New Tax Regime: Understanding Exemptions and Deductions
Exemptions and Deductions under the New Tax Regime
The new tax regime introduced in India for the fiscal year (FY) 2023-24 and assessment year (AY) 2024-25 offers certain exemptions and deductions to taxpayers.
Standard Deduction
Under the new tax regime, taxpayers are entitled to a standard deduction of Rs. 50,000, which is a fixed amount that is deducted from their gross income before calculating the taxable income. This standard deduction is available to all salaried individuals, pensioners, and family pensioners.
Deductions under Section 80C
The new tax regime allows deductions under Section 80C for investments in certain specified instruments, such as:
- Life insurance premiums
- Equity-linked savings schemes (ELSS)
- Public Provident Fund (PPF)
- National Pension System (NPS)
- Bank fixed deposits
The overall limit for deductions under Section 80C remains Rs. 1,50,000.
Other Deductions
Apart from the standard deduction and deductions under Section 80C, the new tax regime also allows for the following deductions:
- Deduction for house rent allowance (HRA)
- Deduction for entertainment allowance
- Deduction for children's education expenses
- Deduction for medical expenses
Conclusion
The new tax regime offers taxpayers the option to choose between the old tax regime and the new tax regime, considering their individual circumstances and tax liability. By understanding the available exemptions and deductions, taxpayers can optimize their tax planning and reduce their tax burden.
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