollment in the Indian Armed Forces as detailed in the Ministry of Defence letter dated December 29, 2022.
- Agniveer Corpus Fund: Is the fund that holds the combined contributions of all Agniveers, the matching contributions from the Central Government, and the interest accrued on these contributions.
Absolutely. Let’s create a clear example of how Section 80CCH(2) works for an Agniveer in the new tax regime (Section 115BAC), where it’s the only allowed deduction related to the Agniveer Corpus Fund.
Scenario:
- Agniveer Rohan: Rohan is enrolled in the Agnipath Scheme and is contributing to the Agniveer Corpus Fund.
- Government Contribution: During the financial year 2023-24, the Central Government contributed ₹50,000 to Rohan’s account in the Agniveer Corpus Fund.
- Rohan’s Own Contribution: Rohan himself contributed ₹30,000 to the fund.
- Rohan opts for the New Tax Regime (Section 115BAC).
- Rohan’s Total Income (Before Deductions): ₹6,00,000
How Section 80CCH(2) Applies:
- Government Contribution Deduction:
- Under Section 80CCH(2), Rohan can deduct the entire ₹50,000 contributed by the Central Government.
- Rohan’s Own Contribution:
- Under the new tax regime, Rohan cannot deduct his own contribution of ₹30,000. This is because 80CCH(1) is not allowed under 115BAC.
- Calculation of Taxable Income:
- Rohan’s total income (before deductions): ₹6,00,000
- Deduction under 80CCH(2): ₹50,000
- Rohan’s taxable income: ₹6,00,000 – ₹50,000 = ₹5,50,000
Result:
- Rohan’s taxable income is reduced to ₹5,50,000 due to the deduction under Section 80CCH(2).
- Rohan will then calculate his tax based on the new tax regime tax slabs using the 5,50,000 taxable income.
Key Points to Emphasize:
- In the new tax regime, only the government’s contribution to the Agniveer Corpus Fund (80CCH(2)) is deductible.
- The Agniveer’s own contributions (80CCH(1)) are not deductible under the new tax regime.
- This is a very important distinction,.
Absolutely! Here’s the information presented in a clear tabular format:
Deductions Allowed in New Tax Regime : Family Pension Section 57(iia) –
| Feature | Old Tax Regime ( AY 2025-26 and AY 2026-27) | New Tax Regime (Section 115BAC) (AY 2025-26 and AY 2026-27) |
|---|---|---|
| Deduction Calculation | 33.33% of family pension income or ₹15,000, whichever is lower. | 33.33% of family pension income or ₹25,000, whichever is lower. |
| Maximum Deduction Limit | ₹15,000 | ₹25,000 |
| Applicability | Applies to all taxpayers receiving family pension. | Applies to taxpayers who have opted for the new tax regime (Section 115BAC). |
| Effective in | AY 2025-26 and AY 2026-27 | Assessment Year 2025-26 onwards |
Key Points:
- Family Pension Definition: “Family pension” is a regular monthly payment by an employer to a family member of a deceased employee.
- Deduction Calculation: In both regimes, the deduction is calculated as 33.33% of the family pension income.
- Maximum Limit Increase: The key change is the increase in the maximum deduction limit from ₹15,000 to ₹25,000 for those who opt for the new tax regime from AY 2025-26.
Deductions Allowed in New Tax Regime for Interest on Housing Loan
| House Status | Deductibility of Interest | Limit |
|---|---|---|
| Rented | Deductible against rental income | No limit |
| Self-Occupied | Not deductible | – |
let’s compare the two scenarios side-by-side to highlight the differences in tax treatment under the new regime:
| Feature | Example 1: Rented House | Example 1: Self-Occupied House |
|---|---|---|
| A. Gross Business Income | ₹5,00,000 | ₹5,00,000 |
| B. Rental Income | ₹3,00,000 | – |
| C. Home Loan Interest | ₹1,50,000 | ₹1,50,000 |
| D. 30% Standard Deduction | Applicable on Rental Income (Rs 300000*30% = ₹90,000) | Not Applicable |
| E . Home Loan Interest Deduction | Rs 150000 is Deductible against Rental Income | Not Deductible |
| F. Net Income from House Property | ₹60,000 ( Rs 300000-Standared Deduction of Rs 90000 Less Home Loan Interest Rs 150000) | – |
| G. Total Taxable Income | ₹5,60,000 ( A+F) | ₹5,00,000 |
Key Takeaways from the Comparison
Taxable Income:
- Rented House: The taxable income is lower (₹5,60,000) due to the deduction of home loan interest and the 30% standard deduction on rental income.
- Self-Occupied House: The taxable income remains higher (₹5,00,000) as there are no deductions available.
Tax Liability: Amit would pay less tax in the scenario where the house is rented out, as his taxable income is lower.
Income Tax Slab Rates for FY 2024-25 (AY 2025-26) in New Tax Regime
| Income tax rates | Income slab (Rs.) previously under new tax regime For FY 2023-24 (AY 2024-25) | Income slab (Rs.) under new tax regime for FY 2024-25(AY 2025-26) |
| 0% | Upto Rs 3,00,000 | Upto Rs 3,00,000 |
| 5% | From Rs 3,00,001 to 6,00,000 | From Rs. 3,00,001 to Rs. 7,00,000 |
| 10% | From Rs 6,00,001 to 9,00,000 | From 7,00,001 to Rs. 10,00,000 |
| 15% | From Rs 9,00,001 to 12,00,000 | From Rs. 10,00,001 to Rs. 12,00,000 |
| 20% | From Rs 12,00,001 to 15,00,000 | From Rs. 12,00,001 to Rs. 15,00,000 |
| 30% | Rs 15,00,000 and above | Above Rs. 15,00,000 |
Rebate and Marginal Relief in Section 87A
| Feature | Old Tax Regime | New Tax Regime (Section 115BAC) |
|---|---|---|
| Maximum Income Limit | ₹5,00,000 | ₹7,00,000 (with additional rebate for higher incomes) |
| Rebate Amount | 100% of income tax or ₹12,500, whichever is less | 100% of income tax or ₹25,000, whichever is less (for incomes up to ₹7,00,000) Excess of income tax over the amount by which income exceeds ₹7,00,000 (for incomes above ₹7,00,000) |
This table highlights the key differences in the rebate available under the old and new tax regimes. The new regime offers a higher rebate for lower incomes and also provides a rebate for incomes above ₹7,00,000, although the calculation is different.
Income Tax Slab Rates for FY 2025-26 (AY 2026-27) in New Tax Regime
| Total Income (Rs.) | Rate of Tax |
|---|---|
| Up to 4,00,000 | Nil |
| 4,00,001 to 8,00,000 | 5% |
| 8,00,001 to 12,00,000 | 10% |
| 12,00,001 to 16,00,000 | 15% |
| 16,00,001 to 20,00,000 | 20% |
| 20,00,001 to 24,00,000 | 25% |
| Above 24,00,000 | 30% |
Increase in Section 87A Rebate
From assessment year 2026-27 onwards, the rebate under section 87A will be available to individuals resident in India whose income is chargeable to tax under subsection (1A) of section 115BAC. The limit of total income for rebate will be enhanced from Rs. 7,00,000 to Rs. 12,00,000. The limit of rebate will be increased from Rs. 25,000 to Rs. 60,000. The deduction under the first proviso to section 87A shall not exceed the amount of income tax payable as per the rates provided in subsection (1A) of section 115BAC.
Refer Govt of India Website