New Income Tax Act 2026 from April 1: What deductions and exemptions you lose under new tax regime
Under the New Tax Regime (governed by Section 202 of the Income-tax Act, 2025, which comes into effect on April 1, 2026), taxpayers must compute their total income without claiming a wide range of traditional exemptions and deductions.
Here are the key deductions and exemptions you will lose if you opt for the new tax regime:
1. Chapter VIII Deductions (Investments and Personal Deductions) Most deductions under Chapter VIII are strictly not allowed under the new regime. This means you lose the ability to claim:
- Specified Savings & Investments (Section 123): The aggregate deduction of up to ₹1,50,000 for life insurance premiums, contributions to provident funds, deferred annuities, and other specified savings instruments.
- Health Insurance & Medical Expenses (Sections 126 & 128): Deductions for health insurance premiums and preventive health check-ups, as well as deductions for medical expenditures incurred for treating specific prescribed diseases or ailments.
- Disability Deductions (Sections 127 & 154): Deductions allowed for the medical treatment, maintenance, and rehabilitation of a dependent with a disability, or flat deductions allowed for an assessee with a disability.
- Interest Income (Section 153): Deductions on interest income earned from savings accounts and time deposits with banks, co-operative societies, or post offices.
2. Salary Exemptions and Deductions
- House Rent Allowance (HRA): The exemption for special allowances granted by an employer to meet residential rent expenses (Schedule III, Sl. No. 11) is forfeited.
- Professional Tax: The deduction for tax on employment paid by the assessee is not allowed.
- Other Allowances/Perquisites: Any exemption or deduction for allowances or perquisites provided under any other law in force is also lost.
3. House Property Deductions and Set-offs
- Home Loan Interest: The deduction for interest paid on borrowed capital for self-occupied residential properties is not allowed.
- Loss Set-off: Taxpayers lose the right to set off losses under the head “Income from house property” against income from any other head.
4. Other Specific Exemptions
- Minor Child Income: The exemption (up to ₹1,500 per child) for the income of a minor child that is included in the parent’s total income is no longer available.
- Various other specific allowances and exemptions listed under Schedule III (such as those under Sl. Nos. 5, 6, 7, 8, 12, and 13) are not allowed.
5. Business and Profession Deductions Taxpayers with business income who opt for the new regime will lose several specific business-related deductions, including:
- Additional depreciation on new machinery or plant.
- Deductions for newly established units in Special Economic Zones (SEZs) under Section 144.
- Deductions for specified businesses under Section 46.
- Deductions related to Tea, Coffee, and Rubber development accounts or Site Restoration Funds.
- Deductions for specific scientific research expenditures or agricultural extension projects.
- The ability to set off any carried forward losses or depreciation from earlier tax years if those losses are attributable to any of the above disallowed deductions.