The New Tax Regime has become the default option for individual taxpayers in India; it’s a lower tax rate but many traditional exemptions and deductions are taken away. The regime simplifies income tax filing but yet often leaves taxpayers wondering what deductions they can still claim.
If you’re filing an ITR for FY 2026–27 (Assessment Year 2027–28) then understand the possibilities to deduct from the tax bill because of the new tax law.
Standard deduction is still a benefit for salaried employees
Salaried employees and pensioners will see real relief in the new tax regime with the standard deduction of ₹75,000. Without investment or proof of expenses, it is available. It automatically lowers your taxable salary and it is one of the most interesting benefits in the new system.
For most salaried taxpayers, it is still the biggest deduction when they are calculating taxable income.
Employer's contribution to NPS is allowed.
The new tax regime also allows a deduction for the employer's contribution to the NPS under Section 80CCD(2).
If your employer contributes to your NPS account, you can claim this deduction within the prescribed limits. This benefit is available over and above the standard deduction and can greatly reduce your taxable income, especially for salaried professionals working in the private or government sectors.
Deduction for Agniveer Corpus Fund
Individuals enrolled in the Agnipath Scheme can claim deductions under Section 80CCH for contributions made to the Agniveer Corpus Fund. This deduction has been introduced to support Agniveers and is still available under the new tax regime.
Some allowances continue to be exempt.
Most salary-related exemptions have been eliminated, but we still allow some allowances in the case of special circumstances.
These include transport allowance for employees with disabilities, conveyance allowance for official duties, and some reimbursements for work-related expenses only. But such exemptions only apply if the conditions of the Income Tax Act are met.
Deductions that are no longer available
The biggest change in the new tax regime is the disappearance of several popular deductions that taxpayers had previously relied on in order to reduce their tax liability.
The following deductions are generally not available:
Section 80C investments such as PPF, ELSS, LIC premiums, NSC, tax-saving fixed deposits, EPF voluntary contributions, and tuition fees.
Section 80D deduction for health insurance premiums.
Section 80E deduction for education loan interest.
Section 80G deduction for charitable donations.
Section 80TTA and 80TTB deductions on savings account interest.
House Rent Allowance (HRA).
Leave Travel Allowance (LTA).
Deduction on interest paid for self-occupied home loans under Section 24(b).
Additional self-contribution to NPS under Section 80CCD(1B).
In light of this, people who previously relied on these deductions will see a different tax outcome in the new regime.
Should you choose the new tax regime?
The new tax regime is generally beneficial to those who do not make significant tax-saving investments or claim multiple deductions. It has lower tax rates and simpler compliance, and fewer documentation requirements.
Taxpayers who invest in instruments that are eligible under Section 80C, pay high health insurance premiums, or claim home loan benefits should compare their tax liability under the old and new regimes before making any decisions.
The new tax system simplifies India’s income tax system by reducing the number of deductions and offering competitive tax rates. For FY 2026–27, the key deductions available include the ₹75,000 standard deduction, employer’s NPS contribution under Section 80CCD(2), Agniveer Corpus Fund deduction, and a few specified allowances.
You have to carefully consider your salary structure, investments, and possible deductions before filing your Income Tax Return. A comparison between both tax regimes can help you decide on the one offering the lowest tax liability and the best results by keeping in mind current income tax rules.
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