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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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.
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.