Income tax deductions in new tax regime
Income tax deductions in new tax regime In the Union Budget of 2024, the features of the newly introduced tax regime under Section 115 BAC, with concessional tax slab rates, are retained for the Financial Year (FY) 2023-24. Additionally, the government has introduced several key changes for this financial year.
The streamlined income tax slab for the year 2024 along with the corresponding tax rates:
| Income Tax Slabs | Tax Rates (in % p.a.) |
| Up to Rs. 3 lakhs | NIL |
| Rs. 3 lakhs – Rs. 6 lakhs | 5% |
| Rs. 6 lakhs – Rs. 9 lakhs | 10% |
| Rs. 9 lakhs – Rs. 12 lakhs | 15% |
| Rs. 12 lakhs – Rs. 15 lakhs | 20% |
| Rs. 15 lakhs & Above | 30% |
Education Cess: 4% p.a. of taxable income
Increase in Tax Rebate Limits in 2024
Income tax deductions in new tax regime The tax rebate limit has been raised in 2024, allowing for a full tax rebate on income up to Rs. 7 lakhs under Section 87A of the Income Tax Act, 1961.
Income tax deductions in new tax regime The comparison of tax rebate limits between the old tax regime and the new tax regime for FY 2023-24:
| Tax Regime | Tax Rebate Limit (FY 2023-24) |
| Old Tax Regime | Rs. 5 lakhs |
| New Tax Regime | Rs. 7 lakhs |
Increase in Basic Tax Exemption Limit in 2024
The comparison of basic tax exemption limits under the old and new tax regimes for FY 2023-24:
| Age Categories | Basic Tax Exemption Limit (FY 2023-24) – Old Tax Regime | Basic Tax Exemption Limit (FY 2023-24) – New Tax Regime |
| < 60 Years of Age | Rs. 2.5 lakhs | Rs. 3 lakhs |
| 60-80 Years of Age | Rs. 3 lakhs | Rs. 3 lakhs |
| > 80 Years of Age | Rs. 5 lakhs | Rs. 5 lakhs |
The latest exemption limits are effective from April 1, 2023, and continue into 2024 for individuals opting for the new tax regime.
Section 80TTB Deductions – Standard Deductions in 2024
Income tax deductions in new tax regime Under the new tax regime, salaried individuals can avail a standard deduction of Rs. 50,000, which can be claimed as a deduction under Section 80TTB of the Income Tax Act, 1961.
For family pensioners, the standard deduction available under the new tax regime is Rs. 15,000.
Below Surcharge Rates on High-Income Individuals in 2024
The comparison of surcharge rates for high-income earners between the old and new tax regimes:
| Income Slabs | Surcharge Rates (in % p.a.) – Old Tax Regime | Surcharge Rates (in % p.a.) – New Tax Regime |
| Rs. 50 lakhs | NIL | NIL |
| Rs. 50 lakhs – Rs. 1 crore | 10% | 10% |
| Rs. 1 crore – Rs. 2 crores | 15% | 15% |
| Rs. 2 crores – Rs. 5 crores | 25% | 25% |
| Rs. 5 crores & above | 37% | 25% |
In the new tax regime, the surcharge rates for incomes above Rs. 5 crores have been revised to 25% from the previous rate of 37% in the old tax regime.
New Tax Regime is the Default Option in 2024
The new tax regime is automatically selected as the default option for income tax deductions by both employers and the Income Tax Department.
Exemptions and Deductions in the new tax regime:
Deductions refer to the expenses or investments made by the taxpayer that can be subtracted from their gross total income to arrive at the taxable income. Income tax deductions in new tax regime Deductions can help reduce the tax liability of an individual or a company.
Income tax deductions in new tax regime Exemptions refer to the income or investments made by the taxpayer that are not included in the calculation of their taxable income.
The new tax regime for the year 2024, the following exemptions and deductions are not claimable by individuals:
- Standard Deductions under Section 80TTA and Section 80TTB.
- Deductions under various sections such as 80C, 80D, 80E, 80CCC, 80CCD, 80DD, 80DDB, 80EE, 80EEA, 80G, etc., of Chapter VI-A of the Income Tax Act.
- Professional Tax.
- Entertainment Allowance on Salaries.
- House Rent Allowance (HRA).
- Leave Travel Allowance (LTA).
- Helper Allowance.
- Child Education Allowance.
- Minor Child Income Allowance.
- Interest on Housing Loan for Self-Occupied or Vacant Property.
- Other Special Allowances under Section 10(14).
- Employee’s Contributions to NPS Account.
- Donations to Political Parties or Trusts.
The new tax regime, the following deductions and exemptions are provided:
- Transport Allowances for Persons with Disabilities (PwD).
- Conveyance Allowance.
- Travel/Tour/Transfer Compensation.
- Perquisites for Official Purposes.
- Exemptions for Voluntary Retirement Scheme under Section 10(10C).
- Gratuity Amount under Section 10(10).
- Leave Encashment under Section 10(10AA).
- Interest on Home Loan on Lent-out Property under Section 24.
- Gifts of Up to Rs. 5,000.
- Employer’s Contributions to Employees’ NPS Accounts under Section 80CCD(2).
- Additional Employee Costs under Section 80JJA.
- Standard Deductions on Family Pension under Section 57(IIA).
- Deductions on Deposits in Agniveer Corpus Fund under Section 80CCH(2).
Deductions on Business Income Not Provided Under New Tax Regime in 2024
Income tax deductions in new tax regime The new tax regime for the year 2024, businesses are not eligible to claim the following exemptions and deductions:
- Additional Depreciation under Section 32.
- Investment Allowance under Section 32AD.
- Sector-wise Deductions for Businesses under Section 33AB and 22ABA.
- Expenditure on Research & Development under Section 35.
- Expenses on Capital Expansion under Section 35AD.
- Exemptions under Section 10AA for Units in Special Economic Zones (SEZ).
- Depreciation and Losses in the Business.
Comparison of Deductions under Old Regime vs. New Regime for FY 2023-24
Comparative analysis of available exemptions and deductions under the old and new tax regimes:
| Available Exemptions/ Deductions | Old Tax Regime | New Tax Regime |
| Standard Deductions of Rs. 50,000 under Section 80TTB Deduction | YES | YES |
| Employment/ Professional Tax under Section 10(5) | YES | NO |
| House Rent Allowance (HRA) under Section 10(13A) | YES | NO |
| Exemptions for Free Food & Beverages through Vouchers/Food Coupons | YES | NO |
| Deductions of Up to Rs. 1.5 lakhs under Chapter VIA towards investments like Section 80C, 80CCC, 80CCD, 80DD, 80DDB, 80E, 80EE, 80EEA, 80G, etc. | YES | NO |
| Deductions under Section 80CCD(2) for Employer’s Contribution to Employee NPS Accounts | YES | YES |
| Deductions under Section 80CCD(1B) of Up to Rs. 50,000 | YES | NO |
| Medical Insurance Premium under Section 80D | YES | NO |
| Interest on Home Loan for Self-Occupied/Vacant Property | YES | NO |
This table illustrates the availability of exemptions and deductions under both tax regimes.
Conclusion:
Income tax deductions in new tax regime In conclusion, the comparison between the old and new tax regimes reveals significant differences in the availability of exemptions and deductions. While the old tax regime offered a range of deductions such as standard deductions, employment taxes, HRA, and various investment-related deductions, the new tax regime limits these benefits. Deductions for medical insurance premiums, interest on home loans, and employer contributions to NPS accounts are no longer available under the new tax regime. Income tax deductions in new tax regime This shift highlights a streamlined approach with fewer deductions and exemptions in the new tax regime, potentially simplifying tax filing processes but also impacting taxpayers’ overall tax liabilities.
Sources : https://www.incometax.gov.in/iec/foportal/help/individual/return-applicable-1
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