The new tax regime offers lower tax slab rates but it also removes almost all the exemptions. But there are still few tax deductions that are available under the New Tax Regime from 1st April 2023.
So what are the exemptions under new tax regime?
New Tax Regime Exemption List (FY 2024-25)
The following deductions under New Tax Regime are still available for tax payers:
- The Standard Deduction of Rs 50,000 for salaried individuals and pensioners.
- The deduction for employer’s contribution made towards employee’s NPS account under Section 80CCD(2). The maximum deduction that an employee can claim under this varies for private and government employees. A private sector employee can claim a maximum deduction of 10% of their salary. This figures changes to 14% for the government employees. So if you are a private sector employee with basic salary of Rs 16 lakh per annum and your employer is contributing Rs 2 lakh every year to the employee’s NPS account, then as per section 80CCD (2), the employee is eligible to claim only Rs 1.6 lakh (10% of Rs 16 lakh) as deduction. Read more about NPS taxation.
- In general, the employers’ contributions to their employee’s EPF and NPS and superannuation accounts are also applicable for tax exemption. However, for that, the contributions made in a year to all the employee accounts should not be above a maximum limit of Rs 7.5 lakh to qualify for the tax exemption.
There are a few more not-so-obvious deductions that can be claimed under the new tax regime by all the taxpayers for whom these are applicable. These deductions are:
- A deduction of Rs 15,000 is allowed from the family pension as deduction under the new tax regime.
- Gratuity payment of up to Rs 20 lakh for private sector and employee and the entire gratuity received by government employees are exempted from being taxed. Here is how to do Gratuity calculation using Excel Calculator.
- The maturity payout from life insurance policies, under Section 10(10D) which has the insurance maturity taxation rules are eligible for tax exemption.
- The interest earned on your EPF account balance and EPF contributions (up to EPF Rs 2.5 lakh per year) is still tax-free.
- The interest earned on your PPF account balance is still tax-free.
- The interest earned on your daughter’s Sukanya Samriddhi Yojana account is still tax-free.
- The PPF maturity payout is still tax-free.
- The Sukanya Samriddhi Yojana maturity payout is still tax-free.
- The leave encashment during retirement is eligible for tax exemption.
While the tax payers might be attracted to the deductions/exemptions available in the old tax regime, they need to properly assess and compare new vs old tax system to understand the implications of choosing either.
So these are all the latest deductions that are eligible as part of all the new tax exemption list (FY2024-25). The government still offers few exemptions in new tax regime which can be useful for many taxpayers in India (2024).
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