The recent hike in income tax slabs under new tax regime has been the highlight of Union Budget 2025-26. Besides the direct income tax relief, there are a few exemptions and deductions which can be claimed by a tax payer under the new tax regime. These include:
Salary:
- Salaried individuals who opt for the new tax regime can continue to claim standard deduction of Rs.75,000.
- 87 A rebate is allowed for income up to Rs.12 lakh and it has been raised to Rs.60,000 from FY 2025-26.
- Employer’s contribution to the National Pension Scheme, up to 14 per cent of the salary (basic+dearness allowance) is eligible for deduction.
- Any compensation received to meet cost of travel on official tours or transfers like rail fare, air fare is tax exempted, i.e., considered less in income. This also includes daily allowance incurred to meet regular expenses like food for such trips.
- Exemption up to maximum Rs.25 lakh on leave encashment, Rs.20 lakh on gratuity, Rs.5 lakh on voluntary retirement are allowed.
Let-out house property
- Interest on home loan on let out property is allowed as deduction. It can be offset against rental income. Standard deduction of 30 per cent is also allowed on rental income. However, if the interest exceeds the rental income, the resultant loss cannot be adjusted against other income heads neither can it be carried forward.
Income from other sources:
- For a retiree receiving uncommuted pension, i.e., pension paid out in regular instalments, it is exempt to a certain extent. Rs.25,000 or 1/3rd of the uncommuted pension received – whichever is less is eligible for tax deduction.
- Gifts up to Rs.50,000 from non-relatives in a financial year.