Tax deductions & exemptions are no longer available under the new tax regime.

Individuals who choose to pay tax under the new lower personal income tax scheme will lose practically all of the tax benefits they were entitled to under the previous system. Section 80C (investments in PF, NPS, life insurance premiums, house loan principal repayment, etc. ), Section 80D (medical insurance premiums), tax discounts on HRA (House Rent Allowance), and interest paid on housing loan will all be unavailable under the new tax regime. Under the new tax structure, there will be no tax benefits for the disabled or charity donations.

“Under the new tax framework, individuals can choose to pay lower rates of tax without taking use of numerous tax exemptions and deductions. Individuals must calculate their tax liability under both the old and new tax regimes before deciding which is most advantageous. While the new system appears to be straightforward due to the lack of exemptions, persons who have already committed to recurring tax savings instruments may still wish to take advantage of exemptions and be taxed under the old regime.

Here’s a rundown of the major exemptions and deductions that taxpayers will lose if they opt for the new system.

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  • Exemption from the leave travel allowance (LTA), which is now given to salaried employees twice in a four-year period.
  • House rent allowance (HRA), which is generally granted as part of a salary to salaried workers. If the individual was staying in rental housing, this might be claimed as tax-free up to specific restrictions.
  • For salaried taxpayers and retirees, a standard deduction of Rs 50,000 is now provided.
  • Taxpayers will not be able to take advantage of the deductions allowed under sections 80TTA/80TTB. According to Abhishek Soni, CEO and creator of Tax2win.in, “Because Sections 80TTA and 80TTB are covered by Chapter VIA, the new tax regime bans deductions under Chapter VIA, with a few exceptions. As a result, a person who chooses the new tax system will be ineligible to claim deductions under sections 80TTA (Interest on Savings Account Deposits) and 80TTB (Interest on Senior Citizens Deposits).”
  • Section 16 provides for a deduction for entertainment allowance (for government personnel) and employment/professional tax.
income tax regime
  • Interest paid on a home loan for a self-occupied or vacant house property is tax deductible: Interest paid on a housing loan for such a property might be deducted from revenue from a house property that resulted in a loss (because the property was self-occupied or unoccupied). This loss could be offset against salary income, lowering taxable income and lowering net tax liability. This is covered in section 24.
  • Section 57, clause (iia), allows a deduction of Rs 15000 from the family pension.
  • The most frequently claimed deductions under section 80C shall be eliminated as well. This includes the often claimed section 80C deductions for provident fund contributions, life insurance premiums, children’s school tuition fees, and different specified investments such as ELSS, NPS, and PPF, among others.

Investment restrictions on tax-saving fixed deposits, income tax

However, deductions under section 80CCD (employer contribution on employee’s behalf in notified pension scheme—mostly NPS) and section 80JJAA (for new employment) can still be claimed.

  • The deduction for medical insurance premiums claimed under section 80D will also be lost.
  • Sections 80DD and 80DDB of the Internal Revenue Code do not allow for the claim of disability payments.
  • Section 80E will not allow you to claim a tax deduction on interest paid on a student loan.
  • Section 80G, which provides a tax benefit for charitable contributions, would no longer be available.

All deductions under Chapter VIA (such as sections 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, 80IB, 80-IBA, 80IB, 80-IBA, 80IB, 80-IBA, 80I

The above are only a few of the 70 tax deductions and exemptions that will be eliminated under the proposed new tax system.

Which tax deductions are possible under the new tax law?

Under the new tax scheme, a person can claim a deduction under Section 80CCD(2). The employer’s contribution to the employee’s NPS account is deductible under Section 80CCD (2).

Under the new tax structure, can I claim a tax exemption on HRA and LTA?

No, under the new tax structure, you cannot claim a tax exemption on HRA and LTA.

Is the section 80D deduction still available under the new tax law?

No, if a person has chosen the new tax regime, he or she cannot claim the 80D deduction.