The new income tax regime does not offer the same deductions and exemptions as the old regime. However, some deductions and tax benefits are available in the new regime. Taxpayers switching from the old regime to the new regime can avail these benefits.
Many salaried taxpayers and pensioners are expected to switch to the new tax regime this financial year (2025-26). The new income tax regime has higher tax slabs, lower tax rates and income up to Rs 12 lakh per annum is tax-free. However, the new regime does not have the benefits of deductions and exemptions like the old regime. However, some deductions and benefits are also available in the new regime.
Corporate NPS Contribution
This is a tax benefit that is rarely used. However, this benefit is available in both the new and old Income Tax regimes. In the old regime, a deduction of up to Rs 1.5 lakh can be claimed in NPS under section 80C. Apart from this, a deduction of Rs 50,000 can be claimed under section 80CCD (1B). These benefits are not available in the new regime. However, the facility of deduction on employer’s contribution to the employee’s NPS account is available in the new regime.
An employer’s contribution of up to 14 per cent (basic pay plus DA) to the employee’s NPS account can be claimed as a deduction under section 80CCD(2). It is to be noted that there is a tax-free limit of Rs 7.5 lakh in a year for total cumulative benefits from the employer. Once the total benefits reach this limit, the employer’s contribution above this limit will be taxable.
Tax benefit on home loan interest on rented house
In the new income tax regime, tax benefits can be availed on the interest on home loan for a rented house. However, deduction of up to Rs 2 lakh in a year on interest on home loan for self-occupied property under section 24(B) is not allowed in the new regime.
In the old income tax regime, interest expenses are deducted from the rent received (after property tax and 30% standard deduction) to calculate income from house property. This reduces the taxable property income. This also reduces your total tax. If this calculation shows a loss instead of income from house property and it does not exceed Rs 2 lakh, then it can be set off with other income. This can be set off in the same financial year to reduce the tax liability. If the loss from rented property is more than Rs 2 lakh, then it can be carried forward and claimed during the next 8 financial years.
However, the rules for this tax benefit are slightly different in the new tax regime. Loss from house property can be set off only against income from house property. It cannot be set off against any other income.
Employers’ contribution to EPF is up to 12% of their basic salary
Your employer contributes 12% of your basic salary to your EPF account. Like the employer’s contribution to the NPS account, this amount is also exempt from tax as long as the aggregate retirement benefit from the employer exceeds the limit of Rs 7.5 lakh in a year.
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