New Income Tax Act 2026: Deductions, exemptions added under new tax regime from April 1

new tax regime deductions

• Income-tax Rules, 2026 notified, replacing previous tax framework
• New tax regime offers higher exemption but fewer deductions
• Meal vouchers, gifts, NPS, and standard deduction still allowed

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The Government of India has notified the Income-tax Rules, 2026, publishing them in the Official Gazette ahead of the new financial year starting April 1. This notification marks an important procedural step in bringing the Income-tax Act, 2025, into effect, replacing the long-standing taxation framework under the previous law.

“Salaried employees opting for the new tax regime from April 1, 2026, gain a higher basic exemption limit but forgo most deductions like HRA, 80C, and 80D (available only in old regime). However, simplified perquisite valuation for non-cash benefits like rent-free accommodation and employer vehicles is available,” Archit Gupta, Founder & CEO, ClearTax.

Let us have a look at Key deductions and exemptions still available under the new tax regime

Meal: Meal vouchers up to 200 per meal is not taxable, and this is applicable for those under the new tax regime. “This will equate to 4400 for one meal a day or 8800 for two meal a day basis 22 working days a month,” said SureshKumar S, Partner, Deloitte India.

Car owned by employee but used for official and personal purpose:

Engine capacity up to 1.6 litres: Actual expenditure incurred by the employer minus Rs 5,000 per month (plus Rs 3,000 per month if a chauffeur is provided)

Engine capacity above 1.6 litres: Actual expenditure incurred by the employer minus Rs 7,000 per month (plus Rs 3,000 per month if a chauffeur is provided)

Gifts: Any gifts on ceremonial occasions or otherwise up to Rs 15,000 is not taxable. Under both regime. Value of perks is NIL. “It shall be nil, if the value of such gift, voucher or token, as the case may be, is below Rs 15,000 in aggregate during the tax year.” Earlier, this was Rs 5000,” Kumar said.

Standard deduction: Salaried individuals and pensioners can claim a flat deduction of Rs 75,000 from their income, offering a direct reduction in taxable salary.

Employer’s contribution to NPS (Section 80CCD(2)): Contributions made by an employer to an employee’s National Pension System (NPS) Tier-I account remain deductible. The limit is up to 14 percent of basic salary (basic + DA) for central government employees and 10 percent for others, making it a significant tax-saving avenue. Also, employees opting for new tax regime can claim deduction up to 14 percent of basic salary.

Interest on home loan (let-out property): Interest paid on a home loan for a let-out or deemed let-out property can still be claimed as a deduction under Section 24(b). However, the set-off of loss against other income is capped at Rs 2 lakh, and any unadjusted loss cannot be carried forward.

Family pension deduction (Section 57(iia)): Individuals receiving family pension can claim a deduction of Rs 25,000 or one-third of the pension received, whichever is lower.

Agniveer Corpus Fund (Section 80CCH): Contributions made by individuals enrolled under the Agnipath Scheme to the Agniveer Corpus Fund qualify for deduction.

Transport allowance for differently abled employees: Transport allowances provided to employees who are blind or orthopedically handicapped continue to be tax-exempt.

Voluntary retirement compensation (Section 10(10C)): Amounts received on voluntary retirement or separation are exempt up to the prescribed limit.

Gratuity (Section 10(10)): Eligible gratuity received by employees remains tax-free within specified limits.

Leave encashment (Section 10(10AA)): Leave encashment received at the time of retirement or superannuation is exempt up to a defined threshold.