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Important Pointers about Deductions Under The Old & New Tax Regimes

The Union Budget established a new tax regime with lower tax slab rates. If an individual or HUF chooses this new tax regime. He will lose the majority of the exemptions and deductions proprietorship firm and professional tax registration available under the Income Tax Act. Keep reading this blog to learn more.

Aspects about Deductions Under The Old & New Tax Regimes

While the income tax slab rates are low under the new regime, individuals and HUFs will have to forego the majority of exemptions and deductions. However, if such an assessee chooses the old tax regime, he will not have to forego these exemptions and deductions, but he will have to pay more tax than under the new tax regime.

As a result, the assesse is perplexed as to which tax regime he should choose. To comprehend this, the taxpayer should be aware of all exemptions and deductions that will no longer be available under the New Tax Regime.

Exemptions and deductions not available under the new tax regime for individuals under the age of 60 and HUFs

Standard deduction, House Rent Allowance (HRA), Leave Travel Assistance (LTA), and even some allowances for performing duties are all allowed.

Section 80C deductions (which include items such as EPF, LIP, school fees, PPF, NSC, ELSS, home loan repayment, and so on)

80 CCD(1) and Section 80 CCD(1B) deductions (for NPS)

Section 80D deductions (for health insurance premiums),

Deductions for self-occupied home loan interest (Section 80EEA)

Setting off or carrying forward the loss on rented property.

Under the new scheme, any carried forward losses are offset against current income.

Senior Citizens Over the Age of 60:

Standard deductibility

Section 80TTB deduction for post office and bank interest of up to Rs. 50,000 Income Tax Slab Under The Old & New Tax Regimes

How Does the Tax Regime Work?

Individuals and HUFs are the only ones who can choose the new tax regime. There is no fixed formula for determining whether a particular tax regime will suit a specific type of individual. This is due to the fact that tax benefits differ from person to person. However, when considering the tax benefits that the majority of taxpayers must forego, the benefits of the existing regime outweigh the benefits of lower tax rates obtained by migrating to the new regime. This is best understood with the help of an example for both salaried and self-employed individuals who apply for udyam registration.

Illustration

The following can be deduced from the above illustration: – If the individual or HUF has a lot of exemptions and deductions available to him. He should stick with the old tax regime.

This is because if he chooses the new tax regime, he will have to forego all or most of them. If an individual or HUF has no or few exemptions and deductions, he must choose a new tax regime.

Allowances and deductions are now available under the new tax regime.

The following are the allowances and deductions that you can still claim under the current regime:

First, allowances to cover the cost of a tour/travel for work.

Second, transportation allowance for ‘divyang’ or specially-abled individuals. Furthermore, this is to commute between the place of residence and the place of employment.

Third, there is a transportation allowance for office duties.

Fourth, a daily allowance to cover daily expenses when working away from the office.

Fifth, there is a deduction for the employer’s contribution to the National Pension Account [Section 80CCD(2)].

Furthermore, deduction for additional employee costs [Section 80JJA]

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