Income Tax: Exemptions Under Old and New Tax Regimes

In FY 2023, the new tax regime became the default for all taxpayers. This means that unless you choose to opt-out, you will file your income tax return (ITR) under the new regime. The main benefit of the new regime is lower tax rates, but it does not allow several deductions available under the old regime.

To determine which tax regime is better for you, you can use an Income Tax Calculator. Below is a comparison of exemptions available under both regimes.

Exemptions Under the Old Tax Regime

1. House Rent Allowance (HRA)
   • Tax exemption is available on HRA for salaried employees who live in rented accommodation.
2. Section 80C Deductions (Limit: ₹1.5 lakh per financial year)
   • Investments in schemes like:
     • Equity Linked Saving Schemes (ELSS)
     • Public Provident Fund (PPF)
     • Life insurance premiums
     • Principal repayment of home loans
     • Sukanya Samriddhi Yojana (SSY)
     • National Savings Certificate (NSC)
     • Senior Citizens Savings Scheme
3. Section 80D: Health Insurance Premium
   • Deduction of up to ₹25,000 for health insurance premiums.
4. Section 80DD: Medical Expenses for a Dependent with Disability
   • Deduction of up to ₹75,000 for medical treatment, training, and rehabilitation.
5. Section 80CCD (1): NPS Contribution
   • Deduction for contributions made to the National Pension System (NPS).
6. Section 80G: Donations to Charity
   • Tax deduction is available for donations made to approved charitable organisations.
7. Standard Deduction
   • Flat deduction of ₹50,000 from salary income.

Exemptions Under the New Tax Regime

1. Standard Deduction
   • Higher standard deduction of ₹75,000 from salary income.
2. Employer’s NPS Contribution (Section 80CCCD (2))
   • The deduction is available for employer contributions to an employee’s NPS account.
3. Agnipath Scheme Exemption (Section 80CCH)
   • Tax exemption on income earned under the Agnipath recruitment scheme for the Indian Armed Forces.

By comparing these exemptions, you can decide which tax regime is more beneficial for you.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks, read all the related documents carefully before investing.