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Deductions Under The New Tax Regime

What Stays & What Goes

A major chunk of deductions and exemptions are removed under the New Tax Regime. The important tax breaks that will no longer be available under the New Tax Regime include Chapter VI-A deductions like 80C, 80D, 80DD, 80U, 80TTA/TTB, 80E, HRA, LTA and interest on Housing Loan. There are a few deductions that can still be claimed!
Look at a list of all the deductions under the New Tax Regime which the Budget 2020 covers and does not cover!

Deductions we have to part ways with:

The most popular deductions of Chapter VIA have been abolished-

All deductions except 80CCD(2) and 80JJAA have been removed. The sections removed are:

These include deductions on Life Insurance Premium, School Tuition Fees, Housing Loan Principal, Medical Insurance Premium & other investments like ELSS, NPS, and finally the majorly claimed Provident Fund.

PPF might still continue to be the most popular fixed-income product, irrespective of these changes.

Investment in PPF can no longer be claimed. The exemption on the interest earned through PPF as well as the total sum received at maturity is exempt from tax. This will give a boost to long-term investment planning. 

The huge deduction of medical insurance premium has been removed, too:

A deduction of INR 25,000 can be claimed under section 80D on insurance for self, spouse and children. An additional deduction for insurance of parents is also available. This depends on the age of the parents. The maximum deduction available u/s 80D is Rs. 1,00,000. This can only be claimed in the Old tax Regime.

Interest from savings bank account abolished:

This exemption is claimed under Section 80TTA and 80TTB. No more deductions in respect to interests from savings accounts is allowed. This applies to both senior and non-senior citizens.

No deduction for interest paid on education loan:

Under Section 80E, you can claim deduction on interest paid on education loan. It does not have any maximum limit. However, it can be claimed for a maximum period of 8 years under the Old Tax Regime. But this is also being excluded from the list of tax-deductions under the New Tax Regime.

Salaried individuals can no longer claim a large number of exemptions:

A few other exemptions which were removed:

Deductions that stay:

A little something under Chapter VIA can still be claimed:

These include Employer’s Contribution to Provident Fund (EPF) and deduction under section 80JJAA i.e. deduction for employment of new employees. 

Rebate Under Section 87A:

This rebate is limited to INR 12,500. This means that if your total income is lower than INR 5,00,000 then the tax payable will be your rebate under section 87A.

Standard Deduction on Rent Received still remains:

Standard Deduction on Rent Received is 30% of the Net Annual Value of Income from House Property. This 30% deduction is allowed even when your actual expenditure on the property is higher or lower.

Interest on Housing Loan for Let Out Property:

This deduction can still be claimed under the New Tax Regime unlike the Interest on housing loan for self-occupied property. However, you can only claim Interest upto the amount of Rental Income received. You can not set off or carry forward the loss of Interest paid on Housing Loan.  

Agricultural Income is not taxable. It is not counted as a part of an individual’s total income.     However, the ‘state’ government can levy tax on agricultural income if the amount exceeds INR 5,000 per year.

No compromise on retirement allowances to salaried individuals:

The following exemption are still allowed under the New Tax Regime:

Few of the the exemptions which can still be claimed by the salaried individuals are Food Coupons and Gifts from Employer. Also Tax paid by employer on non-monetary perquisite can be claimed.

A few other exemptions which haven’t been removed:

Budget 2020 made some really important changes to the Tax Regime. Taxpayers have two options. They can go with the New Tax Regime or the Old Tax Regime. There is nothing to worry about. Keep in mind the above. Select the suitable regime for FY 2020-21 so that maximum benefits can be derived. As a result your employer can deduct correct TDS once you have decided between the two.

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