Income Tax Deductions and Rebates for AY 2026-27 & Tax Year 2026-27

A practical guide to the major income-tax deductions, rebates and tax-saving provisions available to individuals and HUFs, including 80C, NPS, health insurance, disability deductions, education-loan interest, home-loan interest, donations, house rent and savings-bank interest.

Updated: 2 September 2026

Major deductions at a glance

Section 80C deductions and section 123 of the Income-tax Act, 2025

For AY 2026-27, eligible taxpayers under the old regime can claim deductions under sections 80C, 80CCC and 80CCD(1), subject to the combined ceiling of ₹1,50,000.

Common eligible items under section 80C include, subject to statutory conditions:

• Life-insurance premium;
• Public Provident Fund (PPF);
• Employees' Provident Fund (EPF);
• National Savings Certificate (NSC);
• eligible five-year tax-saving fixed deposits;
• eligible Equity Linked Savings Scheme (ELSS) investment;
• specified tuition fees;
• qualifying principal repayment of a housing loan;
• Senior Citizens' Savings Scheme deposits, where covered;
• Sukanya Samriddhi Account deposits; and
• other payments specifically listed in the law.

For Tax Year 2026-27 under the Income-tax Act, 2025, section 123 is the principal provision for deduction of eligible life-insurance premiums, deferred annuity, provident-fund contributions and other sums enumerated in Schedule XV. The overall ceiling under section 123 is ₹1,50,000, subject to Schedule XV conditions.

NPS and pension deductions

Under the 1961 Act, qualifying contributions to the National Pension System are dealt with through sections 80CCD(1), 80CCD(1B) and 80CCD(2).

Section 80D - health insurance and medical expenditure

For AY 2026-27 under the old regime, section 80D permits deduction for eligible health-insurance premiums, preventive health check-ups and specified medical expenditure.

• Self, spouse and dependent children: generally up to ₹25,000, increased to ₹50,000 where the relevant person is a senior citizen.
• Parents: a separate limit of ₹25,000, increased to ₹50,000 where the relevant parent is a senior citizen.
• Preventive health check-up: up to ₹5,000 within, not in addition to, the overall applicable limit.
• Specified medical expenditure for an uninsured senior citizen can qualify within the ₹50,000 limit, subject to conditions.

Except for preventive health check-up, the qualifying payment conditions generally require a mode other than cash.

Section 80DD - dependant with disability

A resident individual or HUF can claim the prescribed flat deduction for maintenance or medical treatment of an eligible dependant with disability, subject to certification and other requirements.

The deduction is ₹75,000 for disability and ₹1,25,000 for severe disability of 80% or more. Under the Income-tax Act, 2025, the corresponding disability-dependent provision is section 127. Form 10-IA under the 2026 Rules is used for specified disability certification requirements.

Section 80DDB - treatment of specified diseases

For AY 2026-27, a resident individual or HUF can claim deduction for eligible expenditure on prescribed diseases or ailments. The deduction is the actual qualifying expenditure or ₹40,000, whichever is lower. For a senior citizen, the monetary ceiling is ₹1,00,000.

Insurance reimbursement or employer reimbursement reduces the amount eligible for deduction. A prescription from the prescribed medical specialist is required.

Under the Income-tax Act, 2025, section 128 continues this deduction framework for prescribed medical treatment, with the same ₹40,000 / ₹1,00,000 ceiling structure.

Home-loan interest - section 24(b)

For AY 2026-27, interest on borrowed capital is deductible in computing income from house property subject to section 24(b). For a qualifying self-occupied property acquired or constructed with eligible borrowed capital, the maximum deduction can be ₹2,00,000 where the statutory conditions are satisfied.

Different rules apply for repairs, older borrowings, let-out property, pre-construction interest and set-off of house-property loss. The tax regime selected by the taxpayer also affects the availability and practical benefit of the deduction.

Section 80EE and similar first-home provisions

Section 80EE was linked to loans sanctioned during specified historical periods and continues only where all statutory conditions applicable to the relevant loan are met. It should not be presented as a generally available deduction for every new home loan taken in 2026.

Education-loan interest - section 80E / section 129

For AY 2026-27 under the old regime, section 80E allows an individual a deduction for qualifying interest paid on an eligible higher-education loan. There is no separate rupee ceiling on the amount of qualifying interest.

The deduction is available for the initial year and the next seven years, or until the interest is fully paid, whichever occurs earlier. Principal repayment does not qualify under section 80E.

For Tax Year 2026-27 onward, section 129 of the Income-tax Act, 2025 carries forward the education-loan interest deduction for qualifying loans taken from a financial institution or approved charitable institution.

Section 80G - donations to eligible funds and institutions

Eligible donations can qualify for 100% or 50% deduction, either with or without the qualifying-limit restriction depending on the fund or institution. The deduction is therefore not simply "10% of income" for all donations.

No deduction is allowed for a donation made in cash exceeding ₹2,000. Taxpayers should verify the donee's eligibility, retain the donation receipt and ensure that required donation-reporting information matches the return.

Section 80GG - rent paid where HRA is not available

Section 80GG can apply to an eligible individual paying rent for residential accommodation where the statutory HRA-related and property-ownership conditions are satisfied.

The deduction is based on the least of the amounts prescribed by law, including rent paid in excess of 10% of adjusted total income, 25% of adjusted total income and ₹5,000 per month.

Under the Income-tax Act, 2025, section 134 continues the rent-deduction framework. Form 10BA under the Income-tax Rules, 2026 corresponds to the declaration for claiming this deduction.

Savings-account and deposit interest

Section 80TTA

An eligible individual or HUF can claim up to ₹10,000 for qualifying savings-account interest under the old regime. This deduction does not cover fixed-deposit interest.

Section 80TTB

A resident senior citizen can claim up to ₹50,000 on qualifying interest from specified deposits under section 80TTB, subject to the statutory conditions.

Section 80U - resident individual with disability

A resident individual certified as a person with disability can claim a flat deduction of ₹75,000. For severe disability of 80% or more, the deduction is ₹1,25,000, subject to the prescribed medical certification requirements.

Under the Income-tax Act, 2025, the corresponding provision is section 154. The Income-tax Rules, 2026 retain Form 10-IA for specified disability certification.

Section 87A rebate and current nil-tax threshold

For AY 2026-27, the rebate differs materially between the old and new tax regimes.

Because the standard deduction for eligible salary income under the current new regime is ₹75,000, a salaried taxpayer with qualifying normal income up to ₹12,75,000 can have nil tax liability after the standard deduction and rebate, subject to the applicable conditions.

Income-tax Act, 1961 and Income-tax Act, 2025 - practical transition

Official Income Tax resources

• Income Tax Department - Salaried Individuals for AY 2026-27
• Income Tax Department - Senior Citizens for AY 2026-27
• Income Tax Department - Income and Tax Estimator for the Income-tax Act, 2025
• Income Tax Department - Income-tax Act, 2025 as amended
• Income-tax Act, 2025 - Section 123
• Income-tax Act, 2025 - Section 128
• Income Tax Department - Income-tax Rules, 2026 forms and guidance

Conclusion

The deduction structure has changed substantially since the period originally associated with this URL. For AY 2026-27, familiar provisions such as 80C, 80D, 80E, 80G, 80TTA, 80TTB and 80U continue under the Income-tax Act, 1961, principally for taxpayers eligible to claim them under the old regime. For Tax Year 2026-27 onward, deductions are governed by the reorganised Chapter VIII of the Income-tax Act, 2025.

Before making an investment or claiming a deduction, taxpayers should verify the relevant tax year, regime, monetary limit, eligibility condition, payment mode and documentation requirement.