Under the New Tax Regime introduced in the Finance Act, 2020, individual taxpayers who opt for the new tax regime will not be eligible to claim several deductions and exemptions that were available under the old tax regime. The deductions and exemptions not available under the new tax regime:
- Section 80C: Deduction for investments in specified instruments such as PPF, ELSS, NSC, etc.
- Section 80CCD (1b): This deduction is available for investment made in the NPS account. The maximum deduction that can be claimed under this section is Rs 50,000.
- Section 80D: Deduction for payment of health insurance premiums.
- Section 80E: Deduction for payment of interest on education loan
- Section 80G: Deduction for donations made to charitable organizations.
- The leave travel allowance (LTA) exemption, which salaried employees can currently take advantage of twice every four years.
- House Rent Allowance (HRA): Exemption for the amount received as HRA from the employer.
- Tax deduction for interest paid on housing loan.
- Deduction available under section 80TTA/80TTB will not be available to the taxpayers.
- All the other deductions under chapter VIA such as 80CCC, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc. will not be claimable by those opting for the new tax regime.
However, in Budget 2023 it was announced that the standard deduction benefit of Rs.50,000 will be available for the salaried and pensioners under the new tax regime. Similarly, family pensioners can claim deduction of Rs.15,000 under the new income tax regime.
It is essential to carefully evaluate the available deductions and exemptions under both tax regimes and determine which one is more beneficial based on individual circumstances. Taxpayers may consult a tax professional or use online tax calculators to assess their tax liability under both tax regimes and make an informed decision.