Finance Minister Nirmala Sitharaman in her Budget 2020 speech proposed a new tax regime with lower income tax rates and rejigging tax slabs. The new system, however, is optional and payers will have to let go of 70 tax exemptions of the existing to avail it.
Here’s a list of major exemptions that taxpayers will have to forgo if they opt for the new regime.
The most commonly claimed deductions under section 80C will also go. This includes the commonly availed section 80C deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc.
House rent allowance normally paid to salaried individuals as part of the salary. This could be claimed as tax-exempt up to certain specified limits if the individual was staying in rented accommodation.
Standard deduction of Rs 50,000 currently available to salaried taxpayers
Tax benefit on interest paid on housing loan taken for a self-occupied or vacant house property: Interest paid on housing loan for such a property could be claimed as a deduction from income from house property which resulted in a loss from house property (as the property was self/occupied or vacant). This loss could be set off against salary income thereby reducing the individuals’ taxable income and net tax liability. This comes under section 24.
Deduction of Rs 15000 allowed from family pension under clause (iia) of section 57.
Leave travel allowance exemption which is currently available to salaried employees twice in a block of four years.
Deduction for entertainment allowance and employment/professional tax as contained in section 16
Tax benefits for disability under sections 80DD and 80DDB will not be claimable.
Tax break on interest paid on education loan will not be claimable-section 80E.
Tax break on donations to charitable institutions available under section 80G will not be available.
All deductions under chapter VIA (like section 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.