Income tax deductions in India reduce taxable income when the applicable tax law, eligibility conditions and documentation requirements are satisfied. For Assessment Year (AY) 2026-27, most familiar tax-saving claims remain available only under the old tax regime.
The new tax regime is the default and permits a narrower set of claims.
This guide covers individuals filing for income earned during Financial Year (FY) 2025-26. It explains common claims, differences between tax options and Income Tax Return (ITR) reporting requirements.
It is an independent tax reference, not personalized tax, legal, accounting or investment advice.
What are tax deductions in India?
Tax deductions are eligible amounts subtracted from gross total income before taxable income is calculated. A tax deduction differs from an exemption, rebate or credit, although each may reduce the final income tax burden.
An exemption removes specified income or an allowance from the tax computation. House Rent Allowance (HRA), when eligible under the old regime, is an example.
A deduction generally applies after income has been computed under the individual heads and reduces gross total income under provisions such as Chapter VI-A.
A tax rebate reduces income tax after taxable income and the applicable tax rates have been calculated. Tax Deducted at Source (TDS) is also not a deduction from taxable income.
It is tax already collected against the final liability, which the taxpayer reconciles when filing the return.
The practical tax-computation sequence is:
- Classify income under the applicable tax heads.
- Apply permitted tax exemptions and head-specific adjustments.
- Calculate gross total income.
- Subtract eligible Chapter VI-A claims.
- Calculate taxable income under the selected option.
- Apply tax rates, surcharge and cess where relevant.
- Reduce the result by any eligible tax rebate and tax already paid.
A tax claim cannot ordinarily exceed the eligible payment, statutory limit or gross total income, as applicable. It also cannot be claimed twice merely because the same tax-saving payment appears in more than one record.
The next step is to identify which income enters this calculation.
How do deductions reduce taxable income?
Deductions lower the amount to which tax rates are applied, but the resulting tax saving is not equal to the deduction itself. The actual saving depends on the taxpayer’s marginal tax rate, selected option, eligible income and applicable cess.
Consider an old-regime example. Assume gross total income of ₹10,00,000 and eligible claims of ₹1,50,000 under Section 80C, ₹25,000 under Section 80D and ₹50,000 under Section 80CCD(1B).
The calculation reduces taxable income by ₹2,25,000 to ₹7,75,000, subject to all eligibility rules.
This is a tax-planning estimate, not a tax-filing calculation. The saving may be low when taxable income falls within a lower tax band, moderate when part of the claim offsets income in a middle tax band, or high when the entire amount offsets income in a higher tax band.
The exact result requires the applicable slab, rebate, surcharge and cess.
Do not choose a financial product solely for its tax treatment. A Public Provident Fund (PPF) contribution, National Pension System (NPS) contribution or Life Insurance Corporation of India (LIC) premium can have different liquidity, risk, cost and suitability characteristics.
Income tax saving is one consideration, not the entire investment decision.
Taxable income may include salary, house-property income, capital gains, business or professional income and income from other sources. Some claims have special restrictions or cannot be adjusted against particular income, so the calculation must classify income before subtracting them.
The selected tax regime also determines whether common claims remain available. That choice must be recorded correctly in the ITR.
Which deductions can you claim in an ITR?
An ITR allows only claims permitted by the selected regime and supported by the required details. The taxpayer must use the correct ITR form, complete the relevant schedules and retain supporting records.
For AY 2026-27, the new regime is the default.
According to the Income Tax Department’s ITR-1 guidance, taxpayers who have not opted for the old regime generally see only Section 80CCD(2), for eligible employer contributions to a Tier-I NPS account, and Section 80CCH, for eligible Agniveer Corpus Fund contributions, among the personal Chapter VI-A entries in that form.
Under the old tax regime, an eligible taxpayer may enter common claims in the Chapter VI-A portion of the return. Depending on the ITR form, the Income Tax Department’s portal may require policy numbers, document identification numbers, donation details, a Permanent Retirement Account Number (PRAN), lender information or medical-disability documentation.
Before filing the ITR, reconcile each claim with:
- Form 16 and salary records;
- Form 26AS, the Annual Information Statement and TDS certificates;
- bank and tax-saving investment statements;
- insurance premium receipts;
- NPS contribution records;
- education-loan interest certificates;
- housing-loan statements;
- rent records and Form 10BA, where required;
- donation receipts and the eligible institution’s details; and
- prescribed disability or medical certificates, where applicable.
An employer’s payroll declaration does not replace the claim in the ITR. A claim omitted from payroll may still be made in the income tax return if the law permits it, the correct option is selected and the taxpayer holds the necessary evidence.
Taxpayers with business or professional income may have additional filing steps and different rules for opting out of the default regime. They should verify the applicable form and deadline before filing.
The next decision is whether the old or new income tax option produces the appropriate result.
Which income tax regime allows more deductions?
The old income tax regime allows more familiar claims, while the new regime uses fewer concessions alongside its own slab structure. Compare the complete tax liability under both options instead of comparing claim totals alone.
Under the old regime, eligible taxpayers may claim provisions such as Sections 80C, 80D, 80CCD(1B), 80E, 80G, 80GG, 80TTA or 80TTB. Eligible salaried taxpayers may also use the HRA exemption, while qualifying interest on a self-occupied home loan may receive tax treatment under Section 24(b).
Under the new tax regime, common personal claims such as Sections 80C, 80D and 80G are generally unavailable. The HRA exemption is also unavailable.
The Income Tax Department’s regime guidance explains this restriction, while its AY 2026-27 salaried-taxpayer guidance identifies claims that remain available.
An eligible salaried taxpayer can receive a standard deduction under the applicable rules without showing how the amount was spent. This allowance is distinct from Chapter VI-A claims.
Use the amount displayed in the relevant AY 2026-27 tax form and verify it against current Income Tax Department guidance before filing.
A sound income tax comparison uses the same salary, other income, eligible claims, capital gains and tax paid for both options. Compare three scenarios: low claims with limited exemptions, moderate claims with recurring insurance or investment payments, and high claims with several eligible items.
The option producing the lower lawful tax liability may differ across these scenarios.
Use the official Income Tax Department tax calculator for an initial comparison. Treat its result as an estimate until the return includes every income item, deduction, special-rate gain and tax payment.
Once the tax option is chosen, the return must reflect that choice consistently.
How should deductions be reported in the tax return?
Report deductions in the correct tax-return schedule with the eligible amount, prescribed identifiers and supporting information. The return should match the selected regime, even if the employer used a different option to calculate TDS.
Start by choosing the applicable ITR form. ITR-1 may suit certain resident individuals with specified types and levels of income, but it is not available in every tax situation.
Capital gains, multiple house properties, business income, foreign assets or other circumstances may require a different form.
Next, complete the income schedules before entering claims. The Income Tax Department’s portal uses these figures to determine gross total income and validate whether a claimed amount exceeds an applicable limit.
A deduction shown in Form 16 should still be checked rather than copied automatically.
Then enter each claim in its designated field. For example, Section 80C payments belong in the 80C field, while an additional eligible NPS deduction belongs under Section 80CCD(1B).
Combining unrelated payments under one provision can trigger a validation error or produce an incorrect income tax return.
Certain claims require another form. A taxpayer claiming Section 80GG may need to file Form 10BA.
For specified claims under Sections 80DD or 80U, Form 10-IA may be required in relevant cases. The Income Tax Department’s ITR-4 manual describes these return requirements and confirms that a PRAN is required for claims under Sections 80CCD(1) and 80CCD(1B).
Finally, preview the income tax computation, reconcile TDS and other tax payments, submit the return and complete electronic verification. Retain records even when the portal does not request an upload.
Correct reporting depends on knowing the limit attached to each provision.
Which section limits apply to common deductions?
Each section has its own eligibility rules, payment conditions and deduction limit. The following summary covers frequently used old-regime provisions for AY 2026-27; exceptions can change the allowable amount.
| Section | Eligible item | General limit or tax treatment |
|---|---|---|
| 80C | PPF, eligible provident fund contributions, qualifying LIC or other life-insurance premiums, tuition fees, National Savings Certificates and eligible housing-loan principal | Combined ₹1,50,000 limit with Sections 80CCC and 80CCD(1) |
| 80CCD(1B) | Eligible contribution to the Central Government pension scheme, commonly NPS | Additional deduction up to ₹50,000 |
| 80CCD(2) | Eligible employer contribution to NPS | For AY 2026-27, the Income Tax Department states a limit of 14% of salary for all employer categories; verify the regime-specific calculation |
| 80D | Eligible health-insurance premiums and specified medical expenditure | Common limits are ₹25,000 or ₹50,000 for a covered group, depending on senior-citizen status and other conditions |
| 80E | Interest on an eligible higher-education loan | Eligible interest for the initial assessment year and up to seven succeeding assessment years, or until paid |
| 80G | Donations to approved funds or institutions | Deduction may be 50% or 100%, with or without a qualifying limit |
| 80TTA | Savings-account interest for eligible non-senior individuals or a Hindu Undivided Family (HUF) | Up to ₹10,000 |
| 80TTB | Eligible deposit interest for resident senior citizens | Up to ₹50,000 |
| 80U | Eligible resident taxpayer with a certified disability | Fixed deduction based on the qualifying disability category |
The ₹1,50,000 Section 80C limit is shared; it is not a separate limit for every product. If PPF contributions, eligible tuition fees and LIC premiums total ₹1,80,000, the deduction within the combined Section 80C group remains capped at ₹1,50,000.
Section 80D applies separate rules based on whom the policy covers and whether an insured person is a senior citizen. The payment method also matters: a cash payment generally does not qualify for the health-insurance deduction, although the law treats eligible preventive health check-up expenditure differently.
Section 80G requires the taxpayer to check the recipient’s approval, deduction rate and qualifying-limit category. A donation does not receive an income tax deduction merely because it was made to a charitable organization.
Cash donations above the statutory threshold do not qualify under this provision.
These are concise summaries, not substitutes for the legislation or the Income Tax Department’s form instructions. Verify the current provision, limit and evidence requirements before treating any payment as a deduction.
How do you calculate an eligible deduction?
Calculate an eligible deduction by taking the lowest applicable amount among the qualifying payment, statutory limit and any income-linked restriction. Exclude ineligible payments and amounts already claimed elsewhere.
For a simple Section 80C calculation, suppose eligible provident fund contributions are ₹72,000, eligible tuition fees are ₹48,000 and a qualifying life-insurance premium is ₹40,000. The total payment is ₹1,60,000, but the deduction is limited to ₹1,50,000 under the combined ceiling.
For a combined NPS calculation, suppose a taxpayer has already used the full Section 80C group limit and separately contributes ₹60,000 to an eligible NPS account. Subject to the applicable conditions, Section 80CCD(1B) may allow a further deduction of up to ₹50,000.
An employer’s eligible NPS contribution is tested separately under Section 80CCD(2).
For a Section 80D calculation, classify the premium by covered person before applying the limit. A small claim may involve only self or family cover, a moderate claim may include a separate eligible parents’ policy, and a large claim may involve senior-citizen limits for one or both groups.
Do not combine every payment and apply the highest limit to the total.
Use this checklist for each deduction:
- Identify the exact tax provision.
- Confirm that the taxpayer is eligible.
- Confirm that the expense, contribution or income qualifies.
- Check whether the old or new tax option permits it.
- Apply the applicable limit and any shared ceiling.
- Remove reimbursements and duplicate claims.
- Record the allowable amount in the correct ITR field.
- Retain the prescribed evidence.
Record tax-saving expenditure using actual eligible amounts, not a rounded target chosen to exhaust a limit. This supports accurate income tax saving estimates and prevents overstated claims.
The final check is whether the claim remains available under the tax option selected for the year.
What can you claim under the selected tax regime?
Under the selected tax regime, you can claim only deductions expressly permitted for that option, taxpayer category and assessment year. The final decision should follow a side-by-side income tax calculation supported by records.
Use this tax-saving decision process before filing:
- Under the new regime, include the permitted standard deduction and eligible provisions such as Sections 80CCD(2) or 80CCH where they apply.
- Under the old regime, list every eligible exemption and deduction, then apply each limit separately.
- Compare the complete income tax liability, not only taxable income.
- Select the tax option in the return using the process applicable to your income type.
- File the correct ITR, reconcile tax payments and electronically verify the return.
Frequently asked questions
Can I claim Section 80C under the new tax regime?
No. Section 80C is generally unavailable under the new regime.
It may be claimed under the old regime when the taxpayer, payment and documentation satisfy the conditions.
Can I claim both Section 80C and Section 80D?
Yes. Under the old regime, an eligible taxpayer may claim Sections 80C and 80D because they cover different items and have separate limits.
Each deduction must independently satisfy its requirements.
Is NPS available as a tax deduction in both regimes?
An eligible employer NPS contribution under Section 80CCD(2) may qualify in both regimes. Personal NPS deductions under Sections 80CCD(1) and 80CCD(1B) generally require the old tax regime.
Must I submit deduction receipts with my ITR?
The Income Tax Department’s portal generally asks for claim details rather than routine uploads of every receipt. Retain supporting records because the Income Tax Department may request evidence during verification, assessment or another proceeding.
Can a HUF claim tax deductions?
A HUF can claim deductions for which it meets the statutory eligibility requirements. Some provisions are limited to individuals, while others cover an individual or HUF, so the return must apply the wording of each provision.
Does a deduction produce an equal tax saving?
No. A ₹50,000 deduction reduces taxable income by up to ₹50,000; it does not automatically reduce income tax by ₹50,000.
The saving depends on the applicable marginal tax rate, cess and the rest of the calculation.
Income tax deductions in India begin with a simple definition - eligible amounts reduce taxable income - but the correct claim depends on the regime, provision and evidence.
Before filing, verify the current rule with the Income Tax Department, calculate both tax options and claim only the amount permitted under the selected tax regime.