There has been a lot of confusion over the new proposed tax regime. While there has been much consternation over the 70 exemptions that one will have to forgo after moving to the new ‘simplified’ tax regime, there are several types of incomes that remain exempted.
Budget 2020 offered taxpayers the option to choose between the existing tax regime and new one with slashed income tax rates but fewer exemptions. The new regime offers lower rates but will result in lower tax outgo for for the taxpayer.
This means that individuals will now have the option to choose which regime to follow, like corporates. While there’s some confusion about the regimes, individuals will have to forgo exemptions under Section 80C.
Home loan exemption, insurance exemptions, standard deductions will also not stay under the regime. These include Section 80C and 80D, LTC, housing rent allowance, the deduction for entertainment allowance, professional tax, and interest on self-occupied/vacant property.
But the employees will still benefit from the following exemptions.
This include Employers’ Provident Fund, employers’ contribution to NPS and others.
Here are some exemptions you can avail under the new regime:
Withdrawal by an employee from the EPF is not taxable but only if the employee has worked for five years straight.
The amount received on maturity of PPF account and the interest credited on the PPF balance.
Maturity among on Sukanya Samriddhi Yojana. (The Sukanya Samriddhi Account offers a high interest rate of 8.4% and still has tax benefits)
Conveyance allowance granted to an employee still remains tax-free. Conveyance Allowance refers to the expenditure incurred by employees while travelling or on tour or relocation.
The interest received from post office saving are tax-free annually but only up to Rs 3500.
The gratuity received from an employer up to Rs 20 lakh after five years of continuous service is still tax-free.
All scholarships granted under Section 10(16) of the IT Act are still exempt.
Withdrawal from NPS on maturity or premature closure up to 40% of the amount received will be tax-free.
Any bonus paid on maturity of life insurance plan – under Section 10 (10D) of the IT Act, will also remain tax-free.
