The new tax regime comes up with several benefits for taxpayers, even with the lack of deductions. Some simple steps towards tax planning can also enhance benefits under the new tax regime, which features lower tax slabs.
The new income tax regime got a fresh makeover in the Union Budget 2023. (Photo: Pixabay)
The new income tax regime, which got a massive makeover in Budget 2023, could see more takers this year with an enhanced tax rebate limit and lower tax slabs.
While the government has sweetened the new tax regime significantly, it still does not offer 80 odd deductions that can be claimed under the old income tax regime.
Even then, the new tax regime -- which, while being optional, has become the default regime for all taxpayers -- has brought in a number of sweeping reforms that could significantly increase its adoption among taxpayers.
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Also Read: ITR filing: Why salaried individuals should not delay selecting preferred tax regime
Benefits under new income tax regime
IndiaToday.in got in touch with Abhishek Soni, co-founder and CEO of Tax2win, to understand how taxpayers can increase tax savings under the new regime.
He first highlighted that the new income tax regime received a number of upgrades in the budget, including increased basic exemption limit, standard deduction of Rs 50,000, hiked rebate limit and more.
While this is technically not a deduction that can be claimed, the basic exemption limit under the new tax regime has been raised to Rs 3 lakh from the existing Rs 2.5 lakh.
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Taxpayers will get a standard deduction of Rs 50,000 from their total gross salary income. In addition, family pensioners opting for the new tax regime can claim a standard deduction of Rs 15,000 from their pension income.
Soni highlighted that the rebate under section 87A has been hiked to Rs 7 lakh from Rs 5 lakh under the new tax regime. The rebate benefit will be up to Rs 25,000, provided income doesn't exceed the limit of 7 lakh.
Technically, anyone who has an income of Rs 7.5 lakh or less per annum does not have to pay any tax, since they can claim a standard deduction of Rs 50,000 on their gross income.
Also Read | How much income tax do you pay now under new tax regime? Quick guide
Deductions under new tax regime
But is there a way you can save more tax under the new tax regime? While the aim of the new tax regime is to offer lower upfront tax slabs in lieu of deductions, there are some areas where it allows taxpayers to claim additional tax benefits.
Abhishek Soni said, “Taxpayers can claim a deduction for interest paid on housing loans taken for a rented-out property under Section 24(b) of the Income Tax Act in the new tax regime.”
“The deduction for interest paid on housing loans taken for a rented-out property under Section 24(b) in the new tax regime is beneficial up to the amount of rental income received by the taxpayer,” he added.
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However, if the interest paid on the housing loan exceeds the rental income received, then the excess amount cannot be set off against any other head of income under the new tax regime, Soni explained.
Taxpayers can also claim the benefit of employer contributions to the National Pension System (NPS) account under Section 80CCD (2) of the Income Tax Act.
“This deduction is restricted to the employer's contribution to NPS made for the employee's benefit, up to 10% of the employee's salary, including Basic Pay and Dearness Allowance,” Soni said.
Soni further highlighted that taxpayers can also claim exemptions on voluntary retirement, gratuity and leave encashment under the new regime.
The new tax regime comes up with several benefits for taxpayers, even with the lack of deductions. Some simple steps towards tax planning can also enhance benefits under the new tax regime, which features lower tax slabs.
While tax filing under the new regime is pretty straightforward, individuals can simply ask their employer to allocate a portion of their income towards reimbursem*nts.
This could include allowances for conveyance, phone bills, food coupons, gifts from employers, allowances for official duties and more.
Published By:
Dev Goswami
Published On:
Apr 14, 2023
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