The new tax regime has removed many exemptions and deductions, but it is still a preferred option for most taxpayers due to lower tax rates. The government now provides higher rebates under the new regime, effectively making income up to Rs 12 lakh tax free. For salaried taxpayers, this can go up to Rs 12.75 lakh due to standard deduction benefit.
The government has limited most of the deductions to the old tax regime. These include the popular investment tools such as 80C benefits, insurance and other aspects. Still, many people may not be aware but the new regime carries certain benefits on some expenses.
Taxpayers opting for the new regime can use these deductions to claim additional benefits and reduce their overall tax liability.
Top 6 Tax Benefits Under New Regime:
- No tax up to Rs 4 lakh income: One of the prominent tax benefits of the new regime is that the basic exemption limit has been raised to Rs 4 lakh. This means tax will only be calculated once the income crosses this threshold. In the old regime, the basic income exemption limit is just Rs 2.5 lakh.
- Lower rates: Besides higher basic exemption limit, the new regime also offers lower tax rates compared to the old regime. This results in lower tax liability for taxpayers.
- Benefits on interest paid on housing loan: Under Section 24(b), taxpayers under the new tax regime can claim a deduction on interest paid on a housing loan for a let-out property. The benefit is available when the loan is taken for the construction or purchase of a house property that has been rented out.
- Under Section 80CCD(2), taxpayers opting for the new tax regime can claim a deduction on contributions made by their employer to the National Pension System (NPS). The deduction is available for employees of all categories of employers and is allowed up to 14% of the employee's salary.
- Section 80CCH provides tax benefits under the Agnipath Scheme. An individual enrolled as an Agniveer who contributes to the Agniveer Corpus Fund on or after Nov. 1, 2022 is eligible for a deduction on the full amount.
- Additionally, any contribution made by the central government to the Agniveer Corpus Fund account of the individual is also fully deductible. This means both the Agniveer's contribution and the government's contribution qualify for a 100% tax deduction.
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