From standard deduction to NPS: 5 tax benefits still available under new regime
Many taxpayers assume the new tax regime eliminates all deductions and exemptions, but that's not entirely true. Several tax benefits are still available and can help reduce your tax burden. Here are five key deductions and exemptions you can claim under the new tax regime.
Standard Deduction
The standard deduction stands out as the most prominent incentive within the updated tax structure. Under this regime, salaried employees can automatically reduce their taxable income by Rs 75,000. This amount is deducted and applies directly to the gross salary of people, shrinking final tax liability instantly, with no investment, financial proof, or administrative hassle. It continues to be one of the most substantial tax-saving tools for salaried individuals opting for the new regime.
Deduction on Family Pension
Under the new tax regime, individuals who receive a family pension can still claim tax relief. They are eligible for a deduction of either Rs 25,000 or one-third of the total pension amount received, whichever is less. This deduction effectively lowers their taxable income and has been successfully carried forward into the new tax structure.
Corporate Contributions to the National Pension System (NPS)
The updated tax framework preserves the tax break for retirement savings when an employer deposits funds directly into an employee's NPS account under Section 80CCD(2). Staff members are permitted to deduct up to 14 per cent of their salary (basic plus dearness allowance), matching the employer's input. This perk applies equally to both private-market employees and government personnel. If your company includes corporate NPS matching within your cost-to-company (CTC) structure, it serves as an excellent way to secure a major tax advantage.
Exemptions on Retirement Benefits
The new tax regime continues to safeguard several key tax exemptions for retirees. Eligible employees can still claim tax-free benefits on gratuity under Section 10(10), leave encashment under Section 10(10AA), and payouts from a Voluntary Retirement Scheme (VRS) under Section 10(10C), provided they meet the specified conditions and monetary limits.
Home Loan Interest Relief for Rented Properties
If you are paying off a mortgage on a property that is currently leased out to tenants, you remain eligible to claim a tax deduction on your loan's interest payments under Section 24(b). There is no maximum cap on the amount of interest you can write off against your incoming rent. However, a crucial catch under the new tax rules is that any net financial loss calculated under "Income from House Property" is locked; it can no longer be used to offset your income from other sources, nor can it be rolled over into upcoming financial years.
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