The new tax regime was introduced as a simple, less paperwork option for taxpayers. A provision has also been made for some tax relief.
The new tax regime was introduced as a simple, less paperwork option for taxpayers. A provision has also been made for some tax relief. From the financial year 2023-24 onwards, the default tax system has been fixed to the new regime. The rates and rules under this system will continue to be applicable to you, unless you opt for the old regime, in which you will get different discounts.
The Income Tax Department has recently launched the Income Tax Calculator, with the help of which people choose the tax regime with lower tax liability. However, before taking a final decision, you should also know about the exemptions that you will get under the new regime. Let us know the exemptions available under the new tax regime.
Standard deduction of Rs 50,000
It has been introduced in Budget 2023 to make the new regime more attractive to taxpayers. It is available by default. That is, you do not need to show any steps or proof to claim this deduction.
Employer’s contribution to employee’s NPS
Not many people know about this. This benefit is available under both the regimes. Where the tax deduction linked to the National Pension System – up to Rs 1.5 lakh under section 80C and Rs 50,000 under section 80CCD (1B) – has not been given a place in the new regime. At the same time, this deduction has been included.
Employer’s contribution to National Pension System up to 10% (14% for government employees) is eligible for deduction under section 80CCD(2). However, the tax-free limit on benefits received from the employer has been fixed at Rs 7.5 lakh annually.
Employer’s EPF contribution
The employer contributes 12% of the basic salary to the Provident Fund (EPF) of your employee. Tax exemption is also available on this amount as long as the total retirement benefits received from your employer do not cross the limit of Rs 7.5 lakhs annually.
Standard deduction on rental income
If you own a property that you have given out on rent, you can claim a standard deduction of 30% on the annual value of that property.
