New Income Tax Act 2026: Full List Deductions And Exemptions Under The New Tax Regime From April 1

With the adoption of the Income Tax Act, 2025, which goes into effect on April 1, 2026, India is entering a major period of tax reform as the new fiscal year draws near. The basic exemption cap under the new system is still Rs 4 lakh. However, individuals with a taxable income of up to Rs 12 lakh would pay no income tax because of the enhanced rebate under Section 87A. After accounting for standard deduction, this essentially raises the tax-free threshold for salaried persons to Rs 12.75 lakh.

The new Income-tax Act, 2025 (ITA 2025), effective April 1, 2026, reinforces the new tax regime by offering concessional tax rates with restrictions on claiming specified deductions and exemptions. While an individual taxpayer opting for the old tax regime can claim all available deductions and exemptions, a taxpayer opting for the new tax regime u/s 115BAC (corresponding sec. 202 under ITA 2025) cannot claim the following deductions and/ or exemptions, as per CA (Dr.) Suresh Surana.

Sections under ITA 1961	Sections under ITA 2025	Exemption/Deduction
10(5)	Schedule III, Sl No. 8	Leave travel concession
10(13A)	Schedule III, Sl No. 11	House rent allowance
10(14)	Schedule III, Sl No. 12 & 13	Exemption in respect of special allowances or benefit to meet expenses relating to duties or personal expenses (other than those as may be prescribed for this purpose)
10(17)	Schedule III, Sl No. 5,6 & 7	Daily allowance or constituency allowance of MPs and MLAs
10(32)	Schedule III, Sl No. 17	Exemption in respect of income of minor child included in the income of parent
10AA	144	Tax holiday for units established in SEZ
16	19(1) - Table S. No.1 (Tax on Employment)	(i) Entertainment allowance (ii) Professional tax
24(b)	22(1)(b)	Interest on loan in respect of self-occupied property
32(1)(iia)	33(8)	Additional depreciation
33AB	48 & Schedule IX	Tea/Coffee/Rubber development Account
33ABA	49 & Schedule X	Site Restoration Fund
35(1)(ii),(iia),(iii) Or 35(2AA)	45(3)	Deduction in respect of contribution to:
		Approved research associations, universities, colleges or institutions engaged in scientific research, social science research or statistical research. [Section 45(3)(a)]
		An Indian company whose main object is scientific research and development, subject to prescribed approval and conditions. [Section 45(3)(b)]
		Specified notified entities such as national laboratories, universities, Indian Institutes of Technology or other specified persons also qualify for deduction. [Section 45(3)(c)]
35AD	46	Investment Businesses linked tax incentives for specified business
35CCC	47(1)(a)	Deduction in respect of expenditure incurred on agricultural extension project and skill development project
80C to 80U	123- 154 (Except S. 144)	Deductions under Chapter VI-A (other than employers contribution towards NPS under section 80CCD(2), Central Government contribution towards Agnipath Scheme under section 80CCH(2) and deduction in respect of employment of new employees under section 80JJAA)

Certain losses are not allowed to be set off: While computing total income, set-off of any following loss would not be allowed:

(i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred above; or

(ii) under the head house property with any other head of income

Exemption or deduction for allowances or perquisites

While computing total income, any exemption or deduction for allowances or perquisites provided under any other law for the time being enforced in India would not be allowed. In the case of a person having a unit in IFSC referred to in section 80LA(1A), whose income is chargeable to tax under section 115BAC(1A), deduction under section 80LA would be allowed subject to the fulfillment of the conditions specified in that section.

An employee whose income is chargeable to tax under section 202 would be entitled for the following deductions -

1. In case of salary income, enhanced standard deduction upto 75,000;
2. Deduction under section 124(1) in respect of employer contribution of upto 14% of the salary to the specified pension scheme of Central Government.
3. Deduction in respect of contribution to Agnipath Scheme [Section 125(2)]
4. Deduction in respect of additional employee cost [Section 146].