Can you claim tax deductions under the new tax regime?

The new tax regime was introduced to simplify compliance and offer lower income tax rates in exchange for fewer deductions. While it removed many popular exemptions from the previous regime, there are still legitimate strategies to lower your taxable income and save on taxes under the new regime. The new regime is particularly beneficial for individuals who prioritise liquidity and simplicity in their financial planning.

By extending the rebate under Section 87A to an income of up to ₹12 lakh, Budget 2025 introduced a substantial relief to the taxpayers under the new tax regime. “There is a common notion that no deductions are allowed under the new tax regime,” says Akhil Chandna, partner–global people solutions leader, Grant Thornton Bharat.

However, certain deductions are still permitted, he says, including an enhanced standard deduction of ₹75,000 for salaried employees and a contribution of up to 14% of the basic salary to the National Pension System (NPS). “Further, if the salary is restructured appropriately by the employer, components such as internet and telephone, car expenditure (up to specified limits) etc. (are also exempted),” Chandna adds.

For those who don’t typically claim exemptions, such as HRA, home loan interest, or deductions under sections like 80C or 80D, the new system simplifies the process, says Gaurav Jain, partner–direct tax, Forvis Mazars in India. “With reduced tax rates across various slabs and minimal paperwork, it enables salaried professionals, freelancers, and consultants to save without locking their money into long-term instruments.”

The new tax regime provides lower tax rates with fewer deductions, unlike the old regime, which permitted multiple deductions but taxed income at higher rates. “It’s especially helpful for individuals who value liquidity and prefer not to have their savings dictated by tax planning rules. The new regime rewards clarity. What you earn is more aligned with what you keep. If you are not maximising deductions anyway, the new structure ensures you are not penalised for it,” says Jain.