New Delhi: As an optional replacement for the Old Tax Regime for individuals and Hindu Undivided Families (HUFs), the government implemented the New Tax Regime (Section 115BAC) on April 1, 2020 (FY 2020–21). Three years later, in the Union Budget 2023, it was declared that taxpayers who fail to make a choice at the start of the fiscal year would automatically be placed under the New Tax Regime.
The 2023–24 Union Budget proposed a new tax regime that gives taxpayers a choice between higher tax rates with more deductions and exemptions and lower tax rates with fewer deductions.
About 70 exemptions for individual taxpayers were eliminated under this new tax regime in the Union Budget 2023. This includes benefits on medical insurance premiums under Section 80D and deductions similar to those under Section 80C (up to Rs 1.5 lakh). Nonetheless, taxpayers can still claim a few deductions under the new tax structure.
Here's How the New Tax Regime Will Save You on Income Tax Deductions:
Salaried individuals opting for the new option under the present tax regime will have two opportunities to save taxes in the fiscal year 2023–2024:
Typical Calculation:
There is a standard deduction of Rs 50,000 from the person's pay or pension.
Section 80CCD (2) deduction for the National Pension System (NPS):
Under Section 80CCD (2) of the Income-tax Act, 1961, salaried persons are eligible to get a deduction for contributions made by their employer to the National Pension System (NPS).
Enumeration of the new tax regime's exemptions:
1. Transportation Allowances for Persons with Disabilities (PwD): This category includes people with disabilities as exempt from paying transportation expenses.
2. Allowance for Conveyance:
Exemption from the allowances offered for transportation.
3. Payment for Travel, Tours, and Transfers:
Exemption from payment for transports, tours, or travel-related expenses.
4. Requirements for Official Objectives:
Exemptions for benefits obtained on an official basis.
5. Section 10(10C) Voluntary Retirement Scheme (VRS):
Exclusion for sums obtained through a voluntary retirement plan.
6. Section 10(10) Gratuity Amount:
Exemption from Section 10(10)'s gratuity requirements.
7. Encashment of leaves pursuant to Section 10(10AA):
Exemption from Section 10(10AA) tax on payments received for encashment of leave.
8. Section 24 Interest on Home Loan for Leased Property:
Interest on house loans for properties loaned out is exempt under Section 24.
9. Presents Up to 5,000 Rupees:
Exemption for presents up to 5,000 rupees in value.
10. Employer Contributions under Section 80CCD(2) to Employees' NPS Accounts:
Section 80CCD(2) exempts employer donations to employees' NPS accounts.
11. Exceeding Job Costs as Per Section 80JJA:
Exemption from Section 80JJA's increased personnel expenditures.
12. Section 80CCH(2) Deductions for Deposits in the Agniveer Corpus Fund:
Section 80CCH(2) exempts deposits made into the Agniveer Corpus Fund from deductions.
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