Income Tax News: Important! Following New Tax Regime? Check Instruments That Can Increase Your Tax Savings

Income Tax News: The Indian government introduced the new tax regime to simplify the process of filing taxes. This streamlined system focuses on offering reduced tax rates instead of requiring taxpayers to navigate a complex web of deductions and exemptions. However, some allowances are still claimable under the new regime. Let's explore what these are and how they differ from the old system.

Allowances You Can Claim Under the New Tax Regime

1. Standard Deduction: Under the new regime, all taxpayers are entitled to a standard deduction of Rs. 50,000, irrespective of their income level. This replaces various deductions available in the old regime, making tax filing more straightforward.
2. Retirement Benefits: Gratuity and leave encashment received upon retirement remain non-taxable under the new tax regime, offering relief to retirees.
3. Employer Contributions to NPS/PF: Contributions made by employers towards the National Pension System (NPS) or Provident Fund (PF) are exempt from taxation. However, deductions for employee contributions under Section 80C are no longer applicable.
4. Long-Term Capital Gains (LTCG): Taxpayers can still benefit from deductions on long-term capital gains from the sale of equity shares or equity-oriented mutual funds, up to a limit of Rs. 1 lakh, in the new tax regime.

Exemptions Under the New Regime

The new tax regime also allows taxpayers to claim certain exemptions, including:

• Transport allowances for specially-abled individuals
• Compensation for travel during tours or transfers
• Conveyance allowance for employment-related travel expenses
• Interest on Home Loan for let-out property
• Perquisites for official purposes
• Gifts up to Rs. 50,000
• Exemption on retirement benefits such as gratuity and leave encashment
• Deduction for additional employee costs

Important Points to Note

• Section 80C deductions are not applicable in the new tax regime.
• HRA exemption is not allowed under this system.