Under the Default New Regime, Only 80CCD(2), 80CCH and 80JJAA Survive From Chapter VI-A

As you file your income tax return for FY 2025-26 (assessment year 2026-27), the single biggest question is which tax regime to tick. Since assessment year 2024-25, Section 115BAC of the Income-tax Act, 1961 is the default regime; you are taxed under it automatically unless you positively opt out. Its appeal is lower headline rates and a wider zero-tax band, but the price is steep: almost every deduction in Chapter VI-A that Indian taxpayers have built their savings habits around is switched off.

The Income Tax Department's own new-versus-old regime FAQ is blunt about it. Under the default new regime, only three Chapter VI-A deductions survive: Section 80CCD(2) for the employer's contribution to the National Pension System, Section 80CCH for Agnipath scheme subscriptions, and Section 80JJAA for additional employee cost. Everything else, from the Rs 1.5 lakh Section 80C basket to the Section 80D health premium and the Section 24(b) interest on a self-occupied house, is available only if you choose the old regime. This article walks through exactly what the statute allows, a worked example with real arithmetic, and the mistakes that surface most often in Section 143(1) processing.

What the Section Says

Section 115BAC was inserted by the Finance Act 2020 and rewritten by the Finance Act 2023 to become the default regime from FY 2023-24. Sub-section (2) of Section 115BAC lays down the condition: the concessional slab rates apply only if the total income is computed without most exemptions and deductions. In plain English, when you elect (or default into) the new regime, you surrender the bulk of Chapter VI-A of the Act.

The three deductions that remain live under Section 115BAC(2) are narrow and specific. Section 80CCD(2) allows the employer's contribution to your NPS Tier 1 account, capped at 14% of salary (basic plus dearness allowance) for both government and private-sector employees from AY 2025-26 onwards, after the Finance Act 2024 raised the private-sector limit from 10% to 14%. Section 80CCH covers contributions to the Agniveer Corpus Fund by Agnipath recruits enrolled on or after 1 November 2022. Section 80JJAA gives employers a 30% deduction on additional employee cost for three assessment years. Note what is missing: Section 80CCD(1) and the extra Rs 50,000 under Section 80CCD(1B) for your own NPS contribution are both not allowed in the new regime; Section 80CCD(1B) is available only if you opt for the old regime.

The new regime does keep a handful of non-Chapter-VI-A reliefs. The standard deduction for salaried taxpayers is Rs 75,000 under the new regime for FY 2025-26 (versus Rs 50,000 in the old regime). The Section 87A rebate under the new regime is now up to Rs 60,000 for total income up to Rs 12,00,000, which means a salaried person earning up to about Rs 12.75 lakh can pay zero tax after the standard deduction. Employer NPS under 80CCD(2), family pension deduction under Section 57(iia), and the transport allowance for specially-abled employees also survive. Health and education cess of 4% applies on the tax in both regimes.

The FY 2025-26 slab structure under Section 115BAC, notified by the Finance Act 2025, is as follows.

The surcharge on high incomes is also lighter here: the top surcharge rate in the new regime is capped at 25%, against 37% in the old regime, for total income above Rs 5 crore. To see how the two regimes stack up for your own numbers, run the old vs new regime calculator and the new regime income tax calculator.

Worked Example

Consider Meera, a salaried professional with a gross salary of Rs 18,00,000 for FY 2025-26 and a basic salary of Rs 9,00,000. Her employer offers a corporate NPS facility. She restructures her cost-to-company so that the employer contributes 14% of basic, that is Rs 1,26,000, directly to her NPS Tier 1 account. Because this is an employer contribution, it qualifies for the Section 80CCD(2) deduction even in the default new regime.

Here is her tax under the new regime with, and without, the 80CCD(2) routing. Both scenarios keep the same Rs 18,00,000 CTC; the only difference is whether Rs 1,26,000 flows into NPS or is paid as taxable cash.

Routing Rs 1,26,000 through employer NPS saves Meera Rs 26,156 in tax for the year, entirely within the new regime, without touching a single old-regime deduction. The arithmetic on the tax-before-cess line follows the slabs above: on Rs 15,99,000 she pays 5% on the Rs 4,00,000 in the second slab (Rs 20,000), 10% on the next Rs 4,00,000 (Rs 40,000), and 15% on the remaining Rs 3,99,000 (Rs 59,850). Since her income exceeds Rs 12,00,000, the Section 87A rebate of Rs 60,000 does not apply to her.

Contrast this with an old-regime taxpayer. Had Meera stayed in the old regime and claimed the full Rs 1,50,000 Section 80C, Rs 25,000 Section 80D, and Rs 50,000 own-NPS under 80CCD(1B) (a deduction not allowed in the new regime), her deductions would total far more, but she would be taxed at the old slab of 30% above Rs 10,00,000 and get only a Rs 50,000 standard deduction. Whether the old regime beats the new one depends entirely on how many deductions you can genuinely claim; use the income tax calculator to test your exact figures before you tick the box.

Common Mistakes

The commonest error, seen repeatedly in Section 143(1) intimations, is claiming an old-regime deduction while filing under the default new regime. Taxpayers carry over habits: they enter Rs 1,50,000 of Section 80C investments or Rs 25,000 of 80D health premium in the ITR, forget they never opted out of 115BAC, and the Central Processing Centre simply disallows the claim and raises a demand. The deduction is not "lost paperwork"; it is legally unavailable in that regime.

A second mistake is confusing Section 80CCD(2) with 80CCD(1B). Only the employer's NPS contribution under 80CCD(2) survives in the new regime. Your own voluntary NPS contribution, whether the 80CCD(1) portion or the additional Rs 50,000 under 80CCD(1B), is not allowed in the new regime under Section 115BAC. Anyone banking on the Rs 50,000 own-NPS top-up under 80CCD(1B) in the new regime is relying on a deduction that is not allowed there. Learn the difference on our tax deduction glossary page.

The third pitfall concerns the switching rules and Form 10-IEA. A taxpayer with no business or professional income may choose between the regimes every single year, simply by indicating the choice in the ITR before the due date. But a taxpayer with business or professional income who wants the old regime must file Form 10-IEA before the return due date, and crucially, once such a person opts out of the new regime they can switch back only once in their lifetime. Missing the Form 10-IEA deadline locks a business taxpayer into the default new regime for that year, with no deductions.

A fourth error is assuming home loan interest is fully gone. The Section 24(b) interest deduction on a self-occupied house (up to Rs 2,00,000) is indeed disallowed in the new regime. However, interest on a let-out property remains deductible against that rental income even under 115BAC, because it is computed under the head "income from house property" rather than Chapter VI-A. Filers routinely either wrongly claim self-occupied interest or wrongly drop let-out interest.

FAQ

Which deductions can I still claim in the new tax regime under Section 115BAC?

From Chapter VI-A, only three survive under the default new regime: Section 80CCD(2) for employer NPS contributions, Section 80CCH for Agnipath subscriptions, and Section 80JJAA for additional employee cost. Outside Chapter VI-A, you also keep the Rs 75,000 standard deduction for salary, the Section 57(iia) family pension deduction, and the Section 87A rebate of up to Rs 60,000. Section 80C, 80D, 80TTA, 80TTB and 80CCD(1B) are all unavailable.

Is the Rs 50,000 extra NPS deduction under 80CCD(1B) allowed in the new regime?

No. The Section 80CCD(1B) deduction of up to Rs 50,000 for your own NPS contribution is available only in the old regime. In the new regime under Section 115BAC, the sole NPS benefit is the employer's contribution under Section 80CCD(2), capped at 14% of basic salary plus dearness allowance from AY 2025-26.

Can I claim Section 80C investments like PPF and ELSS in the new regime?

No. Section 80C, which covers PPF, ELSS, life insurance premium, principal repayment of home loan and the like up to Rs 1,50,000, is disallowed under Section 115BAC. You may continue to invest in these instruments, but you cannot claim a deduction for them unless you opt for the old regime by the return due date.

Can I switch between the old and new regimes every year?

If you have no income from business or profession, yes: you can choose afresh each assessment year through your ITR. If you have business or professional income, you must file Form 10-IEA to opt out, and you can switch back to the default new regime only once in your lifetime after opting out.

Does the new regime allow the standard deduction of Rs 75,000?

Yes. Salaried taxpayers and pensioners get a standard deduction of Rs 75,000 in the new regime for FY 2025-26, higher than the Rs 50,000 available in the old regime. This is why a salaried person earning up to roughly Rs 12.75 lakh can pay nil tax after combining the standard deduction with the Section 87A rebate.

Is home loan interest deductible in the new regime?

Interest on a self-occupied house under Section 24(b), up to Rs 2,00,000, is not deductible in the new regime. Interest on a let-out property, however, remains deductible against the rental income even under Section 115BAC, since it falls under the "income from house property" head and not Chapter VI-A.

How do I decide between the two regimes for FY 2025-26?

Add up the deductions you can genuinely substantiate with proof (80C, 80D, HRA, 24(b) interest and so on). If that total is large, the old regime often wins; if you claim few deductions, the new regime's lower slab rates usually win. Compare both on the old vs new regime calculator with your actual salary before filing.