Yes, You Can Still Claim Deductions Under the New Tax Regime

There is a widespread belief that choosing the new tax regime means giving up every deduction. It is the single most common misconception we hear during filing season — people assume it is a straight trade: lower slab rates in exchange for nothing else.

That is not quite accurate. The new regime removes most of the familiar deductions — your 80C investments, 80D health insurance, HRA, and home loan interest on a self-occupied house are all gone. But a handful of deductions survive, and several of them are ones most people have never heard of. Those are the ones worth knowing about, because the well-known deductions get written about endlessly while the genuinely useful, lesser-known ones quietly go unclaimed.

So let us start with those.

The Lesser-Known Deductions Worth Knowing

These are the ones that rarely make the headlines but can matter a great deal in the right situation.

NPS Vatsalya (Section 80CCD(1B)). Following Budget 2025, contributions to the NPS Vatsalya scheme — an NPS account opened in the name of a minor child — qualify for a deduction of up to ₹50,000. For parents planning long-term for a child's future, this is a rare deduction that survives in the new regime and is almost never discussed.

Agniveer Corpus Fund (Section 80CCH). Contributions to the Agniveer Corpus Fund by individuals enrolled under the Agnipath scheme are fully deductible. For Agniveers and their families, this is a meaningful benefit that remains intact.

Transport allowance for differently-abled employees. Specific transport allowances paid to employees who are blind, deaf and dumb, or orthopedically handicapped continue to be exempt under the new regime. If this applies to you, it is a deduction you should not overlook.

Family Pension Deduction (Section 57(iia)). If you receive a family pension — a pension paid to the family member of a deceased employee — you can claim a deduction of ₹25,000 or one-third of the pension received, whichever is lower. This applies under the new regime and is frequently missed by pensioners' families.

Additional employee cost (Section 80JJAA). This deduction, available to employers who create new employment, survives in the new regime. It is relevant mainly to those with business income rather than purely salaried individuals, but it is worth knowing it exists.

These are the deductions that reward knowing the detail. Now let us cover the bigger, more familiar ones — and one important nuance on home loans that most articles get wrong.

The Better-Known Survivors

Standard Deduction — ₹75,000. Every salaried individual and pensioner gets a flat standard deduction of ₹75,000 under the new regime, automatically, with no investment or proof required. This is why income up to ₹12.75 lakh is effectively tax-free for salaried people under the new regime: the ₹12 lakh rebate threshold plus the ₹75,000 standard deduction.

Employer's NPS Contribution — Section 80CCD(2). Here is the distinction that trips people up. Under the new regime, you cannot claim a deduction for the money you put into NPS yourself. But if your employer contributes to your NPS account, that contribution remains deductible — up to the prescribed percentage of your salary (Basic + Dearness Allowance). It sits over and above your standard deduction. If your employer offers this as part of your CTC, opting in can reduce your taxable salary meaningfully.

Home Loan Interest — The Nuance Most Articles Get Wrong

This one deserves careful reading, because the version you will find on most websites is misleading.

For a self-occupied house, the position is simple: interest is not deductible under the new regime. The ₹2 lakh benefit you may remember exists only under the old regime.

For a let-out (rented) property, you will often read that "there is no upper limit on the interest deduction." That statement is technically true but practically misleading, and here is why.

Under the new regime, the interest you can effectively benefit from is limited to the rental income from that property. If your interest exceeds the rent received or receivable, the resulting loss does not help you. Specifically: any house property loss (where interest exceeds rental income) cannot be set off against any other head of income — not against your salary, not against anything else. And that excess loss cannot be carried forward to future years either. It simply lapses.

A concrete example: suppose your let-out property earns ₹2,00,000 in rent for the year, but your home loan interest for that year is ₹3,00,000. Under the new regime, you can set the interest off against the ₹2,00,000 rental income — bringing that income to nil — but the remaining ₹1,00,000 of interest gives you no benefit at all. It cannot reduce your salary income, and it cannot be carried forward. It is simply lost.

So the accurate way to think about it: under the new regime, home loan interest on a let-out property is useful only up to the extent of the rent that property earns. Anything beyond that does not save you tax. This is very different from the old regime, where house property losses could be set off (up to ₹2 lakh) against other income and the balance carried forward for eight years.

If you own a rented property with a large loan on it, this distinction matters enormously when choosing between regimes.

What You CANNOT Claim — A Quick Reality Check

So there is no confusion, here is what the new regime removes. If your tax planning relied on any of these, they do not apply: Section 80C (PPF, ELSS, life insurance, EPF, tuition fees, home loan principal); Section 80D (health insurance premium); Section 80E (education loan interest); Section 24(b) for self-occupied house property; House Rent Allowance (HRA); Section 80TTA / 80TTB (savings and deposit interest); Leave Travel Allowance (LTA); and professional tax.

So, Which Regime Should You Choose?

There is no universal answer — it depends entirely on your numbers. As a rough guide: if you have substantial 80C investments, pay significant HRA, or carry meaningful home loan interest on a self-occupied house, the old regime may still win. If your deductions are modest, the new regime's lower rates usually come out ahead, especially given the ₹75,000 standard deduction and the ₹12.75 lakh tax-free threshold.

The only reliable way to know is to calculate both. Do not assume — our income tax calculator lets you compare the two side by side in a couple of minutes.