BackIncome tax new regime: These are the deductions you can still claim
The new tax regime is the default choice unless one intends to go back and avail of the benefits under the old tax regime. Some deductions available under the old regime will no longer be available under the new regime.
PremiumMany taxpayers are confused about whether to file taxes under the new tax regime or continue with the old tax regime. The new tax regime is bereft of the much-needed deductions though the same also provides for lower tax rates corresponding to various income slabs.
As opposed to the old tax regime where one could one claim deductions under various sections pursuant to long-term savings, investments in Public Provident Fund (PPF), health insurance premiums, house rent allowance received or the principal repayment on home loans sought.
Interest on loan repayment
While you cannot claim deductions on the principal component of a home loan during repayment, you can surely claim a deduction for the interest paid on home loans taken for a leased-out property under Section 24B of the Income Tax Act, 1961.
This means that the interest paid on the mortgage is deducted from the rental income received from the property, thus, lowering the taxable income from the property. The deduction for interest paid on housing loans taken for a self-occupied property, on the other hand, is no longer available under the new tax regime.
Benefiting from contributions to NPS
Section 80CCD (2) of the Income Tax Act allows taxpayers to claim the benefit of employer contributions to their National Pension System (NPS) account under the new tax regime. This deduction is limited to the employer's contribution to NPS made for the employee's benefit, up to 10 per cent of the employee's salary (Basic + DA).
Other deductions
Separate from the deductions available on loan repayment and NPS contributions under various sections, the new tax regime also allows scope for exemption on voluntary retirement receipts, gratuity and leave encashment exemption amounts.
However, taxpayers lose the benefit of donating to charitable organizations or trusts under Section 80G of the Act. CA Kanan Bahl, a financial educator and growth consultant said, “One cannot claim deductions under Sections 80G and 80TTA or even Section 80TTB of the Income tax act, 1961 as given in Section 115BAC (2) of the Income Tax Act, 1961."
Bahl adds, “Majorly, the deductions that are available under the new tax regime which might be relevant for most are:
A. Standard deductions for salaried employees of Rs 50,000.
B. Contribution by private employees of up to 10 per cent of Basic Salary + DA to NPS. In the case of state or central govt are employers, then this limit is up to 14 per cent of Basic Salary + DA.
Do consult your financial advisor before filing your return as they might be able to help you optimize with more relevant deductions that are specific to your case."
Deductions are an essential element of tax calculation, and one cannot afford to ignore them. Both the old and new tax regimes have their benefits, though it depends on the extent of your taxable income and your choice of investment options which you must choose.
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