With the new tax regime becoming more widespread, taxpayers are losing access to several exemptions and deductions previously available under the old tax system. Key provisions such as Sections 80C, 80D, 80DD, and 80G are not applicable under the new tax regime.

Growing Adoption of the New Tax Regime

Currently, around 73% of taxpayers have switched to the new tax regime, and the CBDT chairman expects this number to rise to 90% next year.

However, some specific exemptions and deductions are still available under the new tax system. Here are the key ones:

Tax Exemptions Allowed in the New Tax Regime

1. Section 80CCD (2): Exemption on employer contributions to the National Pension System (NPS).
2. Section 80CCH: Tax exemption on income earned through the Agnipath scheme.
3. Section 80JJAA: Businesses hiring additional employees can claim a 30% deduction on recruitment costs for three consecutive assessment years.

Rebate under Section 87A

• In the Financial Year 2023-24, the rebate under 87A was ₹25,000.
• From FY 2025-26, this rebate has been increased to ₹60,000 under Budget 2025.

Allowances Available Under Both Tax Regimes

Certain allowances are available in both the old and new tax regimes, including:

1. Allowance for travel expenses incurred during tours or transfers.
2. Allowance covering daily expenses for employees traveling on duty or transfer.
3. Allowance for conveyance expenses if the employer does not provide free transport.
4. Transport allowance for employees with disabilities (blind, deaf, or orthopedically handicapped) to help cover commuting costs.

Conclusion

While the new tax regime offers fewer exemptions, certain deductions remain available. Taxpayers should carefully assess their eligibility before choosing their tax regime.