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Every rupee that you invest in instruments like provident fund, health insurance, or even a home loan can double up as a tax-saving move. Income-tax laws in India allow certain tax deductions that let you subtract specific expenses and investments from your gross income to calculate your tax liability for the year.
Though, it is important to note that not every deduction was able to survive the shift when the new tax regime was introduced in the year 2020. Mixing up the deductions available in the old and the new tax regimes is one of the most common errors made by taxpayers, which directly affects the computation of their taxes.
This article will talk about every major deduction available for the year 2025-26 and show you exactly how to claim each one so that you can keep more of what you earn.
Key Takeaways
- India is running two parallel tax systems, the old tax regime and new tax regime. Your choice of regime decides the deductions available to you.
- If you choose the old tax regime, there is scope of up to ₹1.5 lakh in deductions on investments in Public Provident Fund, life insurance, and home loan, among other things.
- Another ₹50,000 deduction is available on voluntary investment in the National Pension Scheme (NPS).
- Payment of health insurance premiums are eligible for deduction of up to ₹1 lakh a year when you and your senior-citizen parents are all insured.
- The new tax regime keeps just two deductions: standard deduction of ₹75,000 and employer NPS contributions.
What are Income Tax Deductions?
Income tax deductions are the specific expenses, investments, and payments that the Income-Tax Act lets you subtract from your gross total income before your tax liability gets worked out.
Rather than taxing every rupee you earn, the law rewards you for directing part of it toward retirement savings, health cover, your children's education, or a home loan. The lower your income looks after these subtractions, the smaller the tax amount.
Deductions, Exemptions and Rebate: What’s The Difference
The three terms get used interchangeably, but they act at different stages of your tax calculation.
A deduction lowers your taxable income before tax is computed. An exemption removes a portion of income from taxation altogether, such as house rent allowance (HRA) or leave travel allowance (LTA).
A rebate, on the other hand, is a direct cut applied to your final tax bill, after tax has already been worked out on the slab rates.
Old Tax Regime vs New Tax Regime: Where Deductions Apply?
This is the single most important thing to get right before you claim anything.
India runs two parallel tax systems, and your choice of regime decides whether most deductions on this list even exist for you.
The new regime, which applies by default unless you opt out, taxes income at lower slab rates but strips away nearly every deduction. The old regime keeps higher slab rates but opens up the full deduction toolkit as detailed below.
Important Switch Rule: Salaried individuals (filing ITR-1 or ITR-2) without business income can freely pick a different regime each financial year. However, if you have business or professional income (filing ITR-3 or ITR-4), your ability to switch back and forth is restricted; you can switch back to the Old Tax Regime only once in a lifetime.
|
Deduction / Benefit |
Old Regime |
New Regime |
|
Standard deduction |
₹50,000 |
₹75,000 |
|
Sections 80C, 80D, 80E, 80G |
Available |
Not available |
|
HRA exemption & Section 24(b) interest |
Available |
Not available* |
|
Employer NPS: Section 80CCD(2) |
Up to 10% of salary (14% for Central/State Govt employees) |
Up to 14% of salary (Universal for all employees) |
|
Section 87A rebate |
Up to ₹12,500 (income ≤ ₹5 lakh) |
Up to ₹60,000 (income ≤ ₹12 lakh) |
*Interest on a let-out property can still be set off, subject to an overall house-property loss cap.
Salaried employees declare their preferred regime to their employer for TDS (Tax Deducted at Source) purposes each year but can switch when filing the return. Run both calculations before you decide, as the gap can run into lakhs.
Income Tax Act 2025: New Section Numbers to Know
From April 1, 2026, the Income-tax Act, 2025, replaces the six-decade-old Income-Tax Act, 1961. Almost every section gets a new number as part of the restructuring into 536 sections.
-
The FY/AY Shift: Starting from Tax Year 2026–27 under the 2025 Act, the traditional and often confusing split between "Financial Year (FY)" and "Assessment Year (AY)" is retired in favour of a single, streamlined term: "Tax Year".
However, the deductions, ceilings and eligibility conditions themselves don’t change.
For the current filing cycle, the return still runs entirely on the 1961 Act. So, every section number used through this article, from 80C, 80D, 24(b), and the rest, remains the correct one to quote. The renumbered sections below apply from Tax Year 2026–27 onward.
|
Old Section (1961 Act) |
New Section (2025 Act) |
What It Covers |
|
80C / 80CCC |
123 |
PF, life insurance, ELSS, tuition, home loan principal |
|
80CCD (1, 1B, 2) |
124 |
NPS contributions |
|
80D |
126 |
Health insurance premium |
|
80DD |
127 |
Dependant with disability |
|
80E |
129 |
Education loan interest |
|
80G |
133 |
Donations |
|
80GG |
134 |
Rent paid without HRA |
|
80TTA / 80TTB |
153 (merged) |
Savings & deposit interest |
|
80U |
154 |
Self-disability |
|
24(b) |
22 |
Home loan interest (house property) |
|
16 (Standard Deduction) |
19 |
Standard deduction on salary income |
|
87A |
156 |
Rebate for lower incomes |
Keep both numbers handy for a while. Your Form 16 and Form 26AS will still reference the old sections. But investment declarations, tax software and professional advice from Tax Year 2026–27 onward will increasingly use the new ones.
Types of Income Tax Deductions You can Claim
Here is a detailed explanation of every major deduction, what it covers, its availability under the old and new tax regimes and the ceiling attached to it for FY 2025-26 (AY 2026-27).
|
Section |
What It Covers |
Maximum Limit |
Regime |
|
80C |
EPF, PPF, ELSS, life insurance, home loan principal, tuition fees, tax-saving FD, NSC, SCSS, SSY |
₹1.5 lakh (combined) |
Old regime only |
|
80CCD(1B) |
Additional NPS contribution |
₹50,000 (over 80C) |
Old regime only |
|
80CCD(2) |
Employer’s NPS contribution |
10%/14% of salary |
Both regimes |
|
80D |
Health insurance and preventive check-ups |
₹25,000-₹1 lakh |
Old regime only |
|
24(b) |
Home loan interest, self-occupied |
₹2 lakh |
Old regime only |
|
80E |
Education loan interest |
No cap (8 years) |
Old regime only |
|
80G |
Donations to approved funds |
50% or 100% of amount |
Old regime only |
|
80GG |
Rent paid without HRA |
Least of 3 conditions* |
Old regime only |
|
80TTA |
Savings account interest, under 60 |
₹10,000 |
Old regime only |
|
80TTB |
Deposit interest, senior citizens |
₹50,000 |
Old regime only |
|
80U |
Self-disability |
₹75,000/₹1.25 lakh |
Old regime only |
|
80DD |
Dependant with disability |
₹75,000/₹1.25 lakh |
Old regime only |
|
Standard Deduction |
Flat deduction, salaried/pensioners |
₹50,000/₹75,000 |
Both regimes |
*Least of ₹5,000/month, 25% of adjusted total income, or rent minus 10% of income.
Section 80C: Investments and Expenses
Section 80C is the deduction most taxpayers reach for first, covering up to ₹1.5 lakh a year across a wide menu of investments and expenses. The ceiling is combined, not per-instrument, so stacking five different 80C products doesn’t multiply the benefit.
-
Public Provident Fund (PPF) contributions
-
Equity Linked Savings Scheme (ELSS) mutual funds
-
Life insurance premiums for self, spouse and children
-
Employee Provident Fund (EPF) contributions
-
Five-year tax-saving fixed deposits and National Savings Certificate (NSC)
-
Home loan principal repayment, plus stamp duty and registration charges in the purchase year
-
Children’s tuition fees for full-time education, up to two children
-
Sukanya Samriddhi Yojana and Senior Citizens’ Savings Scheme deposits
Section 80CCD: NPS Contributions
The National Pension System is the one instrument that can push your deduction beyond ₹1.5 lakh.
Your own contribution under Section 80CCD(1) sits inside the 80C ceiling, but Section 80CCD(1B) adds a further ₹50,000 on top of it. So, your own NPS-linked deduction can reach ₹2 lakh.
Section 80CCD(2), which covers what your employer puts into your NPS account, sits outside both limits and works across both regimes with specific caps:
-
Old Tax Regime: Capped at up to 10% of salary for private-sector employees, and up to 14% of salary for Central and State Government employees.
-
New Tax Regime: Capped uniformly at up to 14% of salary for all employees (both government and private-sector).
If your employer offers this, it’s the single most valuable deduction available to a new-regime taxpayer.
Section 80D: Health Insurance Premiums
Health insurance premiums for yourself, your spouse, your children and your parents all qualify, with the ceiling depending on age.
|
Who’s Covered |
Maximum Deduction (per year) |
|
Self, spouse, children (all under 60) |
₹25,000 |
|
Self and family, one member 60+ |
₹50,000 |
|
Parents, under 60 |
+ ₹25,000 |
|
Parents, senior citizens |
+ ₹50,000 |
|
Maximum combined (self + senior parents) |
₹1 lakh |
The ₹5,000 sub-limit for preventive health check-ups sits inside these caps rather than adding to them, and it's one of the few 80D claims you can pay for in cash. A resident senior citizen with no health policy at all can instead claim actual medical expenditure up to ₹50,000.
Section 24(b): Home Loan Interest
This is one of the largest available deductions to taxpayers opting for the old tax regime. You can deduct up to ₹2 lakh of home loan interest on a self-occupied property each year.
For a let-out property, there’s no yearly cap on the interest itself, though the overall house-property loss that you can set off against other income is capped at ₹2 lakh.
Sections 80EE and 80EEA once offered additional interest deductions for first-time buyers, but the sanction window for 80EEA closed on March 31, 2022; only borrowers who already met the conditions can keep claiming it.
Section 80E: Education Loan Interest
Interest paid on an education loan taken for yourself, your spouse, your children, or a student for whom you're a legal guardian, is fully deductible with no upper limit. The deduction runs for a maximum of 8 years from the year repayment begins, or until the interest is repaid in full, whichever comes first. Only interest qualifies; principal repayment gets no benefit under this section.
Section 80G: Donations To Charity
Contributions to approved charitable funds and institutions qualify for a deduction of either 50% or 100% of the donated amount, with some categories subject to a qualifying limit tied to your adjusted gross income.
Cash donations above ₹2,000 don’t qualify at all. So, route anything larger through a bank transfer, cheque, or digital payment, and retain the receipt with the trust’s registration details.
Section 80GG: Rent Paid Without HRA
This provision is built for taxpayers who pay rent but receive no HRA from their employer. These can include self-employed professionals, or salaried individuals whose pay structure excludes HRA.
You can claim the least of three figures: ₹5,000 a month, 25% of your adjusted total income, or your annual rent minus 10% of that income. You also can’t own residential property in the city where you live and work.
-
Mandatory Compliance Note: To successfully claim deductions under Section 80GG, taxpayers are required to file Form 10BBB electronically on the income tax e-filing portal. Ensure this procedural step is completed to validate your claim.
Sections 80TTA And 80TTB: Interest on Deposits
Section 80TTA lets taxpayers under 60 deduct up to ₹10,000 of interest earned on savings bank accounts.
Section 80TTB replaces it for senior citizens, raising the ceiling to ₹50,000 and widening the scope to interest on fixed and recurring deposits as well, not just savings accounts.
Sections 80U and 80DD: Disability-Related Deductions
Section 80U applies when the taxpayer themselves has a certified disability, while Section 80DD covers a dependant with a disability, which may include spouse, children, parents, or siblings.
Both offer a flat deduction of ₹75,000 for a disability of 40% or more, rising to ₹1.25 lakh for severe disability of 80% or more. The amount claimed doesn’t depend on actual expenditure; a valid medical certificate is what establishes the claim.
Standard Deduction for Salaried Individuals and Pensioners
A flat deduction available to every salaried taxpayer and pensioner, with no bills or proof required. It stands at ₹50,000 under the old regime and ₹75,000 under the new regime, and it’s one of the handful of benefits both systems share.
Pensioners receiving a family pension can additionally claim a deduction of ₹15,000 or one-third of the pension, whichever is lower.
How To Claim Income Tax Deductions
Step 1: Confirm your tax regime first; beyond the standard deduction and employer NPS, nothing else applies under the new regime.
Step 2: Collect proof through the year. Keep a record of your PPF or ELSS statements, insurance premium receipts, the home loan interest certificate from your lender, tuition fee receipts, 80G donation receipts, and NPS statements.
Step 3: Submit these proofs to your employer, usually between January and February. This ensures that your TDS for the year reflects the deductions you are claiming.
Step 4: If you miss the employer window, claim the deduction directly at the time of filing your income-tax return.
Step 5: Retain every document for at least six years. You don’t upload proofs while filing, but you need to produce them if the assessing officer asks.
Common Mistakes to Avoid
-
Claiming 80C or 80D while filing under the new regime. Both are disallowed there, and the claim simply gets rejected.
-
Treating the ₹5,000 preventive health check-up as an amount over and above the 80D cap; it sits inside it.
-
Forgetting that Section 80CCD(1B) is a separate ₹50,000, not part of the 80C ceiling; many taxpayers leave it unclaimed.
-
Assuming Sections 80EE or 80EEA still apply to a fresh home loan; the window for new loans closed on March 31, 2022.
-
Overlooking employer NPS contributions under 80CCD(2). This is the one deduction that new-regime taxpayers most often miss.
-
Donating in cash above ₹2,000 and expecting the amount to qualify under Section 80G.
Conclusion
Income tax deductions exist to push you towards savings, insurance and investing in a home or education. Most of them work only if you stay with the old tax regime; the new regime trades that flexibility for lower slab rates and just two deductions worth chasing. There are no universal rules here but a taxpayer with a home loan and ageing parents would understandably do better choosing the old tax regime, while someone with few investments usually gains more from the new one. Run the numbers for your own income before you file, and revisit the choice every year.
