Union Budget 2023 removed almost 70 deductions in the new tax regime for individual taxpayers. The exclusions include deductions up to Rs 1.5 lakh under Section 80 C and benefits on medical insurance premiums u/ Section 80D. However, certain deductions are still available to taxpayers under the new tax regime. This article is will help you to know some of the valid exemptions and deductions under the new tax regime.
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Union Government introduced a New Tax Regime under Section 115BAC in Budget 2020 with concessional tax slab rates.
In Union Budget 2023 income tax regime, the government introduced the following key changes for the financial year (FY) 2023-24:
|Income Tax Slabs||Tax Rates (in % p.a.)|
|Up to Rs. 3 lakhs||NIL|
|Rs. 3 lakhs- Rs. 6 lakhs||5%|
|Rs. 6 lakhs- Rs. 9 lakhs||10%|
|Rs. 9 lakhs- Rs. 12 lakhs||15%|
|Rs. 12 lakhs- Rs. 15 lakhs||20%|
|Rs. 15 lakhs & Above||30%|
|Education Cess||4% p.a. of Taxable Income|
Full tax rebate on income of up to Rs. 7 lakhs is provided under the new tax regime u/Section 87A of the Income Tax Act, 1961.
|Tax Rebate Limit Under Old Tax Regime for FY 2023-24||Tax Rebate Limit in New Tax Regime for FY 2023-24|
|Rs. 5 lakhs||Rs. 7 lakhs|
You are liable to pay no tax if claiming a standard tax deduction of Rs. 50,000 on an income limit of Rs. 7.5 lakhs.
The basic tax exemption limit of Rs. 2.5 lakhs under the old tax regime increased to Rs. 3 lakhs under the new tax regime.
|Age Categories||Basic Tax Exemption Limit u/ Old Tax Regime for FY 2023-24||Basic Tax Exemption Limit u/ New Tax Regime for FY 2023-24|
|< 60 Years of Age||Rs. 2.5 lakhs||Rs. 3 lakhs|
|60-80 Years of Age||Rs. 3 lakhs|
|> Years of Age||Rs. 5 lakhs|
The latest exemption limit is applicable from 01 April 2023 if opting for the new tax regime.
Salaried individuals are eligible to claim the benefit of standard deductions of Rs. 50,000 under the new tax regime.
Family pensioners can claim the standard deductions of Rs. 15,000 under the new tax regime.
Individuals earning Rs. 50 lakhs & above fall in the high-income category. The government of India levies a surcharge on high-income earners.
|Income Slabs||Surcharge Rates in Old Tax Regime||Surcharge Rates in New Tax Regime (in % p.a.)|
|Rs. 50 lakhs||NIL||NIL|
|Rs. 50 lakhs- Rs. 1 crores||10%||10%|
|Rs. 1 crores- Rs. 2 crores||15%||15%|
|Rs. 2 crores- Rs. 5 crores||25%||25%|
|Rs. 5 crores & above||37%||25%|
The new tax regime is the default choice for an income tax deduction by an employer and the Income Tax Department.
Note: You have to specifically opt (with your employer or IT department) to calculate your TDS and other personal taxes as per the new tax regime.
Let us understand the key terms from the list mentioned below:
Refers to the expenses or investments made by the taxpayer that can be subtracted from their gross total income to arrive at the taxable income
Deductions can help lower the tax liability of an individual or a company
Refers to the income or investments made by the taxpayer that are not included in the calculation of their taxable income
From the table below, let us learn the key exemptions and deductions in the new tax regime that are not claimable by individuals:
|Non-Claimable Tax Deductions & Exemptions in New Tax Regime|
There are certain deductions and exemptions in the new tax regime, which are as follows:
|New Tax Regime Exemption List|
Let us have a look at the various exemptions and deductions in the new tax regime not available to businesses:
|Exemptions/ Deduction Not Claimable by the Businesses in the New Tax Regime|
The table below shows a comparative analysis of the available deductions under the old vs. new tax regime:
|Available Exemptions/ Deductions||Old Tax Regime||New Tax Regime|
|Standard Deductions of Rs. 50,000||YES||YES|
|Employment/ Professional Tax u/ Sec 10(5)||YES||NO|
|House Rent Allowance (HRA) u/ Sec 10(13A)||YES||NO|
|Exemptions for Free Food & Beverages through Vouchers/ Food Coupons||YES||NO|
|Deductions of Up to Rs. 1.5 lakhs u/ Chapter VIA towards investments like u/ Sec 80C, 80CCC, 80CCD, 80DD, 80DDB, 80E, 80EE, 80EEA, 80G, etc.||YES||NO|
|Deductions u/ Sec 80CCD(2) for Employer’s Contribution to Employee NPS Accounts||YES||YES|
|Deductions u/Sec 80CCD(1B) of Up to Rs. 50,000||YES||NO|
|Medical Insurance Premium u/Sec 80D||YES||NO|
|Interest on Home Loan for Self-Occupied/ Vacant Property||YES||NO|
The new tax regime introduced under the Union Budget 2023-24 offers taxpayers the option to choose between lower tax rates and limited deductions or higher tax rates and multiple deductions and exemptions.
It is important for taxpayers to carefully evaluate their deductions in both these tax regime. Choose the one that best suits your financial goals and circumstances.
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