Section 115BAC New Regime — Deductions You Can Still Claim in FY 2026-27

Introduction

The new tax regime has become the default tax regime for individual taxpayers, but choosing it also means giving up many of the deductions that were commonly used under the old regime.

For FY 2026-27, there is an important legal update. The Income-tax Act, 1961 has been replaced by the Income-tax Act, 2025 from 1 April 2026. The new-regime provisions earlier covered under Section 115BAC are now contained in Section 202 of the new Act. However, the basic approach remains similar — lower slab rates with limited deductions.

Tax Rates Under the New Regime — FY 2026-27

A resident individual can also claim the Section 87A rebate of up to ₹60,000 where the prescribed conditions are satisfied. For salaried taxpayers, the ₹75,000 standard deduction means salary income of up to ₹12.75 lakh can effectively result in zero tax, subject to the rebate conditions.

Deductions Still Available in the New Regime

The new regime does not completely eliminate deductions. Some important benefits continue to be available.

Standard Deduction — ₹75,000

Salaried employees and pensioners can claim a standard deduction of ₹75,000 under the new regime. It is available without linking the deduction to any particular investment or expenditure.

Employer’s Contribution to NPS — Section 80CCD(2)

An employee can claim a deduction for the employer’s contribution to NPS, subject to the prescribed percentage limits.

This is particularly useful for employees whose employers structure part of their compensation through NPS contributions. The deduction is available even when the employee chooses the new tax regime.

Contribution to Agniveer Corpus Fund — Section 80CCH

Eligible Agniveers can claim the deduction for qualifying contributions to the Agniveer Corpus Fund. The Income Tax Department continues to recognise Section 80CCH as one of the deductions available under the new regime.

Deduction for Additional Employee Cost — Section 80JJAA

Eligible businesses can continue to claim deduction relating to additional employee cost under Section 80JJAA, subject to the prescribed conditions.

This is more relevant for employers and businesses than for ordinary salaried taxpayers.

Family Pension Deduction

A taxpayer receiving family pension can claim the applicable deduction from family pension income. The deduction is separate from the standard deduction available against salary or pension income.

What You Generally Cannot Claim

The new regime is deliberately restrictive when it comes to traditional tax-saving deductions. Common deductions such as 80C, 80D, 80E, 80G, 80TTA, 80TTB and 80U are not available under the new regime, subject to the specific provisions applicable to the taxpayer.

Similarly, exemptions such as HRA are not available under the new regime. Interest on a housing loan for a self-occupied property is also not deductible under the new-regime rules.

Conclusion

The new tax regime for FY 2026-27 is less about collecting a long list of deductions and more about benefiting from simpler taxation and lower slab rates.

For most taxpayers, the key benefits to look at are the ₹75,000 standard deduction, employer NPS contribution, eligible Agniveer contribution and Section 80JJAA for qualifying businesses.

One point should not be missed in 2026: while taxpayers and professionals may still refer to the system as “Section 115BAC new tax regime,” income for FY 2026-27 falls under the Income-tax Act, 2025, where the corresponding new-regime provision is Section 202.

Before choosing between the old and new regimes, taxpayers should compare their actual deductions and exemptions with the tax payable under both options rather than assuming that one regime will always be better.

Written by

Aman Kumar Poddar

Accounts Executive · Accounts & Taxation

Aman Kumar Poddar is an Accounts Executive in TAXAJ's Accounts & Taxation team. With over six years of industry experience, Aman handles bookkeeping, tax filings and day-to-day compliance for clients. TAXAJ is a multi-disciplinary consulting firm spanning finance, taxation, legal, secretarial, FEMA and IPR, with offices in Delhi, Bihar, Bangalore and Goa.

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