Under the new income tax regime, new income tax rates & slabs will be applicable for those who forego tax exemptions & deductions.
The tax breaks that will not be available under the new regime include Section 80C deductions (Investments in PF, NPS, Life insurance premium), Section 80D (medical insurance premium), HRA & interest paid on housing loan. Tax breaks for the disabled and for charitable donations will also be gone.
Because of these changes, a lot of taxpayers are not sure whether the new personal tax regime will really bring substantial tax relief.
Here's what you will gain or lose if you switch to the new regime : Under the new tax regime, the individuals can opt to pay tax at the reduced rates without claiming the various tax exemptions & deductions. The individuals will have to work out their liability under the old & new tax regime before deciding which one is more beneficial. While the new regime seems simple on account of no exemptions, there would be individuals who have already made commitments in recurring tax savings instruments who may still want to avail exemptions & get taxed under the old regime.
Here’s a list of the main exemptions that taxpayers will have to forgo if they switch to the new regime:
1. Leave travel allowance exemption which is currently available twice in a block of four years
2. House rent allowance is normally paid to salaried individuals as part of the salary.
3. Standard deduction of ₹ 50,000 available to salaried taxpayers.
4. Deduction for entertainment allowance and employment/professional tax as contained in Section 16
5. Tax benefit on interest paid on housing loan taken for self-occupied or vacant house property.
6. Deduction of ₹ 15,000 allowed from family pension under Section 57
7. Deductions under Section 80C include Provident fund contributions, life insurance premium, school tuition fee for children & various specified investments such as ELSS, NPS, PPF etc.
8. Deduction claimed for medical insurance premium under Section 80D.
9. Tax benefits for disability under Sections 80DD & 80DDB.
10. Tax break on interest paid on education loan under Section 80E
11. Tax break on donations to charitable institutions available under section 80G.
12. All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
13. It is worth mentioning that deduction under sub-section (2) of Section 80CCD (employer contribution on account of the employee in a notified pension scheme, mostly NPS) & Section 80JJAA (for new employment) can still be claimed after switching to the new tax regime.
Here’s a list of the main exemptions that taxpayers will have to forgo if they switch to the new regime:
1. Leave travel allowance exemption which is currently available twice in a block of four years
2. House rent allowance is normally paid to salaried individuals as part of the salary.
3. Standard deduction of ₹ 50,000 available to salaried taxpayers.
4. Deduction for entertainment allowance and employment/professional tax as contained in Section 16
5. Tax benefit on interest paid on housing loan taken for self-occupied or vacant house property.
6. Deduction of ₹ 15,000 allowed from family pension under Section 57
7. Deductions under Section 80C include Provident fund contributions, life insurance premium, school tuition fee for children & various specified investments such as ELSS, NPS, PPF etc.
8. Deduction claimed for medical insurance premium under Section 80D.
9. Tax benefits for disability under Sections 80DD & 80DDB.
10. Tax break on interest paid on education loan under Section 80E
11. Tax break on donations to charitable institutions available under section 80G.
12. All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
13. It is worth mentioning that deduction under sub-section (2) of Section 80CCD (employer contribution on account of the employee in a notified pension scheme, mostly NPS) & Section 80JJAA (for new employment) can still be claimed after switching to the new tax regime.
