Income Tax Deductions You Should Not Miss in 2025-26

The 2025 financial year brings updated tax rules, revamped limits and a clearer distinction between the old vs new tax regime. If you are opting for the old regime, you can claim up to 70+ deductions and exemptions. Even if you prefer the new regime, some deductions are still available.

This guide covers all important income tax deductions for FY 2025–26, with examples, limits, planning strategies, and links to relevant WonderTax services so you can get expert help.

---

Choosing Between New vs Old Regime — Why It Matters

Before you claim deductions, remember:

Old Tax Regime → Maximises deductions

You can claim:

• 80C

• 80D

• HRA

• Standard Deduction

• Home Loan Interest

• Donations

• 80E, 80G, 80CCD(1B), etc.

New Tax Regime → Limited deductions

Allowed only:

• Standard deduction (₹75,000 for salaried FY 2025–26)

• Employer NPS contribution (80CCD(2))

• Section 80C for certain notified funds (new amendment)

• Section 80U/80DD (disability)

For most taxpayers with investments + rent + home loan, old regime gives bigger benefits. Use the WonderTax Tax Regime Calculator (available in our filing plans) to choose the right regime.

---

Section 80C — The Most Popular Deduction (Limit: ₹1,50,000)

You can invest or spend on eligible options to claim up to ₹1.5 lakh deduction.

Eligible 80C options include:

• ELSS Mutual Funds

• PPF

• Life Insurance Premium

• 5-Year Tax Saver FD

• Sukanya Samriddhi Account

• EPF Contribution

• Home Loan Principal Repayment

• Tuition Fees for Children

Example:

If you invest ₹50,000 in ELSS + ₹1,00,000 in PPF → full ₹1.5 lakh deduction.

Smart Tip:

ELSS offers lowest lock-in (3 years) + higher return potential. Works best for young earners.

---

Section 80CCD(1B) — Additional ₹50,000 for NPS

Over and above 80C, NPS Tier-I allows:

• Extra deduction of ₹50,000

Why this is a must-claim deduction:

• Helps reduce overall tax liability by up to ₹15,600 (30% bracket).

• Provides retirement corpus + pension.

---

Section 80D — Medical Insurance Deduction

You can claim:

• Health insurance premiums

• Preventive health check-up (₹5,000 included within limit)

Example:

You (age 35): ₹20,000
Parents (age 65): ₹40,000
→ Claim = ₹20,000 + ₹40,000 = ₹60,000

---

Section 24(b) — Home Loan Interest (Limit: ₹2 Lakhs)

Applicable for self-occupied property.
For let-out property, no upper limit — you can claim full interest, but total house property loss set-off is capped at ₹2 lakh.

Key Points:

• Must have possession certificate.

• Loan must be for purchase or construction.

---

HRA Exemption (If You Live on Rent)

HRA is available only in the old tax regime.

Exemption = Least of:

1. Actual HRA received

2. Rent paid – 10% of salary

3. 50% of salary (metro) / 40% (non-metro)

Example:
Salary = ₹6,00,000
Rent = ₹18,000/month
HRA received = ₹12,000/month
City = Non-metro

Exemption = ₹1,08,000

---

Standard Deduction – ₹75,000 (FY 2025–26)

Available to both regimes from FY 2025–26 for salaried and pensioners.
Applied automatically.

---

Section 80E — Education Loan Interest (No Limit)

Deduction available for interest paid on:

• Higher education loan for self/spouse/children

Duration: Maximum 8 years

---

Section 80G — Donations to NGOs/Charities

100% or 50% deduction depending on institution.
Payments must be made in non-cash mode if above ₹2,000.

Common 80G-approved donations:

• PM Relief Fund

• National Defence Fund

• Certified NGOs

---

Section 80TTA / 80TTB — Interest on Savings Accounts

80TTA (below 60 years):
Up to ₹10,000

80TTB (senior citizens):
Up to ₹50,000

---

Section 80U/80DD — Disability Deduction

Flat deduction (slab-based), no bills needed under 80U.

---

Section 80GGC — Contribution to Political Parties

100% deduction
Must be non-cash payment.

---

Deduction on Electric Vehicle (EV) Loan — Section 80EEB

• Available only to individuals

• Max deduction: ₹1,50,000

• EV must be bought between April 2019 – March 2025
  (Extended as per 2024 Budget)

---

Section 80EE/80EEA — Additional Home Loan Deduction

If buying first house:

80EE:

Up to ₹50,000 (older loans)

80EEA:

Up to ₹1,50,000 (affordable housing loans)

These are in addition to Section 24(b) interest deduction.

---

Key Newly Updated Deductions for FY 2025–26

✔ Higher Standard Deduction (₹75,000)

✔ New Regime allows some limited deductions

✔ Higher NPS employer contribution limits

✔ Increased 80D deduction for senior citizens

These updates should be factored into tax planning for FY 2025–26.

---

Smart Tax Saving Strategy for 2025-26

To optimise savings:

Step 1: Max out 80C with ELSS + EPF + PPF

Stable + diversified approach.

Step 2: Add ₹50,000 via NPS (80CCD 1B)

Best additional tax-saving option.

Step 3: Claim medical insurance (80D)

Protects health + reduces tax.

Step 4: Claim home loan benefits

Interest + principal + additional deductions.

Step 5: Claim HRA/standard deduction automatically

Step 6: Avoid last-minute investing

Plan from April itself.

---

CTA: Want Maximum Tax Savings? Let WonderTax Do It for You

Our tax experts ensure:

• Correct deductions claimed

• Maximum tax refund

• Correct regime selection

• Zero errors in return

Choose a plan from our Wonder ITR Starter, Essential, Advanced, Premium or Elite plans — designed for every income type.

👉 File your Income Tax Return with WonderTax — https://wondertax.in/contact-us

---

FAQ (Schema-Ready Block)

Q1. Which deductions are allowed in the new tax regime for 2025?

Only standard deduction, employer NPS contribution, and certain specified deductions like disability deductions are allowed.

Q2. Can I claim both 80C and NPS deduction?

Yes. 80C (₹1.5L) + 80CCD(1B) (₹50k) → Total ₹2 lakh deduction.

Q3. Can I claim HRA and home loan benefits together?

Yes, if you work in one city and own a house in another (or have genuine reasons for not living in own house).

Q4. What is the maximum deduction I can claim in 2025?

There is no absolute maximum; deductions stack across sections.

Q5. Are medical bills deductible?

Only preventive checkups under 80D and disability-related expenses under 80DD qualify.