Standard Deduction:
Under the new tax regime, salaried individuals can benefit from a standard deduction of Rs 50,000. This deduction allows taxpayers to enjoy tax-exempt income up to Rs 7.5 lakh after applying the standard deduction and tax rebate. Family pensioners can also benefit from this deduction by claiming Rs 15,000 or 1/3rd (33.33%) of their pension, whichever is lower. Employer’s National Pension System (NPS) Contribution: Taxpayers can claim a deduction for the employer’s contribution to the NPS account under Section 80CCD(2) of the Income-Tax Act (ITA), 1961.Additional Employee Costs:
Employees can claim a deduction for specific allowances provided by their employers under Section 80JJA of the ITA.Family Pension Income:
Pension received by family members in the event of an employee’s death is exempt under Section 57(iia) of ITA.Leave Encashment Exemption:
Taxpayers can claim a tax exemption of up to Rs 25 lakh on leave encashment under Section 10(10AA) of the ITA, subject to certain conditions. However, it’s important to note that certain deductions are not available under the new tax regime:Chapter VI-A Deductions:
Investments in public provident fund (PPF), equity-linked savings scheme (ELSS), health insurance premiums under Section 80D, and other Chapter VI-A deductions are not available under the new tax regime.Allowances:
Exemptions for allowances such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), and entertainment allowances cannot be claimed under the new tax regime.Interest on Housing Loans:
Deductions for interest paid on housing loans are not allowed on self-occupied or vacant properties under Section 24(b) of the ITA The new tax regime, which became the default option starting from the financial year (FY) 2023-24, offers adjusted tax brackets and lower tax rates. Taxpayers have the option to choose the old regime while filing their income tax return or by declaring it to their employer. The government introduced the new regime to leave more money in people’s hands, allowing taxpayers to choose where to allocate their funds without government incentives or disincentives. However, individuals opting for the new tax regime cannot claim various exemptions and deductions available under the old regime, including HRA, LTA, 80C, 80D, and others.🚀 Ready to level up your finances? Say goodbye to tax woes with Savingz! 🎉
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