The default tax framework in India is now the New Tax Regime. While it is widely known that popular deductions like Section 80C (PPF, ELSS, insurance) and Section 80D (medical insurance) are disallowed, many taxpayers believe the New Regime allows zero tax breaks. This is a common myth. There are still several key deductions you can claim to reduce your tax liability.

Key Deductions Allowed Under the New Tax Regime

For salaried employees, the following deductions remain fully available:

1. Standard Deduction: A flat ₹75,000 Standard Deduction is automatically deducted from your gross salary income (increased from ₹50,000 in recent updates).
2. Corporate NPS (Section 80CCD(2)): You can claim a deduction for the employer's contribution to your National Pension System (NPS) account. This is allowed up to 14% of your basic salary (for government employees) or 10% (for private-sector employees).
3. VRS Exemptions: Any lump-sum amount received upon voluntary retirement (VRS) remains tax-exempt up to ₹5 Lakh.
4. Gratuity & Leave Encashment: Standard exemptions on retirement benefits like gratuity and leave encashment remain fully applicable under the New Regime.

What is Disallowed?

To benefit from lower tax slabs, you must give up deductions under Section 80C, Section 80D, Section 24b (home loan interest on self-occupied property), and HRA. If you do not have substantial investments in these areas, the New Regime is almost always more beneficial.