Tax Deductions & Exemptions under New Tax Regime

Income Tax Tax Savings & Deductions
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The exemption limits for the standard deduction and NPS have been revised in the union budget. Refer to this thread for the updated limits: Union Budget 2024 key highlights | Major announcements Budget 2024-25

The Indian government implemented a new tax regime aimed at streamlining the taxation system by introducing lower tax rates while eliminating deductions. But over the years, the government has allowed certain tax deductions and benefits to make the new tax regime more attractive to taxpayers.

Here are some of the deductions/exemptions available under the new regime:

  1. Standard Deduction: If you are a salaried individual or pensioner, you can claim a standard deduction of ₹50,000.

  2. Employer’s Contribution to NPS Accounts u/s 80CCD (2): You can claim a deduction for your employer’s contribution to your NPS account. The maximum allowed deduction is 10% of the salary which includes Basic Salary and DA (Dearness Allowance).

:bulb:In case of central government employees, the allowable deduction u/s 80CCD (2) is 14% of their salary.

  1. Interest on Home Loan u/s 24b: You can claim the interest component of your home loan as a deduction. The only condition here is that the property must be let out. The deduction is not available in case of a self-occupied or vacant property.

  2. Rebate up to ₹7 Lakhs: The rebate limit under the new regime has been increased from ₹5 lakhs to ₹7 lakhs. This basically means that you do not have to pay any taxes on an income of up to ₹7 lakhs.

  3. Deduction u/s 80CCH: If you have enrolled in the Agnipath Scheme, you can claim a deduction of the amount of contribution made to the Agniveer Corpus Fund.

  4. Deduction u/s 57(iia) for family pension: If you receive income in the form of family pension, you can claim one-third of such income or ₹15,000, whichever is less, as a deduction.

  5. Deduction u/s 80JJAA for additional employee cost: This section allows a tax deduction in respect of the recruitment of new or additional employees. So, if you are a business owner, you can claim 30% of additional employee costs incurred by the business as a deduction.

  6. Marginal Relief: Lastly, even if not exactly a deduction, this has been a recent addition to the new regime. Marginal relief will be beneficial if your income marginally exceeds ₹7 lakh. You can read more on it here!

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