Tax Deductions and Exemptions under the New Tax Regime

  • Author :
  • TATA AIG Team
  • Published on :
  • 06/11/2023

Announced for FY 2023-24, the new tax regime has brought some major changes in the income tax scenario of India. It aims at reducing tax liabilities while simplifying the tax calculation for eligible taxpayers.

Note that the new tax regime has removed nearly 70 tax deductions that were earlier allowed in the old regime. For example, you can not claim tax-saving benefits on expenses related to medical insurance premiums under Section 80D and deductions up to ₹1.5 Lakh under Section 80C in new tax regime.

However, you have the option to choose a lower tax rate instead of availing certain exemptions and deductions declared under the old tax regime.

In this blogpost, we will outline in detail the tax deductions and exemptions allowed in the new tax regime.

Keep reading!

Income Tax Slab Rates Under New Tax Regime

The table below depicts income tax slab rates under the latest tax regime FY 2023-24.

Salary Slab Income Tax Rate Under New Regime
0 - ₹3,00,000 No Tax
₹3,00,000 - ₹6,00,000 0.05
₹6,00,000 - ₹9,00,000 0.1
₹9,00,000 - ₹12,00,000 0.15
₹12,00,000 - ₹15,00,000 0.2
Over ₹15,00,000 0.3

New Tax Regime Deductions Allowed: Deductions and Exemptions Allowed in New Tax Regime

Following is the new tax regime exemption list and deductions list that outlines the exemptions and deductions that are still allowed in the FY 2023-24:

Section 80CCD(2): Employer’s Contribution to a Notified Pension Account

Just like the old tax regime, the new tax regime also allows tax deductions on an employer's contribution to a NPS (National Pension Scheme) account. The only condition is your deduction claims should not be more than 10% of your previous year's salary.

Section 80JJAA: Additional Employee Cost

This tax deduction is available for business owners who incur additional employee costs. Note that eligible candidates can claim deductions up to 30% in this category.

Travel and Tour Allowance

Employers pay travel and tour allowance to their employees for covering official or business tours. These allowances are also eligible for tax deductions under the latest tax regime.

Conveyance Allowance for Office Duties

Conveyance allowance is given to the employees for performing various office duties. It includes the transportation expenses incurred for workplace activities. Note that exemptions allowed in new tax regime include deductions on conveyance allowance. If you are also provided with a conveyance allowance, then you can use it to file tax deductions under certain terms and conditions.

Transport Allowance for Differently-Abled Employees

Differently-abled employees, or simply Divyang employees, are allowed to make tax deductions claims on their transport allowance. It includes the expenses incurred for commuting from their homes to their workplaces.

Daily Duty Travel Allowance

Daily travel allowance refers to the allowance paid to an employee when he is required to work from a different location than his workplace. Note that these allowances are eligible for tax deductions. Thus, you can make tax deduction claims for the expenses incurred for work-related travel.

Section 80G: Donations to Charitable Organisation

There is no change in the tax deductions to charitable institutions under the new tax regime. You can still claim deductions for your donations to certain charities, subject to some specific terms and conditions.

Standard Deduction in New Tax Regime

Deductions on a fixed amount of 50,000 are allowed for salaried individuals under the latest tax regime. There is no change in this deduction.

Deduction in New Tax Regime That Are Not Allowed

Below are the tax deductions that are not allowed under new tax rules:

  • Tax deductions under Section 80C, 80DD, 80CCC, 80DDB, 80E, 80G, 80EEA, etc.

  • Deductions on House Rent Allowance (HRA) under Section 10(13A).

  • Deductions on Medical insurance premiums under Section 80D.

  • Deductions upto ₹50,000 under Section 80CCD(1B).

  • Employment tax under Section 10(5).

Is it a Good Idea to Purchase a Health Insurance Plan in FY 2023-24?

While it is hard to believe, many individuals purchase medical insurance plans merely for health insurance tax benefits, which is not the best thing to do.

As we have mentioned, no tax deductions on the premiums paid towards medical insurance are allowed under the new tax regime.

However, it is crucial to realize that a health insurance plan holds a lot more importance than just being a tax-saving tool. While you may not be allowed to file tax deductions claims for your health insurance premiums, there are various benefits you can enjoy with the right medical insurance plan.

In simple words, the best health insurance policy helps you save a significant amount of money that would otherwise be spent on the hefty treatment of your unforeseen medical emergencies.

Always keep in mind, a penny saved is a penny earned. You may not be eligible for tax deductions on your medical insurance premiums, but you will get the excellent financial coverage that makes it worth investing in.

So, buy health insurance online from Tata AIG today if you haven’t already!

Final Words

The main objective of the new tax regime is to offer a simplified approach to tax calculation. For the same reason, it has lowered the tax slab rates in exchange for removing several tax deductions and exemptions.

While the new regime has removed certain tax benefits, many useful deductions are still allowed. For these reasons, it is very important to have a clear understanding of all the inclusions and exclusions for exemptions in new tax regime

FAQS

Is standard deduction applicable in the new tax regime? If yes, what are the conditions applied?

Yes, a fixed deduction of ₹50,000 is allowed from the total income of salaried individuals under the new tax regime.

However, if you have claimed this standard tax deduction, then you can not claim any other deduction under any section of the IT Act for this fixed amount. Thus, claim your deductions wisely.

Which is better: the old tax regime or the new tax regime?

As you can see in the above blog, the new income tax regime has removed tax deductions and benefits. However, it comes with lower tax slab rates.

On the other hand, the old tax regime offered slightly higher tax rates but offered multiple benefits and exemption options for the taxpayers. Hence, the choice between both regimes depends on your income, financial situation, and tax obligations.

What is Section 80D in the Income Tax Act?

Under Section 80D of the Income Tax Act, any individual can claim tax deductions up to ₹25,000 towards the premiums paid for a health insurance plan(s) for a given year. In the case of premiums paid for medical insurance plans for senior citizens, the allowed deductions are ₹50,000.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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