Quick Answer
13 min read|Updated: Apr 1, 2026|Income-tax
Quick Answer
Under the Income Tax Act 2025, the new regime (default) allows very limited deductions: standard deduction Rs 75,000, employer NPS under 80CCD(2), and Section 80JJAA. The old regime provides full access to Chapter VI-A deductions: 80C (Rs 1.5L), 80D (health insurance), 80E (education loan interest), 80CCD(1B) (NPS Rs 50K), HRA exemption, and home loan interest (Rs 2L).
Section 80GGC — Political Party Contributions
Deduction for contributions to political parties or electoral trusts. No limit on the amount (100% deduction). Cash contributions are not eligible. Electoral bonds were discontinued following the Supreme Court ruling. Old regime only.
Section 80-IAC — Startup Tax Holiday
Eligible startups (DPIIT recognized, incorporated between 1 April 2016 and 31 March 2025, turnover below Rs 100 crore) can claim 100% deduction of profits for 3 consecutive years out of the first 10 years from incorporation. Must be a company or LLP. For a detailed guide, see our startup taxation article. Old regime only.
Section 80JJAA — New Employee Hiring
Businesses subject to tax audit can claim deduction of 30% of additional employee cost incurred for hiring new employees with total emoluments up to Rs 25,000 per month. Available for 3 consecutive assessment years. Employee must have been employed for at least 240 days (150 days for apparel/footwear industry). Available in BOTH regimes.
Section 80TTA — Savings Account Interest (Non-Senior Citizens)
Deduction of up to Rs 10,000 on interest earned from savings accounts in banks, co-operative societies, or post offices. Only savings account interest qualifies — not FD, RD, or current account interest. Available to individuals and HUFs below 60 years. Old regime only.
Section 80TTB — Deposit Interest for Senior Citizens
Senior citizens (60+) can claim deduction of up to Rs 50,000 on interest from all types of deposits — savings accounts, fixed deposits, recurring deposits — with banks, co-operative societies, or post offices. This replaces Section 80TTA for seniors (they claim 80TTB, not 80TTA). Old regime only.
Section 80U — Physical Disability (Self)
Deduction for an individual who has been certified as a person with disability: Rs 75,000 for disability (40%+), Rs 1,25,000 for severe disability (80%+). Flat deduction — does not depend on actual expenditure. Certificate from government medical authority required. Old regime only.
Section 10 Exemptions (Old Regime Only)
In addition to Chapter VI-A deductions, the old regime provides exemptions under Section 10 that reduce gross total income:
- Section 10(13A) — HRA Exemption: For salaried employees living in rented accommodation. Exempt amount is the least of: actual HRA received, 50% of salary (metro) or 40% (non-metro), or rent paid minus 10% of salary. Major benefit for employees in high-rent cities.
- Section 10(5) — Leave Travel Allowance (LTA): Exemption for travel expenses within India for self and family, twice in a block of 4 years. Only travel fare is exempt — not hotel, food, or sightseeing expenses.
- Section 10(10) — Gratuity: Exempt up to Rs 25,00,000 (enhanced from Rs 20 lakh by government notification). For government employees, entire gratuity is exempt.
- Section 10(10AA) — Leave Encashment: On retirement, exempt up to Rs 25,00,000 for non-government employees. For government employees, fully exempt.
- Section 10(10C) — VRS Compensation: Voluntary retirement compensation exempt up to Rs 5,00,000 under prescribed conditions.
Section 24(b) — Home Loan Interest Deduction
One of the most significant deductions available exclusively under the old regime:
- Self-occupied property: Interest on home loan deductible up to Rs 2,00,000 per financial year. Conditions: loan must be for purchase or construction, construction must be completed within 5 years of borrowing.
- Let-out property: Entire interest is deductible without any upper limit (deducted from rental income under house property head). If this creates a loss, up to Rs 2,00,000 can be set off against other income; balance carried forward for 8 years.
- Pre-construction interest: Interest paid during the construction period can be claimed in 5 equal installments starting from the year of completion, in addition to the regular interest.
For more on house property taxation, see our house property guide.
Complete Deduction Summary — Regime Availability
| Section | Description | Maximum Limit | New Regime | Old Regime |
|---|---|---|---|---|
| Standard Deduction | Flat deduction from salary/pension | Rs 75,000 / Rs 50,000 | Yes (Rs 75K) | Yes (Rs 50K) |
| 80C | PPF, ELSS, LIC, NSC, FD, tuition, etc. | Rs 1,50,000 | No | Yes |
| 80CCC | Pension fund contribution | Within 80C limit | No | Yes |
| 80CCD(1) | Employee NPS contribution | 10% of salary (within 80C) | No | Yes |
| 80CCD(1B) | Additional NPS (over 80C) | Rs 50,000 | No | Yes |
| 80CCD(2) | Employer NPS contribution | 14% (govt) / 10% (pvt) of salary | Yes | Yes |
| 80D | Health insurance premium | Rs 25K-1,00,000 | No | Yes |
| 80DD | Disabled dependent maintenance | Rs 75K / Rs 1,25,000 | No | Yes |
| 80DDB | Specified diseases treatment | Rs 40K / Rs 1,00,000 (senior) | No | Yes |
| 80E | Education loan interest | No limit (8 years) | No | Yes |
| 80EEA | Affordable housing loan interest | Rs 1,50,000 | No | Yes |
| 80G | Donations to charity | 50-100% (various limits) | No | Yes |
| 80GGA | Scientific research donations | 100% | No | Yes |
| 80GGC | Political party contributions | 100% (no cash) | No | Yes |
| 80-IAC | Startup profits deduction | 100% for 3 of 10 years | No | Yes |
| 80JJAA | New employee hiring | 30% of add’l cost, 3 years | Yes | Yes |
| 80TTA | Savings account interest | Rs 10,000 | No | Yes |
| 80TTB | Senior citizen deposit interest | Rs 50,000 | No | Yes |
| 80U | Self-disability deduction | Rs 75K / Rs 1,25,000 | No | Yes |
| Sec 10(13A) | HRA exemption | Computed (least of 3 amounts) | No | Yes |
| Sec 24(b) | Home loan interest (self-occupied) | Rs 2,00,000 | No | Yes |
Breakeven Analysis: How Many Deductions to Make Old Regime Worthwhile?
The critical question: at what deduction level does the old regime beat the new regime? The answer depends on your income level. Here is the approximate total deduction value (beyond the Rs 25,000 standard deduction difference) needed:
| Gross Income (Rs) | Approximate Deductions for Old Regime Breakeven | Typical Deduction Mix |
|---|---|---|
| Rs 10,00,000 | Rs 3,25,000+ | 80C (1.5L) + 80D (25K) + HRA (1.5L) = Rs 3.25L — just barely breakeven |
| Rs 12,00,000 | Rs 3,75,000+ | 80C (1.5L) + 80D (25K) + NPS (50K) + HRA (1.5L) = Rs 3.75L |
| Rs 15,00,000 | Rs 4,25,000+ | 80C (1.5L) + 80D (50K) + NPS (50K) + HRA (1.75L) = Rs 4.25L |
| Rs 20,00,000 | Rs 5,75,000+ | 80C (1.5L) + 80D (50K) + NPS (50K) + HRA (1.5L) + Sec 24(b) (1.75L) = Rs 5.75L |
| Rs 25,00,000 | Rs 6,50,000+ | 80C (1.5L) + 80D (50K) + NPS (50K) + HRA (2L) + Sec 24(b) (2L) = Rs 6.5L |
| Rs 50,00,000 | Rs 7,50,000+ | Needs maximum of most deductions + substantial HRA |
Key takeaway: If you are paying a home loan and living in a rented house (which is unusual but can happen, e.g., house under construction), or if you have both HRA and home loan interest, the old regime becomes attractive at Rs 15 lakh+. Without a home loan, most salaried individuals below Rs 20 lakh income find the new regime more beneficial. For detailed regime comparison, see our slabs guide.
Practical Deduction Planning Tips
- Maximize 80C early: Start investments by April itself. PPF and ELSS SIPs spread the investment and reduce lump-sum pressure in January-March.
- Don’t over-invest in 80C: EPF contribution (employee share) already counts. If you contribute Rs 1,800/month to EPF, that is Rs 21,600/year already within 80C. Avoid over-investing in low-return 80C instruments.
- Employer NPS in new regime: If your employer offers NPS contribution under 80CCD(2), this is valuable in the new regime as it reduces taxable income even without other deductions.
- 80D for parents: Paying health insurance for senior citizen parents gives Rs 50,000 deduction (plus Rs 25,000 for yourself). This Rs 75,000 alone can save Rs 15,000-22,500 in tax under the old regime.
- 80E is unlimited: If you have a large education loan, the unlimited interest deduction under 80E can tip the balance significantly toward the old regime.
- Document everything: Keep premium receipts, investment proofs, donation receipts (80G), and loan certificates. Employers request proof by January for TDS adjustment.
For assistance with optimizing your deduction strategy, visit our ITR Filing Service or contact our team.
Frequently Asked Questions
What deductions are available under the new regime for AY 2026-27?
The new regime allows very limited deductions: standard deduction of Rs 75,000 for salaried/pensioners, employer NPS contribution under Section 80CCD(2) up to 14% of salary for government and 10% for private sector employees, family pension deduction of Rs 15,000 or 1/3 (lower), Section 80JJAA for new employee hiring (30% of additional employee cost for 3 years), and Section 80CCH for Agniveer Corpus Fund contributions.
What is the maximum deduction under Section 80C?
The maximum deduction under Section 80C is Rs 1,50,000 per financial year. This limit is shared with Section 80CCC (pension fund) and Section 80CCD(1) (employee NPS). Eligible investments include PPF, ELSS mutual funds, life insurance, NSC, 5-year FD, Sukanya Samriddhi, SCSS, tuition fees for up to 2 children, home loan principal repayment, and stamp duty/registration. Available only under the old regime.
What is the Section 80D deduction for health insurance?
Section 80D provides deduction for health insurance premiums: Rs 25,000 for self, spouse, and dependent children (Rs 50,000 if you are a senior citizen); plus Rs 25,000 for parents (Rs 50,000 if parents are seniors). Maximum total: Rs 1,00,000 if both you and your parents are senior citizens. A preventive health checkup of Rs 5,000 is included within these limits. Cash payments for premiums are not eligible. Old regime only.
Is Section 80CCD(1B) NPS deduction available under the new regime?
No. The additional Rs 50,000 deduction under Section 80CCD(1B) for voluntary NPS contribution is NOT available under the new regime. Only the employer’s NPS contribution under Section 80CCD(2) is permitted in the new regime. If you contribute to NPS, the 80CCD(1B) deduction is a reason to consider the old regime, as it provides Rs 50,000 deduction above and beyond the 80C limit.
Can I claim home loan interest deduction under the new regime?
No. The home loan interest deduction of Rs 2,00,000 under Section 24(b) for self-occupied property is not available under the new regime. This is often the largest single deduction taxpayers lose when opting for the new regime. Under the old regime, interest up to Rs 2,00,000 on a self-occupied property is deductible, and for let-out property, the entire interest is deductible without any limit.
What is the deduction for education loan interest under Section 80E?
Section 80E allows deduction of the entire interest paid on education loan with no upper limit. The loan must be for higher education of self, spouse, children, or a student for whom you are legal guardian. The deduction is available for 8 consecutive years starting from the year repayment begins. Only interest qualifies, not principal. The loan must be from a financial institution or approved charitable institution. Old regime only.
How much deduction is available for donations under Section 80G?
Section 80G provides 100% deduction for donations to PM National Relief Fund, National Defence Fund, and similar approved funds without any limit. Donations to most registered charitable trusts qualify for 50% deduction subject to 10% of adjusted gross total income. Cash donations exceeding Rs 2,000 are not eligible — use banking channels. Donations must be to 80G-registered entities with a valid registration number. Old regime only.
What is Section 80JJAA and is it available under both regimes?
Section 80JJAA allows businesses subject to tax audit to claim a deduction of 30% of additional employee cost for hiring new employees whose total salary/wages do not exceed Rs 25,000 per month. The deduction is available for 3 consecutive assessment years. The employee must have been employed for at least 240 days (150 for apparel/footwear). It is one of the few deductions available under BOTH regimes.
What is Section 80-IAC for startups?
Section 80-IAC provides eligible DPIIT-recognized startups (incorporated between 1 April 2016 and 31 March 2025, with annual turnover below Rs 100 crore) a 100% deduction of profits for any 3 consecutive assessment years out of the first 10 years from incorporation. The entity must be a company or LLP. This is available only under the old regime. For details, see our startup taxation guide.
How do I decide between old and new regime based on my deductions?
Calculate your total old-regime deductions and compare against the breakeven threshold for your income level. At Rs 15 lakh, you need approximately Rs 4,25,000 in deductions. At Rs 20 lakh, about Rs 5,75,000. Typical high-deduction profile: 80C (Rs 1.5L) + 80D (Rs 50K) + 80CCD(1B) NPS (Rs 50K) + HRA (Rs 1.5L+) + Section 24(b) home loan interest (Rs 2L). If you hit these numbers, old regime wins; if not, stick with the new regime.
Is HRA exemption available under the new regime?
No. HRA exemption under Section 10(13A) is not available under the new regime. For employees paying significant rent in metro cities (Mumbai, Delhi, Bangalore, Chennai), the loss of HRA exemption can be worth Rs 1,50,000 to Rs 3,00,000 or more in reduced taxable income, often making the old regime more beneficial for them despite the narrower slabs.
What is the Section 80TTA/80TTB deduction for interest income?
Section 80TTA allows individuals and HUFs below 60 to deduct up to Rs 10,000 of savings bank account interest. Section 80TTB allows senior citizens (60+) to deduct up to Rs 50,000 of interest from all deposits — savings accounts, FDs, and RDs. Seniors claim 80TTB instead of 80TTA (not both). These are available only under the old regime. FD interest for non-seniors does not qualify for any specific deduction.
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Disclaimer: This article is for educational purposes and does not constitute legal or financial advice. Tax laws are subject to amendments via Finance Acts and CBDT notifications. For personalized deduction planning, consult our team.
Written by CA V. Viswanathan, FCA, ACS, CFE, IBBI Registered Valuer (IBBI/RV/03/2019/12333) | Virtual Auditor
