Income Tax Return: Exemptions and Deductions in the New Tax Regime for the FY 2023-24

Income Tax Return Exemptions and Deductions in the New Tax Regime for the FY 2023-24
Table of Contents

Introduction

Filing income tax returns can be confusing, especially with the changes brought by the new tax regime. Here’s a simple guide to help you understand the tax exemptions and deductions you can still claim under the new system.

What is the New Tax Regime?

What is the New Tax Regime?

The new tax regime, introduced in 2020, offers lower tax rates but fewer tax exemptions and deductions. Taxpayers can choose between the old regime, which has higher tax rates but more tax exemptions and deductions, and the new regime.

Key Exemptions and Deductions Allowed

Even though the new regime has fewer benefits, there are still some you can claim:

  1. Employer’s Contribution to NPS: Contributions made by your employer to the National Pension System (NPS) are still exempt under the new regime.
  2. Employer’s Contribution to EPF: The employer’s contribution to the Employees’ Provident Fund (EPF) up to a certain limit is also exempt.
  3. Gratuity: The gratuity received by employees on retirement is exempt up to a specified limit.
  4. Leave Encashment: Leave encashment received at the time of retirement is exempt up to a certain amount.
  5. Retrenchment Compensation: Compensation received on retrenchment is exempt up to a specified limit.
  6. Voluntary Retirement Scheme (VRS): Amounts received under VRS are exempt up to a certain limit.

Benefits Not Available in the New Regime

Under the new tax regime, many common exemptions and deductions are not available, such as:

  • House Rent Allowance (HRA)
  • Leave Travel Allowance (LTA)
  • Standard deduction of ₹50,000 for salaried individuals
  • Deductions under Section 80C for investments in PPF, LIC, ELSS, etc.
  • Deductions under Section 80D for medical insurance premiums
  • Interest on housing loan under Section 24(b)

Choosing the Right Regime

Choosing between the old and new tax regimes depends on your financial situation. If you have significant investments and expenses that qualify for deductions, the old regime might be better. However, if you prefer a simpler tax structure with lower rates, the new regime could be beneficial.

Section Deduction/Exemption Old Tax Regime New Tax Regime
Section 10(13A) House Rent Allowance (HRA) Available Not Available
Section 10(5) Leave Travel Allowance (LTA) Available Not Available
Section 16 Standard Deduction (₹50,000 for salaried) Available Not Available
Section 24(b) Interest on Housing Loan Available (up to ₹2,00,000) Not Available
Section 80C Investments in PPF, LIC, ELSS, etc. Available (up to ₹1,50,000) Not Available
Section 80D Medical Insurance Premium Available Not Available
Section 80E Interest on Education Loan Available Not Available
Section 80G Donations to Charitable Institutions Available Not Available
Section 80TTA/80TTB Interest on Savings Account/Deposits Available Not Available
Section 80CCD(2) Employer’s Contribution to NPS Available Available
Section 10(14) Special Allowances (e.g., children’s education) Available Not Available
Gratuity Gratuity received on retirement Exempt (up to specified limits) Exempt (up to specified limits)
Leave Encashment Leave encashment received at retirement Exempt (up to specified limits) Exempt (up to specified limits)
Retrenchment Compensation Compensation received on retrenchment Exempt (up to specified limits) Exempt (up to specified limits)
VRS Amounts received under Voluntary Retirement Scheme Exempt (up to specified limits) Exempt (up to specified limits)

Key Takeaways

  • Old Tax Regime: Offers a wide range of deductions and exemptions, making it beneficial for those with significant eligible investments and expenses.
  • New Tax Regime: Provides lower tax rates with fewer deductions and exemptions, offering a simpler tax structure.

When deciding between the old and new tax regimes, consider your individual financial situation, investment portfolio, and eligible expenses to choose the most beneficial option. Consulting with a tax professional can also provide personalized guidance.

Conclusion

filing your income tax return

Understanding the available exemptions and deductions under the new tax regime can help you make an informed decision when filing your income tax return. Consider your financial situation and consult with a tax professional if needed to choose the best option for you.

For more information and personalized tax advice, stay informed with the latest tax news and tips to ensure smooth compliance with all tax regulations. Contact Apkireturn at +917665156000 for expert assistance.

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