New Tax Regime – Which Tax Benefits Will Be Gone In 2025?

Introduced in the Union Budget 2020, the new tax regime offers significant reductions in tax rates, but limits the availability of deductions and exemptions. Since its inception, the government has actively encouraged taxpayers to adopt the new regime. However, many tax payers continued to be loyal towards the old tax regime as it offered over 70 exemptions and deductions, reducing the taxable income and overall tax liability.

In a major shift, The Finance Minister Nirmala Sitharaman has announced no tax for income under Rs 12 lakhs during the Union Budget 2025-26 presentation. This move translates to significant savings for middle-class taxpayers and is expected to accelerate the transition from the old to the new regime. With this change, taxpayers must evaluate whether the benefits of lower tax rates outweigh the loss of deductions they previously enjoyed.

Let us take a look at which exemptions and deductions will be no longer available under new tax regime In 2025

Taxpayers opting for the new regime will no longer be able to claim the following deductions and exemptions

• Common Allowances such as Entertainment allowance on Salaries, House Rent Allowance, Leave Travel Allowance, Helper Allowance, Child Education Allowance, Minor Child Income Allowance
• Section 80C Investments - This includes investments made in Equity Linked Savings Scheme, Public Provident Fund, Statutory Provident Fund, Recognized Provident Fund, life insurance premium payments, principal sum of a home loan, National Savings Certificate, Senior Citizens Savings Scheme, and Sukanya Samriddhi Yojana.
• Section 80D- Payment made towards medical insurance premiums up to a maximum limit of Rs 25,000 for self or family, and Rs 50,000 for senior citizens.
• Section 80CCC - Payment made towards premium of a pension fund.
• Donations to political parties or trusts - Contributions under Section 80G, which previously allowed deductions on donations to approved charitable trusts.

Which Exemptions Are Available Under The New Tax Regime ?

• Despite removing some popular deductions, the new tax regime retains the following exemptions -
• Leave Encashment - Tax exemption on unused leaves
• Travel/Tour/Transfer Compensation - Reimbursement for travel and tour-related expenses
• Transport Allowance for Person with Disabilities - special allowance for differently abled individuals
• Conveyance Allowance - exemption for transport expenses incurred for official duties
• Perquisites for Official Purposes - employer-covered expenses directly related to work
• Gifts up to Rs 5,000 - small-value gifts will remain tax-free
• Additional Employee costs - exemptions for newly hired employees under special circumstances
• Standard deductions on family pensions - relief for family members receiving pension benefits
• Deductions on deposits in Agniveer Corpus fund - special exemptions for contributions towards Agniveer scheme
• Exemptions for voluntary retirement - benefits under voluntary retirement scheme remain tax-free

With the Union Budget 2025-26, the government has made the new tax regime more attractive by eliminating taxes for incomes under Rs 12 lakh, prompting taxpayers to reassess their financial planning. While the loss of popular deductions might deter some to make investments in schemes such as Public Provident Fund, National Savings Certificate, and Equity Linked Savings Scheme, it is to be remembered that savings and investment serve different purposes. Savings provide liquidity and security for short-term needs, whereas investments focus on long-term wealth creation and financial stability.