The government introduced the new tax regime as a simpler alternative to the old system, offering lower tax rates in exchange for the removal of many deductions. While this regime may seem to limit tax-saving opportunities, there are still several allowances and exemptions available that can help reduce your taxable income.
Understanding the key deductions under the new regime can help you make informed financial decisions. Here’s a breakdown of the benefits you can still claim, allowing you to take full advantage of the available tax relief options while filing your returns.
- Standard Deduction: Regardless of income level, all salaried taxpayers can avail a flat standard deduction of Rs. 50,000, replacing several previous deductions.
- Retirement Benefits: Gratuity and leave encashment received upon retirement remain non-taxable under the new regime, offering a tax-free cushion.
- Employer Contributions: Contributions made by your employer to the National Pension System (NPS) or Provident Fund (PF) are not taxed. However, unlike the old regime, employee contributions are not deductible under Section 80C.
- Long-Term Capital Gains (LTCG): Gains from the sale of equity shares or mutual funds can still be exempted up to Rs. 1 lakh per year.
Additional exemptions that can be claimed:
- Transport allowance for specially-abled individuals
- Conveyance allowance for work-related travel
- Compensation for travel during job transfers or tours
- Daily allowances for expenses incurred while away from your regular place of work
- Perquisites received for official purposes
- Exemption on voluntary retirement (Section 10(10C)), gratuity (Section 10(10)), and leave encashment (Section 10(10AA))
- Interest on home loans for let-out properties (Section 24)
- Gifts up to Rs. 50,000
- Deduction for additional employee costs (Section 80JJA)
Utilizing these exemptions and deductions, one can effectively reduce your taxable income under the new tax regime.