As a taxpayer, you must be aware of the fact that the new tax regime is now the default regime. Therefore, one has to opt for the old tax regime in case they want to avail one or more tax deductions and exemptions. The last date to file income tax return for financial year 2023-24 is July 31.
For the uninitiated, new tax regime was introduced in Budget 2020 under which income tax slabs were made lower and concessional tax rates were offered.
However, these lower rates were offered with the condition that a range of exemptions and deductions will not be offered anymore under the new tax regime.
In case you are not aware, there are still a few exemptions that taxpayers can avail in the new tax regime which we have listed as follows:
Deductions still given in the new tax regime:
I. Standard deduction: Standard deduction of ₹50,000 from salary is given under the new tax regime (NTR).
II. NPS: One can also claim deduction under section 80CCCD(2) for employer’s contribution to employee NPS accounts.
Other exemptions given under the new tax regime:
1. Transport allowance in case of a specially-abled person
2. Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
3. Any compensation received to meet the cost of travel on tour or transfer
4. Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from regular place of duty.
5. Perquisites for official purposes
6. Exemption on voluntary retirement under 10(10C), gratuity under section 10(10) and leave encashment under section 10(10AA).
Deductions excluded from the new tax regime:
1. Leave Travel allowance (LTA)
2. Section 80TTA/ Section TTB deduction.
3. Employment/ professional tax under 16(iii)
4. House Rent Allowance (HRA) under section 10(13A).
5. Exemptions for free food and beverages through vouchers/ food coupons under section 17(2) (viii).
6. Deductions up to ₹1.5 lakh under chapter VIA towards investments like under section 80C, 80CCC, 80DD, etc.
7. Deductions under section 80CCD (1B) of up to ₹50,000
8. Medical insurance premium under section 80D.
9. Interest on home loan for self-occupied/ vacant property.
It is noteworthy that salaried taxpayers are meant to inform their employer about their intended tax regime during the year. If they fail to do so, they will remain in the default tax regime, and it will be presumed that they have not exercised their option to opt out.