While the new tax regime may offer some benefits, you will have to give up many tax deductions and exemptions available in the old tax regime.
Many deductions and exemptions available in the old tax regime are not there in the default tax regime.
Finance Minister Nirmala Sitharaman announced several changes in the new tax regime in the Union Budget 2023-24 with an aim to make it more attractive for taxpayers. In the new tax regime, the tax slabs were revised while the exemption limit was increased from Rs 5 lakh to Rs 7 lakh. These changes are going to come into effect from 1 April.
The new tax regime will also become the default tax regime for all in the new financial year. This means that if you do not specify your choice, your income tax will be calculated as per the new tax regime. The old tax regime will be available to the taxpayers.
While the new tax regime may offer some benefits, you will have to give up many tax deductions and exemptions available in the old tax regime.
Here, we have simplified all the exemptions and deductions that you can claim under the old and new tax regimes.
old tax regime
The old tax regime offered various exemptions and tax deductions which helped in reducing the tax burden on individuals. Certain deductions are given under section 80C, 80CCC and 80CCD of the Income Tax Act. These include Equity-Linked Savings Scheme (ELSS) Fund, National Pension Scheme, Unit-Linked Insurance Plan (ULIP), Tax Saving Fixed Deposit, Public Provident Fund, Senior Citizen Saving Scheme and Sukanya Samriddhi Yojana.
Read also: Income Tax Calculator Online: How To Know Your Tax Liability On IT Department Portal?
If you opt for the old tax regime, you can also save tax by using your home loan. Section 80C of the IT Act provides a tax deduction of up to Rs 1.5 lakh on the principal repayment of your home loan. You can also claim a tax deduction of up to Rs 2 lakh on the interest payable towards your home loan under section 24 of the IT Act. In addition, first-time home buyers can also reduce their tax liability by up to Rs 50,000 by claiming deduction under Section 80EE of the IT Act.
new tax regime
Many deductions and exemptions available in the old tax regime are not there in the default tax regime. You can still take advantage of some of the benefits. You can claim standard deduction of Rs 50,000, while exemption up to Rs 7 lakh is also available under section 87A. Meanwhile, family pensioners can claim standard deduction of Rs 15,000 in the new tax regime. If your employer is contributing to your NPS account, you can claim a deduction under section 80CCD(2) of the IT Act.
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