New Tax Regime and Chapter VI-A Deductions Explained
- PRITI SIRDESHMUKH
- 3 hours ago
- 9 min read
The New Tax Regime in India, introduced under Section 115BAC, offers simplified slab rates but restricts most commonly used Chapter VI-A deductions. While it reduces paperwork and compliance, taxpayers must weigh whether the Old Regime, with its wide range of exemptions, still provides greater benefits. The Finance Act 2024, applicable from FY 2025-26, revises standard deductions and clarifies which exemptions survive under the new system. Understanding this comparison is essential for making informed tax planning decisions.
Table of Contents
What is the New Tax Regime?
The New Tax Regime was introduced under Section 115BAC of the Income Tax Act to provide a simplified structure of income tax slabs with reduced rates. Instead of relying on exemptions and deductions, the system aims to lower tax liability through straightforward slab benefits. From FY 2025-26, it is set as the default tax regime for all individuals and Hindu Undivided Families (HUFs). Taxpayers without business income can choose between the old and new regimes each year, while those with business income must file Form 10-IEA to switch back to the old regime. The idea is to reduce compliance while making taxation more transparent.
Chapter VI-A Deductions Explained
Chapter VI-A of the Income Tax Act provides one of the most effective ways for taxpayers to reduce their overall taxable income under the Old Tax Regime. It covers a series of deductions ranging from Section 80C to Section 80U, each addressing different types of investments, expenses, and social contributions. These provisions are particularly significant for salaried individuals and families, as they not only encourage disciplined savings and insurance coverage but also provide substantial tax relief when claimed correctly.
Section 80C remains the most widely used provision, offering deductions of up to ₹1,50,000. Eligible investments and payments include contributions to the Public Provident Fund (PPF), Equity Linked Savings Schemes (ELSS), National Savings Certificates (NSC), life insurance premiums, repayment of the principal amount on a housing loan, and even tuition fees for children. By planning investments under this section, taxpayers can significantly lower their taxable income while building financial security.
Section 80D focuses on healthcare, allowing individuals to claim deductions on medical insurance premiums. The limit is ₹25,000 for insurance taken for self, spouse, and dependent children, while an additional deduction of up to ₹25,000 is allowed if insurance is purchased for parents. If the parents are senior citizens, the limit increases to ₹50,000, making it possible for families to claim higher tax relief. This section not only helps reduce tax liability but also promotes long-term health coverage.
Section 80E is designed to support education by allowing deductions on interest paid for higher education loans. The entire interest amount is deductible for up to eight consecutive years, starting from the year repayment begins. There is no monetary cap on the deduction, making it especially beneficial for families who take education loans for professional or higher studies.
Section 80G provides relief for charitable giving by allowing deductions on donations made to approved institutions and funds. Depending on the nature of the institution, donations may qualify for either a 100 percent or 50 percent deduction, with or without a qualifying limit. This section encourages philanthropy while offering tax benefits to individuals contributing towards social development.
Section 80CCD(1B) is an extension of the National Pension Scheme provisions, allowing an additional deduction of ₹50,000 over and above the Section 80C limit. This section is particularly useful for individuals seeking to maximize retirement savings while reducing tax liability further.
Sections 80TTA and 80TTB provide relief on interest income earned from savings accounts and deposits. Section 80TTA allows a deduction of up to ₹10,000 on savings account interest for individuals below 60 years of age. For senior citizens, Section 80TTB increases this benefit to ₹50,000, covering both savings account and fixed deposit interest.
When combined, these provisions under Chapter VI-A offer a wide-ranging framework for tax planning. A salaried individual can save several lakhs annually by utilizing deductions across investments, insurance premiums, education loans, and donations. This makes Chapter VI-A an indispensable part of tax strategy under the Old Tax Regime, especially for those who actively manage their finances to balance savings, protection, and tax efficiency.
Are Chapter VI-A Deductions Allowed in the New Tax Regime?
Most Chapter VI-A deductions are not available under the New Tax Regime. This includes the widely used Sections 80C, 80D, 80E, and 80G. Only a few specific benefits remain, such as:
Employer’s contribution to NPS under Section 80CCD(2).
Income from the Agniveer Corpus Fund under Section 80CCH.
Transport allowance for specially abled employees. For most taxpayers, this means that deductions previously used to reduce taxable income are no longer relevant when filing under the new system.
New Tax Regime vs Old Regime: A Comparative Table
Deduction/Exemption | Old Regime | New Regime (FY 2025-26) |
Section 80C | Up to ₹1,50,000 | Not available |
Section 80D | ₹25,000–₹50,000 | Not available |
Section 80E | Interest fully deductible | Not available |
Section 80G | Available (limits vary) | Not available |
Section 80CCD(2) | Not available | Available |
Section 80CCH | Not available | Available |
Standard Deduction | ₹50,000 | ₹75,000 |
HRA, LTA | Available | Not available |
Is Section 80C Allowed in New Tax Regime?
Section 80C, one of the most commonly used deductions in India, is not available under the New Tax Regime. Investments in PPF, ELSS, NSC, and repayment of housing loan principal cannot be claimed here. However, in the Old Tax Regime, Section 80C allows taxpayers to save up to ₹1,50,000 per year by investing in eligible instruments. For those who rely heavily on such investments, the Old Regime often proves more beneficial.
Is Section 80D Allowed in New Tax Regime?
Section 80D, which covers health insurance premiums and preventive health check-ups, is not permitted in the New Tax Regime. In the Old Regime, it provides deductions of up to ₹25,000 for self and family, and up to ₹50,000 for senior citizens. This provision encourages financial protection through health coverage, but under the new system, it has been removed to simplify tax calculations.
Is Section 80E (Education Loan Interest) Allowed in New Tax Regime?
Section 80E, which allows deduction of the full interest amount on education loans for a maximum of 8 years, is not available under the New Tax Regime. In contrast, under the Old Regime, this section continues to support students and parents by reducing the tax burden linked to higher education expenses.
Standard Deduction under the New Tax Regime
One of the biggest changes in the New Tax Regime from FY 2025-26 is the enhanced standard deduction. Salaried employees and pensioners are now entitled to a deduction of ₹75,000, up from the earlier ₹50,000. This deduction applies automatically and does not require proof of investment or expense, making it the primary relief available under the new system.
Who Benefits More from the New Tax Regime?
The New Regime is more favourable for taxpayers who do not invest much in tax-saving instruments or who prefer minimal compliance. Salaried individuals with limited deductions may find their liability lower under the revised slabs of the New Regime, especially with the higher standard deduction. However, those who invest heavily in 80C instruments or claim significant medical, education, or donation deductions usually save more under the Old Regime.
How to Choose Between Old and New Regime
Choosing between regimes requires calculating tax liability under both options. A taxpayer must compare slab rates with and without deductions. For example, someone with no major deductions may pay less under the New Regime, while another with high Chapter VI-A investments benefits more from the Old Regime. Professional services like TaxBuddy help automate this comparison, making it easier to pick the most tax-efficient route.
Conclusion
The New Tax Regime simplifies compliance and provides reduced slab rates, but it does so at the cost of removing most Chapter VI-A deductions. The Old Regime, meanwhile, continues to benefit those who strategically invest and plan. Selecting the right system depends on personal financial goals, deductions, and long-term planning. For assistance in choosing the optimal regime and ensuring error-free tax filing, it is recommended to download the TaxBuddy mobile app for a simplified, secure, and hassle-free experience.
FAQs
Q1. Does TaxBuddy offer both self-filing and expert-assisted plans for ITR filing, or only expert-assisted options?
TaxBuddy provides flexibility to taxpayers by offering both self-filing and expert-assisted plans. The self-filing option is designed for individuals who are comfortable entering their own details into a user-friendly platform. The expert-assisted plan is suitable for those with complex returns such as capital gains, foreign income, or business income, where professional review ensures accuracy. This dual model helps users choose based on their comfort level and filing needs.
Q2. Which is the best site to file ITR?
The best site to file an income tax return depends on a taxpayer’s requirements. The official Income Tax Department portal is free and secure but may feel complicated for first-time users. Private platforms like TaxBuddy stand out for their AI-driven automation, guided filing process, and professional support. TaxBuddy also offers post-filing assistance, which is particularly helpful in case of notices or queries from the department.
Q3. Where to file an income tax return?
An income tax return can be filed on the Income Tax Department’s official portal (www.incometax.gov.in) or through authorized platforms such as TaxBuddy. Both options are valid, but third-party platforms often provide a more simplified interface, quick data entry, and personalized assistance. TaxBuddy further ensures error-free filing by cross-checking entries against possible mismatches, making it easier for taxpayers to avoid mistakes.
Q4. Can health insurance premium be deducted under the new tax regime?
No, health insurance premiums covered under Section 80D cannot be deducted if the taxpayer opts for the New Tax Regime. Under the Old Regime, this deduction continues to be available, allowing individuals to claim ₹25,000 for self and family and ₹50,000 for senior citizens. Those who rely on health insurance for tax savings may find the Old Regime more advantageous.
Q5. Is Section 80C deduction for LIC/PPF investments available in the new regime?
Section 80C, which allows deductions up to ₹1,50,000 for investments in instruments like LIC premiums, PPF, NSC, and ELSS, is not allowed in the New Tax Regime. It is only applicable under the Old Regime. Taxpayers who make regular investments in these instruments should compare their potential savings carefully before deciding which regime to adopt.
Q6. Can taxpayers switch between regimes every year?
Yes, individuals without business or professional income can switch between the Old and New Tax Regime every financial year while filing their ITR. However, those with business or professional income are restricted and must file Form 10-IEA before the due date if they wish to opt out of the New Regime. Once opted out, they cannot switch back freely.
Q7. Are donations under Section 80G allowed in the new regime?
Donations made to charitable organizations under Section 80G are not eligible for deductions in the New Tax Regime. Only under the Old Regime can taxpayers claim deductions ranging from 50% to 100% of the donated amount, subject to specified limits. Philanthropic taxpayers may therefore prefer the Old Regime for maximizing their tax benefits.
Q8. What is the latest standard deduction in FY 2025-26?
For FY 2025-26, the Finance Act increased the standard deduction for salaried individuals and pensioners to ₹75,000. This deduction applies under both the Old and New Tax Regime. It is automatically applied while computing taxable income, providing relief without the need for documentation or proof.
Q9. How do salaried employees decide between old and new regime?
Salaried employees should calculate their tax liability under both regimes. If they claim high deductions through investments, insurance, and allowances, the Old Regime is likely to result in lower tax. However, employees with minimal deductions may benefit from the reduced slab rates in the New Regime, especially with the enhanced standard deduction. Tools like TaxBuddy’s calculators make this comparison quick and accurate.
Q10. Is Form 10-IEA mandatory for switching regimes?
Form 10-IEA is mandatory only for taxpayers with business or professional income who wish to opt for the Old Regime instead of the default New Regime. For salaried individuals without business income, the choice between regimes can be made directly while filing the ITR, and no additional form is required.
Q11. Which deductions remain available under the new regime?
The New Regime disallows most deductions under Chapter VI-A, but a few remain. These include the employer’s contribution to the National Pension Scheme (Section 80CCD(2)), income from the Agniveer Corpus Fund (Section 80CCH), and transport allowance for specially abled employees. Apart from these, the standard deduction of ₹75,000 continues to be available.
Q12. Can TaxBuddy help compare tax liability under both regimes?
Yes, TaxBuddy’s platform is designed to compare tax outcomes under both the Old and New Regime. It uses AI to automatically calculate liability, factoring in applicable deductions, slab rates, and exemptions. This feature helps taxpayers choose the regime that minimizes tax outgo, while also offering expert-assisted support for those with more complex returns.
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