Deductions in New Tax Regime under Union Budget 2024

There are no major changes made when it comes to deductions in the new tax regime under the recent Union Budget 2024. Whereas, in the new tax regime introduced in Union Budget 2023, almost 70 deductions for individual and business taxpayers were eliminated. This regime excludes various tax benefits like deductions up to Rs 1.5 lakh under Section 80 C and benefits on medical insurance premiums u/ Section 80D. However, certain deductions from the old tax regime are still available to taxpayers under the new tax regime.

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This article will help you to know some of the valid exemptions and deductions under the new tax regime.

What is New Tax Regime for Financial Year 2023-24 (AY 2024-25)?

Union Government introduced a New Tax Regime under Section 115BAC in Budget 2020 with concessional tax slab rates. 

In Union Budget 2024 the features of the recently introduced new tax regime continue for Financial Year (FY) 2023-24. The government introduced the following key changes for the FY 2023-24:

  1. Streamlining of Income Tax Slabs in 2024

    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
  2. Increase in Tax Rebate Limits in 2024

    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.

  3. Increase in Basic Tax Exemption Limit in 2024

    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 and it continues in 2024 as well when opting for the new tax regime.

  4. Section 80TTB Deductions – Standard Deductions in 2024

    Salaried individuals are eligible to claim the benefit of standard deductions of Rs. 50,000 under the new tax regime. You can avail of this benefit as Section 80TTB deduction under the Income Tax Act, 1961.

    Family pensioners can claim the standard deductions of Rs. 15,000 under the new tax regime.

  5. Lower Surcharge Rates on High-Income Individuals in 2024

    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%
  6. New Tax Regime is the Default Option in 2024

    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.

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Meaning of Exemptions and Deductions in New Tax Regime

Let us understand the key terms from the list mentioned below: 

  1. Deductions in New Tax Regime

    • 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

  2. Exemptions in New Tax Regime

    • Refers to the income or investments made by the taxpayer that are not included in the calculation of their taxable income

Exemptions and Deductions Not Available Under New Tax Regime in 2024

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
  • Standard Deductions u/ Section 80TTA and Section 80TTB
  • Deductions u/ Section 80C, 80D, 80E, 80CCC, 80CCD, 80DD, 80DDB, 80EE, 80EEA, 80G, etc. of Chapter VI-A of IT Act
  • Professional Tax
  • Entertainment Allowance on Salaries
  • House Rent Allowance (HRA)
  • Leave Travel Allowance (LTA)
  • Helper Allowance
  • Child Education Allowance
  • Minor Child Income Allowance
  • Interest on Housing Loan Self-Occupied/ Vacant Property
  • Other Special Allowance u/ Section 10(14)
  • Employee’s Contributions to NPS Account
  • Donations to Political Parties/ Trusts

Provision of Exemptions and Deductions in New Tax Regime

There are certain deductions and exemptions in the new tax regime, which are as follows:

New Tax Regime Exemption List
  • Transport Allowances w.r.t. Person with Disabilities (PwD)
  • Conveyance Allowance
  • Travel/ Tour/ Transfer Compensation
  • Perquisites for Official Purposes
  • Exemptions for Voluntary Retirement Scheme u/ Section 10(10C)
  • Gratuity Amount u/ Section 10(10)
  • Leave Encashment u/ Section 10(10AA)
  • Interest on Home Loan on Lent-out Property u/ Section 24
  • Gifts of Up to Rs. 5,000
  • Employer’s Contributions to Employees NPS Accounts u/ Section 80CCD(2)
  • Additional Employee Costs u/ Section 80JJA
  • Standard Deductions on Family Pension u/ Section 57(IIA)
  • Deductions on Deposits in Agniveer Corpus Fund u/ Section 80CCH(2)

Deductions on Business Income Not Provided Under New Tax Regime in 2024

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
  • Additional Depreciation u/ Sec 32
  • Investment Allowance u/ Section 32AD
  • Sector-wise Deductions for Businesses u/ Section 33AB and 22ABA
  • Expenditure on Research & Development u/ Section 35
  • Expenses on Capital Expansion u/ Section 35AD
  • Exemptions u/ Section 10AA for Units in SEZ
  • Depreciation and Losses in the Business

Comparison of Deductions under Old Regime vs. New Regime for FY 2023-24

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 u/ Section 80TTB Deduction 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

Wrapping It Up

The new tax regime offers taxpayers the option to choose between lower tax rates and limited deductions or higher tax rates and multiple deductions and exemptions as per the Union Budget 2024.

It is important for taxpayers to carefully evaluate their deductions in both these tax regimes. Choose the one that best suits your financial goals and circumstances.

New Tax Regime Deductions – FAQs

  • Which deductions are allowed in the new tax regime in 2024?

    In the current new tax regime for the assessment year 2024-25 (referring to income earned in the financial year 2023-24), the available deductions are limited compared to the old tax regime. Some of them are as follows:
    • Standard deductions of Rs. 50,000 under Section 80TTB deduction on taxable income

    • Employer’s contribution to NPS accounts of employees

    • Deductions on health insurance premiums u/ Section 80D

    • Transport allowances to Persons with Disabilities 

    • Gratuity u/ Section 10(10)

    • Leave Encashment u/Section 10(10AA)

  • How can I save taxes in the new tax regime in 2024?

    New tax regime in 2024 removes most of the common deductions like 80C, 80D, HRA etc., which can be significant for you. Meanwhile you can save more taxes in the old tax regime depending on your tax slab.

    You can save few taxes in the new tax regime for 2024 (AY 2024-25) using the following strategies:

    • Compare your tax liabilities under Old vs. new tax regime in 2024

    • Invest in best tax-saving investments in 2024

    • Avail of Section 80TTB deduction of Rs. 50,000

    • Claim tax benefits on home loan

    • Maximize employer contributions

  • What are the rebates in the new tax regime in 2024?

    You can avail of the tax rebate under Section 87A in the new tax regime in 2024:
    • Eligible taxpayers: Resident individuals with a taxable income of up to Rs. 7,00,000 in the financial year 2023-24 (assessment year 2024-25).

    • Rebate amount: Rs. 25,000, or the amount of tax payable, whichever is lower. This means your tax liability becomes nil if your income is up to Rs. 5,00,000 after claiming this rebate.

  • What is the Section 10 exemption in the new tax regime in 2024?

    Section 10 exemptions are not available under the new tax regime as per Union Budget 2023 and Union Budget 2024. However, this benefit is available under the old tax regime in FY 2023 – 24. Section 10 offers a wider range of exemptions under Section 10, including house rent allowance (HRA), leave travel allowance (LTA), medical allowance, and deductions under Chapter VI-A (like 80C, 80D).
  • What is the standard deduction for 2023-24?

    The Section 80TTB deduction, or standard deduction for the 2023-24 tax year (filed in 2024) depends on your filing status and whether you choose the old or new tax regime in India.
    • New Tax Regime:

      • Salaried individuals and pensioners: Rs. 50,000

      • Family pensioners: Rs. 15,000

    • Old Tax Regime:

      • Salaried individuals and pensioners: Rs. 50,000

  • Is hra included in new tax regime?

    No, House Rent Allowance (HRA) is not included in the new tax regime for FY 2023-24 (AY 2024-25). This means if you choose the new tax regime, you cannot claim any deduction for the HRA you receive from your employer.
  • Is standard deduction applicable in the new tax regime?

    Yes, the standard deduction is applicable in the new tax regime. A fixed amount of Rs. 50,000 is allowed as a deduction from the total income of salaried individuals.
    It is important to note that if an employee claims this standard deduction, they cannot claim any other deduction for the same amount under any other section of the Income Tax Act.
  • What deductions are allowed in the new tax regime in 2023?

    The deductions in the new tax regime and the list of various exemptions are as follows:
    • Standard deductions of Rs. 50,000 on taxable income
    • Employer’s contribution to NPS accounts of employees
    • Deductions on health insurance premiums u/ Section 80D
    • Transport allowances to Persons with Disabilities 
    • Gratuity u/ Section 10(10)
    • Leave Encashment u/Section 10(10AA)
  • What is the standard deduction for 2023-24?

    The standard deduction of Rs. 50,000 is provided on the income of up to Rs. 7 lakhs for the financial year (FY) 2023-24.
  • How many deductions are there in the new tax regime?

    Approximately 10 tax exemptions and deductions are available to individuals under the new tax regime. However, the tax slab rates are more simplified and reduced in the new tax regime as compared to the old tax regime.
  • Is standard deduction applicable in the new tax regime?

    Substantial deductions and exemptions aren't permitted under the new tax regime. However, taxpayers do have the option of paying concessional tax rates. The standard deduction from gross salary is also not permitted if the taxpayer is required to file a return under the new tax system.
  • What are the benefits of the new tax regime?

    The benefits of the new tax regime include lower tax rates, easier compliance, and easier filing since fewer documents are needed since most of the exemptions and deductions are unavailable.
  • What are some deductions under the new tax regime?

    Minor child income allowance, HRA, LTA, etc., are some deductions under the new tax regime.
  • Can someone opt for New Tax Regime and avail of Rebate u/s 87A?

    Since the deduction under the new tax regime doesn't mention anything thus, the rebate listed in section 87A applies to both the old and the new tax regimes.
  • How can someone opt for the new tax regime?

    ​To opt for the new tax regime, one has to choose it while filing for tax returns.

*All savings are provided by the insurer as per the IRDAI approved insurance plan.
*Tax benefit is subject to changes in tax laws. Standard T&C Apply
^The tax benefits under Section 80C allow a deduction of up to ₹1.5 lakhs from the taxable income per year and 10(10D) tax benefits are for investments made up to ₹2.5 Lakhs/ year for policies bought after 1 Feb 2021. Tax benefits and savings are subject to changes in tax laws.
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