There is a sentence that appears in almost every article about India's new tax regime: it offers lower rates in exchange for giving up deductions. As a summary it is close enough to be useful and wrong enough to cost people money.
What the new regime removes is Chapter VI-A — the long list that includes Section 80C, Section 80D, 80G and most of what people think of when they say "tax saving". What it keeps is a short list that survives precisely because it does not require you to buy anything. And one item on that list is worth more under the new regime than under the old, which is the opposite of what the summary implies.
This is that list.
Start from the fact that it is the default
Before the deductions, the structural point that decides everything else. Since AY 2024-25 the new regime has been the default for individuals, HUFs, AOPs, BOIs and artificial juridical persons. It is not the alternative you opt into. It is where you already are unless you took a step to leave.
That matters here because the reliefs below require no election, no proof and no investment. They apply to you now, whether or not you have thought about tax at all this year.
For AY 2026-27, the new regime also charges no tax on taxable income up to ₹12,00,000, through a Section 87A rebate of up to ₹60,000. Combined with the standard deduction below, a salaried person pays nothing up to roughly ₹12.75 lakh of gross salary. That is covered in more detail in the guide to Section 80C and 80D under the old and new regimes.
Standard deduction: ₹75,000, and it is larger here
The standard deduction for salaried individuals under the new regime is ₹75,000, raised from ₹50,000 in the Union Budget 2024-25.
The old regime figure stayed at ₹50,000. So before any other comparison, the new regime gives a salaried person ₹25,000 more of deduction than the old one — automatically, with no documentation and no product to purchase.
The Press Information Bureau put the combined effect of the Budget 2024-25 personal tax changes at a saving of up to ₹17,500 annually for a salaried employee in the new regime. Note what that number is not: it is not a reward for arranging anything. It arrives by default.
Family pension: ₹25,000
For pensioners receiving a family pension, the deduction under the new regime was increased from ₹15,000 to ₹25,000, also in the Union Budget 2024-25.
This one is worth stating loudly because stale figures persist. A good deal of published material still quotes ₹15,000, which has been superseded. If you are relying on a number from an article, check its date — this is exactly the sort of figure that gets copied forward for years after it changes.
Employer NPS under 80CCD(2): the one that is genuinely better
This is the item most worth understanding, and the one the "no deductions" summary hides completely.
Section 80CCD(2) covers your employer's contribution to your NPS account — not yours. It is a deduction against your salary income for money your employer pays in on your behalf.
The limits work like this:
- Under the new regime (Section 115BAC): 14% of salary, regardless of who your employer is.
- Under the old regime: 14% of salary for Central and State Government employers, but 10% for everyone else.
Read that twice if you work in the private sector. Moving to the new regime does not reduce your 80CCD(2) entitlement — it raises it from 10% to 14%. On a basic-plus-DA of ₹12,00,000, that is the difference between ₹1,20,000 and ₹1,68,000 of deduction, on money you were never going to see in your bank account either way.
"Salary" here means basic salary plus dearness allowance where the DA forms part of retirement benefits, not your full cost to company.
The catch is that 80CCD(2) is not something you can unilaterally claim. Your employer has to actually make the contribution, which usually means opting into a corporate NPS arrangement through payroll. If your employer offers it and you have not enrolled, that is a live decision rather than a tax technicality.
What does not survive
To be equally clear about the other side:
- Section 80C — ₹1,50,000 for EPF, PPF, ELSS, life insurance premiums, home loan principal, tuition fees. Gone.
- Section 80D — health insurance premiums for yourself and your parents. Gone. Covered separately in the Section 80D guide.
- Section 80CCD(1) and 80CCD(1B) — your own NPS contributions, including the additional ₹50,000. Gone.
- Section 80G — donations. Gone.
- HRA, and interest on borrowed capital for a self-occupied property. Gone.
The asymmetry is the point. Everything removed required you to spend or commit money. Everything retained is either automatic or funded by someone else.
What this changes about how you decide
The comparison most people run is "my deductions under the old regime versus the lower rates under the new one". That framing quietly assumes the new regime contributes nothing to the deduction side, and it does.
A fairer comparison for a salaried private-sector employee starts from:
- new regime standard deduction ₹75,000, against ₹50,000
- new regime employer NPS at 14%, against 10%
- then the old regime's 80C, 80D and the rest on top of its lower baseline
For someone with a large home loan, substantial health insurance premiums for elderly parents and a full ₹1,50,000 of 80C, the old regime can still win. For someone whose employer runs a corporate NPS scheme and who was never going to fill 80C anyway, the new regime frequently wins by more than they expect.
How to opt out, if you decide to
The mechanics differ depending on what kind of income you have, and the difference has a deadline attached:
- Salary and other non-business income: you select the option in ITR-1 or ITR-2, and you may choose afresh each year.
- Business or professional income: you must file Form 10-IEA on or before the due date under section 139(1). Miss it and the choice cannot be exercised at all for that year.
That asymmetry catches people every year. A salaried person can change their mind at filing. Someone with professional income cannot.
What to actually check
- Does your employer offer NPS through payroll? If yes, 80CCD(2) at 14% is the single largest deduction available to you under the new regime.
- Are you using a figure from an article older than the Budget 2024-25 changes? Standard deduction ₹50,000 and family pension ₹15,000 are both superseded for the new regime.
- Do you actually have enough 80C and 80D to beat the gap? Work it out rather than assuming; the old regime starts from a lower standard deduction.
- If you have business income and want the old regime, Form 10-IEA has a hard deadline.
This article explains the rules. It is not advice on your return, and which regime suits you depends on your full income picture. A chartered accountant is the right person to check the arithmetic against your actual numbers.
Sources
- Income Tax Department — Deductions (opens in a new tab)
- Income Tax Department — Section 80CCD (opens in a new tab)
- Income Tax Department — Key Highlights of Finance (No. 2) Bill, 2024 (opens in a new tab)
- PIB — Government makes new tax regime more attractive (opens in a new tab)
- PIB — No income tax on annual income up to ₹12 lakh under new tax regime (opens in a new tab)
This article is general information for an Indian audience and reflects the position for AY 2026-27. It is not financial, tax or investment advice. Tax law changes, figures are revised at each Budget, and the right regime for any individual depends on their full income and circumstances. Verify against the Income Tax Department's own material or take advice from a chartered accountant before relying on any of this. Last reviewed 12 September 2026.
