All you need to know about types of income tax deductions in new regime & old regime in FY 2025–26 

For FY 2025–26, you are effectively choosing between two parallel tax systems: the new tax regime with lower rates and fewer deductions, or the old regime with higher rates but plenty of tax benefits. This blog breaks down which deductions you can use in each regime right now, and then, at the end, explains how things will change once the new Income‑tax Act, 2025 starts applying to income earned from 1 April 2026.

Deductions in the New Tax Regime (FY 2025–26)

Under the new tax regime (Section 115BAC), you get lower slab rates and a higher basic exemption limit of ₹4 lakh. However most traditional deductions are not available in this regime now.

What you can still claim in the new regime

For FY 2025–26, the key deductions allowed in the new tax regime include:

• Standard deduction – ₹75,000

Available to salaried individuals and pensioners. This directly reduces your taxable salary.

• Employer’s contribution to NPS – section 80CCD(2)
  • Up to 14% of basic salary is allowed as a deduction.
  • This 14% limit is still subject to the overall ₹7.5 lakh annual cap wherein your employer’s total yearly contribution to NPS, EPF and superannuation together cannot exceed ₹7.5 lakh.
  • This is over and above the standard deduction and does not eat into any 80C limit.

• Interest on home loan (let‑out property) – Section 24(b)

You can still claim interest on housing loan for a let‑out property under the head ‘Income from house property’.

• Deduction on family pension
  Lower of ₹25,000 or one‑third of such pension is deductible from family pension income.​
• Agniveer Corpus Fund – Section 80CCH (if applicable)
  Contributions to the Agniveer Corpus Fund by Agniveers or the Government are deductible.​

What you cannot claim in the new regime (for FY 2025–26):

• Section 80C (PPF, ELSS, life insurance, EPF, principal on home loan, tuition fees, etc.)
• Section 80D (medical insurance)
• HRA exemption, LTA, home loan interest on self‑occupied property, 80E (education loan interest), 80G (donations), etc.

Effectively, in the new regime your main ‘automatic’ benefit is the ₹75,000 standard deduction, plus specific carve‑outs like NPS employer contribution and certain house‑property/family‑pension cases.

Top Deductions in the Old Tax Regime (FY 2025–26)

The old tax regime has higher tax rates but allows a wide range of deductions and exemptions that can significantly cut your taxable income.

Key deductions that still matter in FY 2025–26:

1. Section 80C – up to ₹1.5 lakh
   Includes:

   • EPF, PPF, VPF
   • ELSS mutual funds
   • Life insurance premiums
   • Principal repayment of home loan
   • 5‑year tax‑saving FDs
   • Children’s tuition fees (specified limits)

2. Section 80D – Health insurance

   • Up to ₹25,000 for self, spouse and children.
   • Additional ₹25,000 for parents (₹50,000 if parents are senior citizens).

3. HRA exemption (Section 10(13A))

   • Available if you live in rented accommodation and receive HRA.
   • Exemption is based on rent paid, salary, and city of residence.

4. Home loan interest – Section 24(b) (self‑occupied & let‑out property)

   • Up to ₹2 lakh per year for self‑occupied property.
   • For a let‑out property, you can claim full home‑loan interest while calculating ‘Income from house property’, but you can set off only ₹2 lakh of resulting loss against other income each year. Any extra loss is carried forward for up to 8 years.

5. Section 80E – Education loan interest

   • Full interest on higher‑education loan (no monetary ceiling), for up to 8 years.​

6. Other useful deductions

   • 80G (donations), 80TTA/80TTB (interest on savings/FD for seniors), etc.

In addition, in the old regime for FY 2025–26, salaried taxpayers also get ₹50,000 standard deduction from salary income.

Strategic Deductions for Traders (FY 2025–26)

For stock and derivatives traders, the type of income matters more than the regime label.

Intraday equity traders

• Intraday equity income is treated as speculative business income under Section 43(5).

  Tax impact:

  • Taxed at slab rates (old or new regime choice applies to your total income).
  • You can claim business expenses (brokerage, internet, research tools, etc.) against trading income under Profits and Gains of Business or Profession (PGBP).
  • Speculative losses can be set off only against speculative gains and carried forward for 4 years, subject to timely ITR filing.​

F&O traders (equity, currency, commodity)

• F&O income is treated as non‑speculative business income.

  You can claim:

  • Trading‑related expenses (brokerage, systems, advisory, office costs, depreciation on laptop, etc.).
  • Presumptive taxation under Section 44AD in some cases (if eligible), or regular books plus tax audit if turnover/profit thresholds are crossed.

Regime + deductions view for traders

Old regime:

• You get all business deductions (available in both regimes) plus personal tax deductions (80C, 80D, home‑loan interest, etc.).
• Better if you actively invest in PPF/ELSS, pay sizeable premiums, or have home loan + HRA.

New regime:

• You still get business expense deductions for trading (this is under PGBP, not under Chapter VI‑A which includes Section 80C/80D).
• Works well for high‑volume traders who don’t invest much in tax‑saving products and prefer simpler slabs.

In both regimes, advance tax rules apply if your total tax liability exceeds ₹10,000.

Which Regime Should You Pick for FY 2025–26?

A simple way to decide for FY 2025–26:

1. Estimate your gross income

   • Salary + trading business income + capital gains + other income.

2. Add up your deductions under the old regime

   • 80C + 80D + home loan interest (self‑occupied) + HRA + other admissible deductions.

3. Compare tax under both regimes

   • Under new regime: apply FY 2025–26 new slabs, subtract only ₹75,000 standard deduction (plus NPS employer contribution, etc.).
   • Under old regime: apply old slabs after all eligible deductions and exemptions (plus ₹50,000 standard deduction if salaried).

4. Rules of thumb (FY 2025–26)

   • If your total deductions + exemptions (80C + 80D + HRA + home‑loan interest, etc.) are low (say, under ~₹2–2.5 lakh), the new regime is often better.
   • If you fully use 80C, have sizeable 80D, HRA and home‑loan interest, the old regime often gives lower tax.
   • Salaried individuals with income up to ₹12 lakh may pay zero tax in the new regime (due to the enhanced 87A rebate and ₹75,000 standard deduction), which makes the new regime very attractive for those with limited deductions.

For FY 2025–26 (AY 2026–27), your tax planning still revolves around a clear choice:

• The new regime: higher basic exemption (₹4 lakh), zero tax up to about ₹12 lakh (with rebate), fewer deductions, and a ₹75,000 standard deduction for salaried taxpayers.
• The old regime: traditional deduction‑heavy framework with 80C, 80D, HRA, LTA, home loan benefits and a ₹50,000 standard deduction, but higher slab rates.

Traders and salary earners should run the numbers once under each regime for FY 2025–26, then lock in the option that gives the lowest total tax and matches their real deduction usage.