New vs Old Tax Regime: Which Deductions You Lose — HRA, 80C, 80D, 24(b) — and Which Survive

The new tax regime under Section 115BAC has been the default option since FY 2023-24 (AY 2024-25), and for FY 2025-26 the distance between the two regimes has widened after the Finance Act 2025 reset the slabs to seven bands and raised the Section 87A rebate to Rs 60,000. The single decision most salaried taxpayers get wrong is assuming the regime that "saved tax for a colleague" will save tax for them. It rarely does, because the two regimes are priced around completely different deduction sets. Under the new regime almost every popular deduction — House Rent Allowance, Section 80C, Section 80D, and the Rs 2,00,000 home-loan interest under Section 24(b) — is switched off; under the old regime the slabs are steeper and the rebate is capped at Rs 12,500. This article maps exactly which deductions you forfeit, which three survive, and gives a worked example you can run against your own Form 16.

What the Section Says

Section 115BAC of the Income-tax Act, 1961 is the concessional-rate regime that has applied as the default since FY 2023-24, per the Income Tax Department's New vs Old Tax Regime FAQs. For FY 2025-26 it carries seven slabs: nil up to Rs 4,00,000, 5% on Rs 4,00,001 to Rs 8,00,000, 10% on Rs 8,00,001 to Rs 12,00,000, 15% on Rs 12,00,001 to Rs 16,00,000, 20% on Rs 16,00,001 to Rs 20,00,000, 25% on Rs 20,00,001 to Rs 24,00,000, and 30% above Rs 24,00,000. The trade-off for these gentler rates is that you surrender almost the entire deduction toolkit that the old regime allows.

In plain English, opting into Section 115BAC means you accept the lower slabs in exchange for giving up House Rent Allowance exemption under Section 10(13A), the whole of Chapter VI-A barring two clauses (so no Section 80C up to Rs 1,50,000, no Section 80D up to Rs 25,000, no Section 80DD, no Section 80E, no Section 80G), the Section 80CCD(1B) extra Rs 50,000 NPS deduction, and interest on a self-occupied house property up to Rs 2,00,000 under Section 24(b). Leave Travel Allowance and the Section 80TTA/80TTB savings-interest deductions also fall away.

Three deductions survive inside the new regime. The standard deduction for salaried taxpayers and pensioners is Rs 75,000 under the new regime for AY 2026-27 (against Rs 50,000 in the old regime). The employer's NPS contribution under Section 80CCD(2) is deductible up to 14% of basic-plus-dearness-allowance in the new regime (10% in the old regime, and 14% for central government employees in both). The Agniveer Corpus Fund deduction under Section 80CCH and the new-employment incentive under Section 80JJAA also continue. The table below summarises the split.

The Section 87A rebate also differs by regime. In the new regime it is up to Rs 60,000 where taxable income does not exceed Rs 12,00,000 for FY 2025-26, with marginal relief just above that threshold; in the old regime it stays at up to Rs 12,500 where taxable income does not exceed Rs 5,00,000, per the Income Tax Department. A 4% health and education cess applies on the tax-plus-surcharge figure in both regimes. You can model both outcomes side by side on our old vs new regime calculator before you decide.

Worked Example

Consider Priya, a salaried professional in Mumbai (a metro) for FY 2025-26 with a gross salary of Rs 14,00,000, of which basic salary is Rs 7,00,000. She pays rent of Rs 3,00,000 a year, receives HRA of Rs 2,80,000, repays a home loan with Rs 2,00,000 of interest on her self-occupied flat, invests the full Rs 1,50,000 under Section 80C, and pays Rs 25,000 in health-insurance premium under Section 80D.

Her HRA exemption under Section 10(13A) is the least of three figures: actual HRA received Rs 2,80,000; rent paid minus 10% of basic, which is Rs 3,00,000 minus Rs 70,000 equals Rs 2,30,000; or 50% of basic for a metro, which is Rs 3,50,000. The least is Rs 2,30,000, so that is her allowed HRA exemption. You can read the rule in our HRA glossary entry.

Under the old regime, Priya stacks her deductions: standard deduction Rs 50,000, HRA Rs 2,30,000, Section 80C Rs 1,50,000, Section 80D Rs 25,000, and Section 24(b) interest Rs 2,00,000 — a total of Rs 6,55,000. Her taxable income falls to Rs 7,45,000. The old-regime tax is Rs 12,500 on the Rs 2,50,000 to Rs 5,00,000 band plus 20% of Rs 2,45,000 (Rs 49,000), giving Rs 61,500, and after 4% cess of Rs 2,460 her liability is Rs 63,960.

Under the new regime, Priya may claim only the Rs 75,000 standard deduction (assume her employer makes no NPS contribution), so her taxable income is Rs 13,25,000. The tax is Rs 20,000 on the Rs 4,00,000 to Rs 8,00,000 band, Rs 40,000 on the Rs 8,00,000 to Rs 12,00,000 band, and 15% of Rs 1,25,000 (Rs 18,750) on the slice above Rs 12,00,000 — a total of Rs 78,750, plus 4% cess of Rs 3,150, giving Rs 81,900.

For Priya, the old regime wins by Rs 17,940 because her HRA, home-loan interest, and 80C investments together knock Rs 6,55,000 off her income. Now change one fact: if her employer routes 14% of her Rs 7,00,000 basic, that is Rs 98,000, into NPS under Section 80CCD(2), that deduction survives in the new regime and pulls her new-regime taxable income down to Rs 12,27,000. Her new-regime tax then falls to roughly Rs 64,050 before cess, narrowing the gap to a few thousand rupees. The lesson: the one large deduction that crosses the regime boundary is employer NPS. Verify your own numbers on the new regime calculator and the full income tax calculator.

Common Mistakes

The most expensive error seen in ITR scrutiny is claiming HRA exemption while filing under the new regime. Because Section 115BAC is the default from AY 2024-25, taxpayers who simply file without opting out land in the new regime, yet still enter an HRA figure under Section 10(13A) carried over from a prior old-regime return. The Centralised Processing Centre disallows it automatically and raises a demand, often with a Section 143(1) intimation. Cross-check your regime before you fill the exemption fields.

A second recurring mistake is assuming Section 80CCD(1B) works in the new regime. The extra Rs 50,000 NPS deduction for your own contribution is not allowed in the new regime — it is an old-regime-only benefit. Only the employer's contribution under Section 80CCD(2) survives in the new regime. Taxpayers frequently confuse the two clauses and over-claim by Rs 50,000.

Third, salaried taxpayers with business or professional income forget that switching regimes is not free for them. While a pure salary earner may choose the regime afresh each year on the return, a taxpayer with business income who wants the old regime must file Form 10-IEA before the due date under Section 139(1), and the option to switch back is limited. Missing the Form 10-IEA deadline locks them into the default new regime for that year.

Fourth, many people compare only the slabs and forget the Rs 75,000 versus Rs 50,000 standard deduction swing and the higher Rs 60,000 rebate under Section 87A, both of which favour the new regime for incomes up to Rs 12,00,000. For a taxpayer with few deductions, the new regime is now almost always cheaper; do not assume the old regime is "safer". Run both before deciding, and read up on the Section 87A rebate so you apply the right threshold.

FAQ

Is the new tax regime compulsory for FY 2025-26?

No, but it is the default under Section 115BAC from AY 2024-25, per the Income Tax Department's FAQs. If you take no action you are taxed under the new regime. A salaried taxpayer may opt for the old regime each year directly in the return; a taxpayer with business or professional income must file Form 10-IEA before the Section 139(1) due date to use the old regime.

Can I claim HRA in the new tax regime?

No. House Rent Allowance exemption under Section 10(13A) is fully disallowed in the new regime. It is available only in the old regime, where the exemption is the least of actual HRA, rent paid minus 10% of basic, or 50% of basic (metro) / 40% of basic (non-metro). Claiming it in a new-regime return triggers an automatic disallowance at the CPC.

Which deductions survive in the new regime?

Three main ones survive: the standard deduction of Rs 75,000 for salaried taxpayers and pensioners; the employer's NPS contribution under Section 80CCD(2) up to 14% of basic-plus-DA; and the Agniveer Corpus Fund deduction under Section 80CCH. The Section 80JJAA new-employment deduction for businesses also continues. Section 80C, 80D, 80CCD(1B), and 24(b) interest do not survive.

What is the Section 87A rebate in each regime for FY 2025-26?

In the new regime the rebate is up to Rs 60,000 where taxable income does not exceed Rs 12,00,000, with marginal relief just above that figure. In the old regime it remains up to Rs 12,500 where taxable income does not exceed Rs 5,00,000. The rebate is applied before the 4% health and education cess.

Does employer NPS contribution help in both regimes?

Yes. Section 80CCD(2) is one of the few deductions allowed in both regimes. The cap is 14% of basic-plus-dearness-allowance in the new regime and 10% in the old regime (14% for central government employees in both). For a Rs 7,00,000 basic, a 14% routing equals Rs 98,000 of deductible employer contribution.

How do I switch from the new regime back to the old regime?

A salaried individual without business income simply selects the old regime while filing the return for that year. A taxpayer with business or professional income must file Form 10-IEA before the due date under Section 139(1); such taxpayers can switch back to the new regime only once, after which the choice becomes final.

Is the standard deduction really higher in the new regime?

Yes. For AY 2026-27 the standard deduction is Rs 75,000 in the new regime against Rs 50,000 in the old regime for salaried taxpayers and pensioners. That Rs 25,000 difference, combined with the enhanced Rs 60,000 Section 87A rebate, is why the new regime wins for most taxpayers who claim few other deductions.