Can You Claim 80C or HRA in a New Tax Regime? Detailed Comparison
- Asharam Swain
- Sep 16
- 9 min read
Income tax planning is an essential part of managing finances efficiently, especially for salaried individuals. Understanding the differences between the old and new tax regimes can help taxpayers optimize deductions, exemptions, and ultimately reduce tax liability. While the old regime allows for multiple deductions such as Section 80C investments, HRA, and other exemptions, the new regime offers lower tax rates with limited deductions. Choosing the right tax regime depends on your income structure, eligible deductions, and long-term financial goals. Let's provide a detailed comparison between the old and new tax regimes, highlight key deductions like 80C and HRA, and offer practical tips for seamless filing using platforms like TaxBuddy.
Table of Contents
Can You Claim 80C in the New Tax Regime?
Under the new tax regime, most exemptions and deductions available under the old regime are not allowed. This includes Section 80C, which covers investments in instruments such as PPF, EPF, ELSS, life insurance premiums, and tuition fees. Taxpayers opting for the new regime will have lower slab rates but cannot claim 80C deductions, which means the focus shifts to simple tax computation rather than maximising exemptions.
How 80C Works in the Old Tax Regime
In the old tax regime, Section 80C allows deductions up to ₹1,50,000 on specified investments and expenses. Eligible options include contributions to the Public Provident Fund (PPF), Employee Provident Fund (EPF), Equity Linked Savings Scheme (ELSS), life insurance premiums, National Savings Certificates (NSC), and tuition fees for children. Utilizing the full 80C limit can significantly reduce taxable income, making it a vital tool for tax planning. Combining 80C with other deductions such as 80D (health insurance) and 24(b) (home loan interest) helps taxpayers lower their tax liability under the old regime.
Is HRA Allowed in the New Tax Regime?
Under the new tax regime, the House Rent Allowance (HRA) exemption is generally not available. Taxpayers cannot claim HRA to reduce taxable income if they choose the new regime, as it has been replaced with reduced slab rates to simplify tax computation. Therefore, salaried individuals must factor this in when evaluating whether the new regime is more beneficial compared to the old regime.
How HRA Works in the Old Tax Regime
In the old regime, HRA provides a valuable exemption for salaried individuals living in rented accommodations. The exemption is calculated based on the least of the following: HRA received, rent paid minus 10% of salary, or 50% of salary for metro cities (40% for non-metros). Proper documentation, such as rent receipts and a rental agreement, is required to claim HRA. This deduction can substantially reduce taxable income, particularly for employees residing in high-rent urban areas.
Key Differences Between Old and New Tax Regime
The Income Tax system in India offers two distinct regimes for taxpayers: the old tax regime and the new tax regime. Choosing between them depends largely on an individual’s income structure, eligible deductions, and financial planning strategies.
Old Tax Regime The old tax regime is characterized by its allowance of numerous deductions and exemptions. Taxpayers can claim benefits under Section 80C, which covers investments such as PPF, EPF, NSC, life insurance premiums, and ELSS mutual funds, with a maximum limit of ₹1.5 lakh per year. Other exemptions include House Rent Allowance (HRA), standard deduction of ₹75,000 for salaried employees, leave travel allowance (LTA), and deductions for education loans, medical insurance, and charitable contributions. While this regime requires careful tracking of eligible expenses and documentation, it can substantially reduce taxable income, making it advantageous for individuals who actively invest in tax-saving instruments or incur significant eligible expenses.
New Tax Regime In contrast, the new tax regime offers simplified taxation with lower tax slab rates but minimal exemptions. Most deductions, including 80C, HRA, and standard deductions, are not available. Tax calculation is straightforward, with fewer components to consider, making it easier to file returns. However, individuals who can fully leverage the exemptions in the old regime may face a higher tax liability under the new system due to the absence of these deductions.
Choosing Between the Two The choice between the old and new regime requires a careful comparison of your income, investments, and potential deductions. Taxpayers with multiple tax-saving investments and allowances typically benefit more under the old regime, whereas those preferring simplicity and lower compliance may opt for the new regime. Using tools like TaxBuddy can help calculate tax liabilities under both regimes to make an informed decision, ensuring optimal tax planning and minimizing the final tax outgo.
Standard Deduction Comparison
The standard deduction under both regimes differs slightly. In the old regime, a flat standard deduction of ₹75,000 (for FY 2024–25) reduced taxable income for salaried individuals, in addition to other exemptions like HRA. In the new regime, while the standard deduction is available, allowances such as HRA, LTA, and other exemptions are largely removed. Comparing net taxable income under both regimes helps determine which option results in lower tax liability.
How to Decide Which Regime Suits You
Choosing between the old and new tax regime requires evaluating taxable income, eligible deductions, and exemptions. Individuals with multiple eligible deductions, investments under 80C, health insurance premiums, or home loan interest may benefit more from the old regime. Conversely, those who prefer lower slab rates without complex calculations may find the new regime advantageous. Using a tax filing platform like TaxBuddy can help simulate both scenarios quickly, enabling an informed decision based on projected tax liability.
Tips for Tax Filing with TaxBuddy
TaxBuddy provides a comprehensive platform designed to make tax filing simple, accurate, and hassle-free for all types of taxpayers. Whether you prefer a self-filing approach or need expert-assisted guidance, TaxBuddy offers flexible solutions tailored to your needs. Users can easily upload essential documents, includingForm 16, Form 26AS, and other supporting proofs, and the platform automatically integrates this information to calculate your tax liability accurately under both the old and new tax regimes.
The platform leverages AI-driven algorithms to ensure that all deductions, exemptions, and eligible benefits are applied correctly, minimizing the risk of human errors or missed claims. Real-time validations detect mismatches, incorrect entries, or missing information, which helps prevent notices from the Income Tax Department and reduces the likelihood of filing revisions later.
TaxBuddy also allows taxpayers to compare tax liabilities across the old and new regimes instantly, helping them make informed decisions and optimize their tax planning. With seamless document uploads, automatic calculations, and guided filing processes, TaxBuddy transforms tax filing into a smooth, efficient experience. This ensures that taxpayers can maximize their refunds and benefits without the stress of manual computation or compliance concerns.
Common Mistakes to Avoid
Filing Income Tax Returns (ITR) accurately is crucial to avoid penalties, delays in refunds, and potential notices from the Income Tax Department. Several common mistakes frequently occur among taxpayers, especially when navigating the complexities of old and new tax regimes, HRA exemptions, TDS credits, and updated ITR utilities. Being aware of these mistakes and actively avoiding them can ensure a smoother filing process and optimal tax savings.
Ignoring Eligible Deductions Under the Old Regime Many taxpayers automatically opt for the new tax regime without assessing whether the old regime could offer higher deductions. Deductions under Sections 80C, 80D, 80E, and others can significantly reduce taxable income. Failing to compare benefits between the old and new regimes may result in paying more tax than necessary.
Incorrectly Calculating HRA Exemption House Rent Allowance (HRA) exemptions are often miscalculated, especially when rent receipts or rental agreements are not properly submitted. Not providing the correct documentation can lead to incorrect taxable income and lower HRA exemptions, affecting overall tax liability.
Missing ITR Filing Deadlines Timely filing is critical. Missing deadlines can attract penalties up to ₹5,000 for belated returns and interest on outstanding tax dues. Delayed filing also postpones refund processing, as returns filed after the due date are processed later than timely submissions.
Not Reconciling TDS Credits with Form 26AS TDS (Tax Deducted at Source) credits reflected in Form 26AS must match your actual income and deductions. Overlooking discrepancies between your Form 16, salary statements, and Form 26AS can trigger notices and delay refunds, as the Income Tax Department may require clarifications.
Overlooking Updates to ITR Forms or System Utilities Each financial year brings updates to ITR forms, formats, and associated system utilities. Filing using outdated forms or software can result in errors, rejection of the return, or misreporting of income. It is essential to download the latest ITR utility or JSON file provided by the Income Tax Department for the current financial year.
Avoiding these common mistakes not only ensures smooth and error-free filing but also maximizes potential tax savings. Taxpayers are encouraged to cross-check their details, use updated utilities, and consider professional assistance or platforms like TaxBuddy for accurate and hassle-free filing.
Conclusion
Understanding the differences between the old and new tax regimes is essential for efficient tax planning. Utilising deductions like 80C and HRA under the old regime or opting for lower slab rates in the new regime can impact overall tax liability. Platforms like TaxBuddy simplify the filing process, provide accurate calculations, and guide taxpayers in selecting the most suitable regime. For anyone looking for assistance in tax filing, it is highly recommended to download the TaxBuddy mobile appfor a simplified, secure, and hassle-free experience.
FAQs
Q1. Can 80C deductions be claimed under the new tax regime? No, under the new tax regime, taxpayers cannot claim deductions under Section 80C. The new regime is designed with lower tax rates but without most exemptions and deductions, including 80C. If you want to claim investments such as PPF, ELSS, life insurance premiums, or tuition fees under 80C, you must opt for the old tax regime while filing your ITR.
Q2. Is HRA exemption available in the new tax regime? No, House Rent Allowance (HRA) exemption is not available under the new tax regime. Taxpayers can only claim the standard deduction of ₹75,000 in the new regime. To benefit from HRA, you would need to choose the old tax regime and provide rent receipts to your employer for proper exemption calculation.
Q3. What is the maximum 80C deduction under the old regime? Under the old tax regime, taxpayers can claim a maximum deduction of ₹1,50,000 per financial year under Section 80C. This includes investments like Employee Provident Fund (EPF), Public Provident Fund (PPF), life insurance premiums, Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), and tuition fees for children.
Q4. Can I switch between old and new regimes annually? Yes, salaried individuals have the flexibility to choose between the old and new tax regimes each financial year while filing their ITR. Your choice should be made carefully after reviewing your income, eligible deductions, and exemptions. Once the financial year ends, the selected regime applies only to that year’s income.
Q5. How does TaxBuddy help in deciding the best regime? TaxBuddy helps taxpayers compare the old and new regimes by simulating tax calculations under both. The platform highlights the most beneficial option based on your income, deductions, exemptions, and investments. This allows you to make a data-driven decision and optimize your tax savings.
Q6. Are rent receipts mandatory for claiming HRA? Yes, rent receipts are necessary to claim HRA exemption under the old regime. These receipts act as proof of rent paid and must be submitted to your employer for accurate exemption calculation. Without proper documentation, HRA exemption may be denied.
Q7. Does the standard deduction differ between regimes? The standard deduction of ₹75,000 for salaried individuals is available in both the old and new tax regimes. However, other allowances, like HRA, conveyance, and leave travel allowance, are only available under the old regime. This is why reviewing your total exemptions before selecting a regime is important.
Q8. What are common mistakes while filing under the old regime? Common mistakes include missing eligible deductions under Sections 80C, 80D, or 80E, calculating HRA incorrectly, mismatched TDS credits, and uploading wrong Form 16 details. These errors can delay refunds or trigger notices from the Income Tax Department. Carefully verifying documents and using platforms like TaxBuddy reduces such errors.
Q9. Can I file my ITR through TaxBuddy for both regimes? Yes, TaxBuddy supports filing ITR under both old and new tax regimes. You can select your preferred regime, upload your Form 16 or income details, and the platform guides you through the filing process step by step. It ensures a seamless and error-free filing experience.
Q10. Are there penalties for missing the ITR filing deadline? Yes, missing the ITR filing deadline can attract penalties under Section 234F, which range from ₹5,000 to ₹10,000 depending on your income. Late filing also delays refunds and can affect carry-forward of losses. The extended deadlines this year provide extra time to avoid such penalties.
Q11. Does TaxBuddy provide expert-assisted filing? Yes, TaxBuddy offers both self-filing and expert-assisted filing options. You can choose self-filing for a DIY approach with guidance, or opt for expert-assisted filing where trained professionals handle your ITR end-to-end, ensuring accuracy and compliance.
Q12. Can I track my refund status on TaxBuddy? Yes, TaxBuddy allows you to track the status of your income tax refund directly within the platform. Once your ITR is filed and processed, you receive real-time updates, helping you stay informed without having to check multiple government portals.
