List of Deductions Allowed in New Tax Regime in AY 2025-26 and AY 2026-27

CA Satbir Singh — Tue, 18 Feb 2025 12:42:57 +0000

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)

Refer Also List of Deductions Allowed in New Tax Regime in 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:

Refer also List of Deductions Allowed in New Tax Regime in AY 2026-27

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 (NPS of employer Contribution and Agniveer Corpus fund conribtution of govt allowed). Employees Own Contribtuion to NPS is not allowed, Similary Employee own contribution to Agniveer Corpus fund not allowed
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:

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.

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

Section 87A Rebate : Note that where the total income of a resident individual is chargeable to tax under section 115BAC(1A) and total income does not exceed Rs. 7,00,000, his tax liability shall be reduced by a rebate of up to Rs. 25,000 in view of the proviso to Section 87A. This rebate is also subject to marginal relief.

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)

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

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Deduction under section 80CCD for self-employed individual w.e.f AY 2018-19

CA Satbir Singh — Thu, 22 Feb 2018 13:34:40 +0000

CBDT CIRCULAR NO.2/2018 [F.NO.370142/15/2017-TPL], DATED 15-2-2018

37. Rationalisation of deduction under section 80CCD for self-employed individual.

37.1 The provisions of section 80CCD of the Income-tax Act provide that employees or other individuals shall be allowed a deduction for amount deposited in National Pension System trusts (NPS). The deduction under section 80CCD(1) of the Income-tax Act could not exceed 10% of salary in case of an employee or 10% of gross total income in case of other individuals. However, under the provisions of section 80CCD(2) of the Income-tax Act, further deduction to an employee in respect of contribution made by his employer was allowed up to 10% of salary of the employee. Thus, in case of an employee, the deduction allowed under section 80CCD of the Income-tax Act added up to 20% of salary whereas in case of other individuals, the total deduction under section 80CCD was limited to 10% of gross total income.

37.2 In order to provide parity between an individual who is an employee and an individual who is self-employed, section 80CCD of the Income-tax Act has been amended so as to increase the upper limit of 10% of gross total income to 20% in case of individual other than employee.

37.3 Applicability: This amendment takes effect from 1st April, 2018 and, will accordingly; apply from assessment year 2018-19 and subsequent years.

Atal Pension Yojana notified for 80CCD of Income tax Act

CA Satbir Singh — Mon, 22 Feb 2016 13:37:49 +0000

THE GAZETTE OF INDIA : EXTRAORDINARY [PART II—SEC. 3(ii)]

MINISTRY OF FINANCE

(Department of Revenue)

(CENTRAL BOARD OF DIRECT TAXES)

NOTIFICATION

New Delhi, the 19th February, 2016

Income-tax

S. O. 529(E).— In exercise of the powers conferred by sub-section (1) of section 80CCD of the Income-tax Act, 1961 (43 of 1961), the Central Government hereby notifies the ‘Atal Pension Yojana (APY)’ as published in the Gazette of India, Extraordinary, Part I, Section 1, vide number F. No. 16/1/2015-PR dated the 16th October, 2015 as a pension scheme for the purposes of the said section.

2. This notification shall come into force from the date of its publication in the Official Gazette.

[Notification No. 7 /2016, F.No.173/394/2015-ITA-I]

DEEPSHIKHA SHARMA, Director

Section 80CCD Archives - Tax Heal

List of Deductions Allowed in New Tax Regime in AY 2025-26 and AY 2026-27