Complete Guide to Tax Deductions for Salaried Employees: Old Regime vs New Regime (FY 2026-27)
Choosing between the Old Tax Regime and the New Tax Regime is one of the most important decisions while filing your Income Tax Return (ITR). The Old Regime allows various deductions and exemptions, whereas the New Regime offers lower tax rates with limited deductions.
Tax Deductions Available Under the Old Tax Regime
The following deductions and exemptions can be claimed by salaried employees opting for the Old Tax Regime.
| Section | Particulars | Maximum Deduction |
|---|---|---|
| Standard Deduction | Available to Salaried Employees | ₹50,000 |
| 80C | EPF, PPF, ELSS, LIC, NSC, Tuition Fees, Home Loan Principal | ₹1,50,000 |
| 80CCD(1B) | Additional NPS Contribution | ₹50,000 |
| 80D | Medical Insurance Premium | ₹25,000 / ₹50,000 |
| 80E | Education Loan Interest | No Limit |
| 80G | Donations to Approved Funds | As Prescribed |
| 80TTA | Savings Bank Interest | ₹10,000 |
| 80TTB | Senior Citizen Interest Income | ₹50,000 |
| 80DD | Disabled Dependent Expenses | Up to ₹1,25,000 |
| 80DDB | Specified Disease Treatment | As Prescribed |
| 80U | Disability Deduction | Up to ₹1,25,000 |
| 80GG | Rent Paid (No HRA) | Subject to Conditions |
| Section 24(b) | Home Loan Interest (Self Occupied) | ₹2,00,000 |
| 80EE / 80EEA | Additional Housing Loan Interest | Subject to Eligibility |
Exemptions Available Under Old Regime
| Exemption | Availability |
|---|---|
| House Rent Allowance (HRA) | Yes |
| Leave Travel Allowance (LTA) | Yes |
| Professional Tax | Yes |
| Food Coupons / Meal Vouchers | Yes |
| Children Education Allowance | Yes |
| Hostel Expenditure Allowance | Yes |
| Certain Special Allowances | Yes |
Tax Deductions Available Under the New Tax Regime
Many taxpayers believe that no deductions are available under the New Regime. However, certain benefits continue to be available.
| Section | Particulars | Deduction Available |
|---|---|---|
| Standard Deduction | Salaried Employees | ₹75,000 |
| 80CCD(2) | Employer Contribution to NPS | Allowed |
| Family Pension Deduction | Family Pensioners | Allowed |
| Employer Contribution to EPF/NPS/Superannuation | Subject to Overall Limits | Allowed |
| Interest on Let-Out Property | House Property Income | Allowed |
Deductions Not Available Under New Tax Regime
- ❌ Section 80C (PPF, ELSS, LIC, EPF, NSC)
- ❌ Section 80D (Medical Insurance)
- ❌ Section 80E (Education Loan Interest)
- ❌ HRA Exemption
- ❌ LTA Exemption
- ❌ Professional Tax
- ❌ Home Loan Interest on Self-Occupied Property
- ❌ Section 80GG (Rent Paid)
- ❌ Additional NPS Deduction u/s 80CCD(1B)
Old Regime vs New Regime – Quick Comparison
| Particulars | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| 80C Deduction | Yes | No |
| 80D Deduction | Yes | No |
| HRA Exemption | Yes | No |
| LTA Exemption | Yes | No |
| Home Loan Interest | Yes | No (Self Occupied) |
| Additional NPS Deduction | Yes | No |
| Employer NPS Contribution | Yes | Yes |
| Compliance Complexity | Higher | Lower |
| Suitable For | High Investments & Home Loan Holders | Employees with Limited Deductions |
Which Tax Regime Should You Choose?
Choose Old Regime If:
- You claim HRA exemption.
- You have a home loan.
- You invest under Section 80C.
- You pay health insurance premiums.
- Your total deductions exceed ₹3–4 lakhs.
Choose New Regime If:
- You do not have significant investments.
- You do not claim HRA or home loan benefits.
- You prefer a simpler tax structure.
- Your deductions are relatively low.
Conclusion
There is no universally best tax regime. Salaried employees should compare tax liability under both regimes before filing their Income Tax Return. While the Old Regime rewards tax-saving investments, the New Regime offers simplicity and lower tax rates with minimal compliance requirements.
Tip: Always calculate your tax under both regimes before filing your ITR to maximize your tax savings.
Tax Deductions Available for Salaried Employees under Income-tax Act, 2025 (Tax Year 2026-27)
With effect from 1 April 2026, the Income-tax Act, 2025 has replaced the Income-tax Act, 1961. While most tax benefits continue, the section numbers have been reorganized and renumbered for easier understanding and compliance.
Deductions Available under the Old Tax Regime
| New Section | Particulars | Maximum Deduction |
|---|---|---|
| Section 22 | Standard Deduction from Salary | ₹50,000 |
| Section 123 | LIC, PPF, EPF, ELSS, NSC, Tuition Fees, Home Loan Principal | ₹1,50,000 |
| Section 124 | Additional NPS Contribution | ₹50,000 |
| Section 126 | Medical Insurance Premium | ₹25,000 / ₹50,000 |
| Section 105 | Education Loan Interest | No Limit |
| Section 108 | Donations to Approved Funds | As Prescribed |
| Section 127 | Dependent with Disability | Up to ₹1,25,000 |
| Section 128 | Specified Diseases | As Prescribed |
| Section 26 | Housing Loan Interest (Self Occupied) | ₹2,00,000 |
Benefits Available under New Tax Regime
| New Section | Particulars |
|---|---|
| Section 22 | Standard Deduction of ₹75,000 |
| Section 124 | Employer Contribution to NPS |
| Section 61 | Family Pension Deduction |
| Section 26 | Interest on Let-Out House Property |
Important Rebate for Tax Year 2026-27
Under Section 156 of the Income-tax Act, 2025, resident individuals opting for the New Tax Regime may be eligible for rebate resulting in Nil Tax liability up to the prescribed income limits.
Old Regime vs New Regime
| Particulars | Old Regime | New Regime |
|---|---|---|
| Standard Deduction | ₹50,000 | ₹75,000 |
| Investment Deduction (Section 123) | Available | Not Available |
| Medical Insurance (Section 126) | Available | Not Available |
| Housing Loan Interest | Available | Restricted |
| NPS Employer Contribution | Available | Available |
Conclusion
Taxpayers should compare tax liability under both regimes before filing their return. Employees having housing loans, insurance premiums, NPS contributions and tax-saving investments may find the Old Regime beneficial, whereas employees with limited deductions may benefit from the New Tax Regime.
