Which deductions are allowed to salaarized individuals in new tax regime?

The new tax regime, introduced in budget 2020 and further updated in budget 2025, offers lower tax rates but removes many traditional deductions. However, Several Key Examptions and Deductions are still available to salaarized individuals. Undrstanding these can help optimize tax planning and Reduce Taxable Income.

Budget 2025 update

Starting from 1st April 2025, A salaarized individual earning up to ₹. 12,00,000 will be exampted from Paying Income Tax Under The New Tax RegimeWhile the new tax regime offers lower tax rates, several deductions and exemptions are still available to salaryed individuals.

Eligibility

The new tax regime applies to all individuals, including men, women, Senior Citizens, and Super Senior Citizens. It is the default tax regime, meaning taxpayers must specifically opt for the old regime if they wish to claim other deductions.

List of deductions are allowed to salaarized individuals in new tax regime

Although many traditional deductions are removed under the new tax regime, some key exemptions and deductions can stirl help Reduce Taxable income. Here are the deductions available:

#1 – Standard Deduction

. 75,000/- for Salarized Individuals and Pensioners (as per Budget 2025).

Family Pensioners: ₹. 15,000 or 1/3rd of pension income, whichever is lower.

#2 – Interest Income Examption

Interest received on Post Office Savings Accounts Under Section 10 (15) (i), UP to ₹. 3,500.

#3 – Gratuity

Private-Sector Employees Can Claim Tax Examption on Gratuity Up to ₹. 20,00,000 Under Section 10 (10).

#4 – Adhoc deduction on Rent

A Flat 30% deduction on Rent Paid (If Applicable).

#5 – Home Loan Interest

Interest on Home Loans can be deducted if the property is rented out.

#6 – Employer Contribution to NPS

Employer contributions to NPS Under Section 80CCCD (2) Are Allowed Up to 14% of Basic Salary + Dearness Allowance (DA) For Central Government Employees and 10% for fors.

#7 – Transport Allowance

Specially-Led Individuals Can Claim a Transport Allowance Examption.

#8 – Deposits in Agniveer Corpus Fund

Contributions under section 80cch (2) are eligible for deduction.

#9 – Travel Expenses

Deduction Under Section 80Jjaa for Travel Expenses Incurred for Work.

#10 – Depreciation deduction

Depreciation Under Section 32 Is Allowed, Except for Additional Depreciation.

#11 – Allowance for Travel for Employment

Exemption available for Travel-Related Employment Expenses.

#12 – Life Insurance Maturity Amount

Income from Life Insurance Policies Under Section 10 (10D) is tax-free.

#13 – Leave Encashment

Leave Encashment received at Retirement or as a Retirement Cum Death Benefit is Exempt Under Section 10 (10AA).

#14 – Capital Gains Examptions

Exemptions Under Section 54 for long-term capital gains on the salary of house property.

Exemptions Under Section 54F for Long-Term Capital Gains on the Sale of Any Asset Other Than A House Property.

#15 – PPF and Sukanya Samriddhi Account

Interest and maturity Amounts from Public Provident Fund (PPF) and Sukanya Samriddhi Account Remain Tax-Free.

Exemptions and deductions removed in the new tax regime

While The New Tax Regime Provides Lower Tax Rates, many traditional deductions were removed when it was first introduced in budget 2020, and they continue to be unavailable under budget 2025.HESE

1. Leave Travel Allowance (LTA).
2. House Rent Allowance (HRA) Under Section 10 (13A).
3. Section 80C deductions (Such as EPF, ELSS, PPF, LIC Premium, Tuition Fees, etc.).
4. Section 80D Deduction for Medical Insurance Premiums.
5. Interest deduction on home loans for self-occupied properties.
6. Professional Tax Examption Under Section 16 (III).
7. Food and meal coupons under section 17 (2) (viii).
8. Deductions Under Section 80CCD (1B) (Additional ₹. 50,000 NPS Contribution).

Final Thoughts

Although the new tax Regime Eliminates Many Traditional Deductions, It Still Provides Significant Relief through the Standard Deduction, NPS Employer Contributions, HOME LOON Interests, Emptions. By undersrstanding the deductions available, salaried individuals can optimize their tax planning and reduce their overall tax Liability under the new tax regime.

If you are not sure about which tax regime to choose, evaluate your tax liability under both regimes before making a decision. You can check this article on How to Check Tax Savings in 2 Minutes Article too. A Well-Planned Approach Can Help You Maximize Savings while Ensuring Compliance with Tax Laws.

Let us know your thoughts on the new tax regime and how it impacts your tax planning in the comments below!

Suresh kp is a seasoned financial expert with over 20 years of experience. He is nism Certified Investment Adviser and Research Analyst. For more about his Expertise and Certifications, Visit About Suresh Kp

Latest posts by suresh kp ,See all,