New tax regime: Deductions and exemptions explained

Here’s a breakdown of what you can still claim under the revamped system.

Deductions

For salaried individuals who opt for the new tax regime, there’s a standard deduction of ₹75,000. Additionally, the employer’s contribution to the National Pension Scheme (up to 14% of salary) is eligible for deduction.

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Housing loan interest can be set off against rental income. However, if the interest exceeds the rental income, the resulting loss cannot be offset against other income heads, nor can it be carried forward.

That said, if there is another rental property, the loss can be adjusted against the rental income from that property. Municipal taxes paid on a property are also deductible.

Interest on a housing loan for a self-occupied property, however, is not available for deduction under the new tax regime. In the old regime, such interest could be claimed, and any resulting loss could be set off against salary or other income, with the ability to carry it forward.

Unlike the old tax regime, where deductions could be claimed on up to two self-occupied properties, the new regime doesn’t have this provision. However, the 30% standard deduction on rental income remains applicable.

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For armed forces personnel, contributions to the Agniveer Corpus Fund are deductible, with no cap on the amount.

Other exemptions:

While the new tax regime doesn’t offer house rent allowance (HRA) exemptions, salaried individuals can still claim exemptions on certain allowances granted by their employers. These include travel allowances for official tours or transfers and daily allowances for day-to-day expenses during official trips.

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Additionally, the new tax regime allows exemptions of up to:

₹25 lakh on leave encashment upon retirement,

₹20 lakh on gratuity, and

₹5 lakh on voluntary retirement.