Tax laws in India keep evolving. Therefore, both individuals and businesses must remain updated with the latest modifications. The Indian tax system witnessed a major transformation in 2024, with the Union Budget aiming to simplify the tax structure and boost compliance. A major aspect of this modification is deductions in new tax regimes or notable changes in allowable deductions.
The standard deduction in the new tax regime goes like this:
The Union Budget 2024 allows total tax deductions in the new tax regime for income up to Rs. 7 lakh. Under section 87A of the Income Tax Act, you need not pay any tax if you claim a standard deduction of Rs. 50 000 on income up to Rs. 7.5 lakhs.
No taxes are levied on income up to Rs. 3 lakhs annually. However, there is a 5% tax rate on income between Rs. 3 lakhs and Rs. 6 lakhs, 10% for income between Rs. 6 lakhs and Rs. 9 lakhs, 15% on income between Rs. 9 lakhs and Rs. 12 lakhs, 20% on income between Rs. 12 lakhs and Rs. 15 lakhs, and 30% on income above Rs. 15 lakhs.
The basic tax exemption limit of Rs. 2.5 lakhs as per the old tax regime has been increased to Rs. 3 lakhs in the new tax regime. This latest deduction is applicable from 1 April 2023 and continues in 2024.
As per section 80TTB deduction of the Income Tax Act, salaried individuals can benefit from standard deductions of Rs—50 000 under the new tax regime. The section also allows family pensioners to claim standard Rs. 15 000 deductions under the new tax regime.
The deduction allowed in the new tax regime is the investments or expenses made by taxpayers that can be subtracted from their gross total earnings to get a taxable income. These deductions can reduce a company's or an individual's tax liability.
Note that there are a few non-claimable deductions in the new tax regime, which include:
A few deductions in the new tax regime not available to businesses include:
Considering the deductions in the new tax regime, it is crucial for businesses and individuals to use financial strategies that can offer optimal tax results. They must explore alternative investments, reassess objectives, leverage tax-exempt allowances, maximize standard deductions, and follow financial advice to effectively navigate all changes in the new tax regime.
No, deductions under Chapter VO-A, including the most well-known ones, like 80C for investments, 80E for education loan interest, and 80D for medical insurance premiums, are no longer applicable in the new tax regime.
No, deductions under section 80TTA do not apply to the new tax regime. However, the exemption for saving bank interest up to Rs. 3,500 applies to both tax regimes.
Section 10 of the new tax regime offers an exemption for costs incurred due to your employer’s business. This includes research, conveyance, and traveling allowance, provided such costs are actually spent for the given purpose.
Under the new tax regime, you cannot opt for LTA (Leave Travel Allowance), entertainment allowances, and HRA (House Rent Allowance) exemptions.