Your Complete Guide to
New Tax Regime Benefits
Every benefit explained with worked examples — under the Income-tax Act, 2025, effective 1 April 2026.
The Income-tax Act, 2025 comes into full effect from 1 April 2026. The tax relief described here was introduced via Budget 2025 / Finance Act 2025 for FY 2025-26 and is now codified in the new Act. Under this Act, the new tax regime is the default for individuals and HUFs. Taxpayers may opt for the old regime when filing their return.
Increased Standard Deduction
Salaried employees and pensioners under the new regime receive a flat standard deduction of ₹75,000 (or the salary amount, whichever is lower) — no documentation required whatsoever. The old regime retains a ₹50,000 limit.
Under the old regime the net would be ₹9,50,000 — the extra ₹25,000 deduction in the new regime directly reduces taxable income.
Favourable Tax Slabs
Seven progressive tax slabs apply under the new regime. The basic exemption limit starts at ₹4,00,000 — compared to ₹3,00,000 for individuals below 60 under the old regime.
| Income Range | Rate | Tax on This Slab | Visual |
|---|---|---|---|
| Up to ₹4,00,000 | NIL | ₹0 | |
| ₹4,00,001 – ₹8,00,000 | 5% | ₹20,000 | |
| ₹8,00,001 – ₹12,00,000 | 10% | ₹40,000 | |
| ₹12,00,001 – ₹16,00,000 | 15% | ₹60,000 | |
| ₹16,00,001 – ₹20,00,000 | 20% | ₹80,000 | |
| ₹20,00,001 – ₹24,00,000 | 25% | ₹1,00,000 | |
| Above ₹24,00,000 | 30% | On balance income |
* Health & Education Cess @ 4% applies on total tax. Surcharge applies at incomes above ₹50 lakh.
Enhanced Tax Rebate & Marginal Relief
Resident individuals with total income not exceeding ₹12,00,000 receive a rebate of 100% of income tax payable, capped at ₹60,000. The result: effectively zero tax liability. For salaried employees, after the ₹75,000 standard deduction, this zero-tax threshold rises to ₹12,75,000.
Income ≤ ₹12,00,000 and tax ≤ ₹60,000 — full rebate applies. Rahul pays zero income tax.
Marginal relief ensures tax cannot exceed the amount by which income exceeds ₹12,00,000. Seema saves ₹26,000 in tax at this boundary.
Higher Deductions for Pension Contributions
Employer’s Contribution to NPS
Under the new regime, the deductible limit for employer contributions to a notified pension scheme (NPS) is 14% of salary (Basic + DA) for all employers — including private sector. Previously the 14% limit applied only to Central Government employers; private employers were capped at 10%. This equalisation is a meaningful benefit for private sector employees.
Amit gains an additional ₹24,000 deduction — reducing his taxable salary by that amount, saving tax at his applicable slab rate.
Family Pension Deduction
Recipients of a family pension under the new regime are entitled to a deduction of one-third of the pension received, or ₹25,000, whichever is lower. The old regime cap is ₹15,000.
The new regime gives Mrs. Sharma ₹5,000 more in deduction, reducing her taxable pension income.
Agnipath Scheme (Agniveer) Benefits
Salaried individuals enrolled under the Agnipath Scheme can claim a deduction for their own contributions to the Agniveer Corpus Fund. Additionally, a deduction is available for any matching contribution made by the Central Government to the individual’s account in the Fund. Both deductions are permitted under the new regime.
Both components — the Agniveer’s own contribution and the Government’s matching amount — qualify as deductions, making this scheme particularly tax-efficient.
Lower Perquisite Valuation — Rent-Free Accommodation
The taxable perquisite value of employer-owned unfurnished rent-free accommodation provided by non-government employers has been reduced. Population thresholds are determined per the 2011 Census as per the Income-tax Rules, 2026.
| City Population (2011 Census) | Previous Rate | Revised Rate | Reduction |
|---|---|---|---|
| Exceeding 40 lakh | 15% | 10% | − 5 pp |
| Exceeding 15 lakh & up to 40 lakh | 10% | 7.5% | − 2.5 pp |
| Other areas (up to 15 lakh) | 7.5% | 5% | − 2.5 pp |
Vikram’s taxable salary reduces by ₹40,000 purely from the revised perquisite valuation — at a 15% tax slab this saves him ₹6,000 in tax (plus cess).
What You Must Forgo Under the New Regime
Choosing the new regime means you cannot claim the following deductions or exemptions:
The new regime suits employees with limited deductible investments who prefer simpler compliance. Always compute tax under both regimes before deciding — the best choice depends on your individual investment profile and salary structure.
Complete Worked Example — All Benefits Combined
Profile: Ananya, private sector salaried employee in Bengaluru (population >40 lakh). Gross Salary ₹15,00,000. Basic + DA = ₹8,00,000. Employer contributes 14% to NPS = ₹1,12,000. Employer provides owned unfurnished accommodation (same city).
Under the previous perquisite rate of 15%, the addition would have been ₹2,25,000 — the revised rate saves ₹75,000 in taxable income right here.
Compare: under the old regime the NPS deduction would be capped at 10% (₹80,000) and standard deduction ₹50,000 — net taxable income ≈ ₹15,70,000, substantially higher.
Income exceeds ₹12,00,000 so the Section 87A rebate does not apply here. However, the combined effect of the revised standard deduction, extended NPS deduction, and lower perquisite valuation reduces taxable income by approximately ₹1,07,000 compared to the old regime — saving around ₹16,000–₹20,000 in total tax.