Opting new tax regime – Basic Conditions

Salary Deductions Available Under the New Tax Regime

• Standard Deduction: The standard deduction is available to salaried employees and family pensioners (subject to prescribed conditions). Amount Available is INR 75,000 from Salary Income (currently applicable under the new regime). Example Gross Salary: INR 1,200,000, Less: Standard Deduction: INR 75,000 and Taxable Salary: INR 1,125,000. This deduction is automatic and does not require any investment or proof.

Chapter VI-A Deductions Still Available

• Although most deductions under Chapter VI-A are not available, certain specific deductions continue to be permitted.

Section 80CCD(2) – Employer’s Contribution to NPS

• This is one of the biggest tax-saving opportunities under the new regime. Eligible Persons: Employees receiving employer contributions to NPS. Deduction Available
  • Up to 14% of salary (basic + DA) for central/state government employees.
  • Up to 10% of salary (Basic + DA) for other employees, subject to prescribed limits.
• Example: Basic Salary + DA = INR 10,00,000; Employer contributes INR 1,00,000 to NPS. And the entire INR 100,000 can be claimed u/s 80CCD(2), reducing taxable income. It’s important to note that this deduction is over and above the standard deduction.

Section 80CCH(2) – Agniveer Corpus Fund

• Applicable only to individuals enrolled under the Agnipath Scheme. Benefit: A contribution made by the central government to the Agniveer Corpus Fund is allowed as a deduction. Not applicable to regular taxpayers.

Section 80JJAA – Additional Employee Cost 

• Applicable to eligible businesses. Deduction: Businesses employing additional eligible employees can claim a deduction for additional employee costs. Available to companies, firms, and proprietary concerns subject to conditions. This is a business deduction rather than an individual tax-saving option.

Exempt Allowances Still Available U/s 10(14)

Certain allowances granted wholly for official duties remain exempt.

• Travelling Allowance: Granted for official tours and transfers. Only actual expenditure incurred for official purposes qualifies.
• Daily Allowance: Provided during official tours and official travel, exempt to the extent spent for official duties.
• Conveyance / Office Duty Allowance: Used for conveyance expenses while performing official duties. And exemption is available to the extent actually incurred.
• Helper Allowance: Applicable when a helper is employed for official work. An exemption allowed for actual expenses incurred.
• Research Allowance: Granted for academic research, scientific research, and professional research activities. Exemption available when used for official purposes.
• Uniform Allowance: Provided for purchase and maintenance of uniforms required during employment. Exemption restricted to actual expenditure incurred.
• Transport Allowance: Generally withdrawn under the new regime. However, exemption continues for Employees with specified disabilities and Other notified cases

Deductions/Exemptions NOT Available Under the New Tax Regime

Here we highlight that the following benefits are generally not available:

Salary-Related Exemptions

• House Rent Allowance
• Leave Travel Allowance

Chapter VI-A Deductions

• Section 80C—LIC Premium, PPF, ELSS, NSC, Sukanya Samriddhi Yojana and Principal repayment of housing loan
• Under Section 80D—Medical Insurance Premium
• Section 80E—Education Loan Interest
• Under  Section 80G—Donations to approved funds/institutions
• Most other Chapter VI-A deductions
• House Property Benefits: Interest on self-occupied housing loan under Section 24(b) (Generally not claimable under the new regime for self-occupied property.)

𝐈𝐧𝐜𝐨𝐦𝐞 𝐓𝐚𝐱 𝐂𝐚𝐥𝐜𝐮𝐥𝐚𝐭𝐢𝐨𝐧 𝐟𝐨𝐫 INR 𝟓𝟎 𝐋𝐚𝐤𝐡 𝐒𝐚𝐥𝐚𝐫𝐲

Practical Tax Planning Under the New Regime

The new tax regime does not completely eliminate deductions. While popular deductions like 80C, 80D, House Rent Allowance, and Leave Travel Allowance are largely unavailable, taxpayers can still benefit from the standard deduction, the employer’s NPS contribution u/s 80CCD(2), specified business deductions, and certain official-duty allowances under Section 10(14). For many salaried individuals, maximizing employer NPS contributions along with the standard deduction remains the most effective tax planning strategy under the new regime. For salaried taxpayers, the major benefits still available are:

1. Standard Deduction: 75,000
2. Employer’s NPS Contribution [Section 80CCD(2)]
3. Exempt official duty allowances under Section 10(14)
4. Tax rebate under Section 87A (where eligible)
5. Lower tax slab rates under the new regime