New Delhi: Starting from April 1, 2020 (FY 2020-21), the government introduced a New Tax Regime (Section 115BAC) as an optional alternative to the Old Tax Regime for individuals and Hindu Undivided Families (HUFs). After three years, in the Union Budget 2023, it was announced that the New Tax Regime would become the default for taxpayers who don’t choose at the beginning of the fiscal year.
Read More:- Decoding The Budget: Take A Look At 10 Key Budget Terms Crucial For Taxpayers
Under the New Tax Regime introduced in the 2023-24 Union Budget, taxpayers can choose between lower tax rates with limited deductions or higher tax rates with multiple deductions and exemptions.
In this new tax regime, about 70 deductions for individual taxpayers were removed in the Union Budget 2023. This includes deductions like those under Section 80C (up to Rs 1.5 lakh) and benefits on medical insurance premiums under Section 80D. However, some deductions are still available for taxpayers under the new tax regime.
Here is How to Save Income Tax Deductions Under New Tax Regime:
In the current tax regime, salaried individuals choosing the new option have two avenues for tax savings in the fiscal year 2023-24:
Standard Deduction:
A standard deduction of Rs 50,000 applies to the individual’s salary or pension.
Deduction under Section 80CCD (2) – National Pension System (NPS):
Salaried individuals can avail of a deduction under Section 80CCD (2) of the Income-tax Act, 1961, for investments made in the National Pension System (NPS) by their employer.
List of exemptions under the new tax regime:
1. Transport Allowances for Persons with Disabilities (PwD):
Exemption for transport allowances related to individuals with disabilities.
2. Conveyance Allowance:
Exemption for allowances provided for conveyance purposes.
3. Travel/Tour/Transfer Compensation:
Exemption for compensation related to travel, tours, or transfers.
4. Perquisites for Official Purposes:
Exemptions for perquisites received for official purposes.
Read More:- Interim Budget 2024: Enhance GST Registration Threshold To Rs 40 Lakh From Rs 20 Lakh
5. Voluntary Retirement Scheme (VRS) under Section 10(10C):
Exemption for amounts received under a Voluntary Retirement Scheme.
6. Gratuity Amount under Section 10(10):
Exemption for gratuity amounts under Section 10(10).
7. Leave Encashment under Section 10(10AA):
Exemption for amounts received for leave encashment under Section 10(10AA).
8. Interest on Home Loan for Lent-out Property under Section 24:
Exemption for interest on home loans for lent-out properties under Section 24.
9. Gifts Up to Rs. 5,000:
Exemption for gifts with a value of up to Rs. 5,000.
10. Employer’s Contributions to Employees’ NPS Accounts under Section 80CCD(2):
Exemption for employer contributions to employees’ NPS accounts under Section 80CCD(2).
11. Additional Employee Costs under Section 80JJA:
Exemption for additional employee costs under Section 80JJA.
12. Deductions on Deposits in Agniveer Corpus Fund under Section 80CCH(2):
Exemption for deductions on deposits in the Agniveer Corpus Fund under Section 80CCH(2).
FAQs
How can someone opt for the new tax regime?
Ans. To opt for the new tax regime, one has to choose it while filing for tax returns.
What are some deductions you can’t claim under the new tax regime?
Ans. The New Tax Regime cannot claim several exemptions and deductions, such as HRA, LTA, 80C, 80D and more, which are earmarked only for the Old Tax Regime.
How many deductions are there in the new tax regime?
Ans. Approximately 10 tax exemptions and deductions are available to individuals under the new tax regime.
Read More:- Direct tax-GDP ratio rose to 15-year high in FY23, tax buoyancy dipped
How is tax deducted from the old regime?
Ans. For the old tax regime – In the case of a resident individual, a rebate of up to Rs. 12,500 is allowed under Section 87A from the amount of tax if the total income of such individual does not exceed Rs. 500,000.
