For FY 2020-21, Salaried individuals, who have no business income, will have to choose between the existing and new tax regimes every financial year, as per their convenience. The new income tax rates are lower compare to old tax rate. However, anyone opting for the new tax regime will have to forego most of the deductions available under the old tax regime (prevailing option) such as Section 80C, 80D, 80E, 80TTA or 80 TTB, Tax rebate u/s 87A (Up to Rs.12500 on taxable income up to Rs.5 lakh) and tax exemptions such as HRA, LTA, exemption under 10(15)(i) etc. In addition to that, the individual who opt for new tax regime are not eligible for deduction on home loan interest up to Rs.2 lakh and additional deduction on Home Loan interest on affordable houses u/s 80EEA – Up to Rs.1.5 lakh. They are also not eligible for deduction on Auto Loan interest for purchase of electric vehicle u/s 80EEB -Up to Rs.1.5 lakh. Other common deductions tax payer has to give up under new tax rule is furnished at the bottom of this post.
However, the government left unchanged some deductions available on some income also in the new tax regime which is applicable from April 1, 2020.
Here are the details of incomes that are exempted from income tax even in the event you opt for new tax regime.
In order to know which tax regime is beneficial for an individual, it is important to know how much will be the tax liability in both the regimes.
Tax slabs of new tax regime are as under.
Those earning up to Rs.5 lakhs are exempt from paying taxes
10% tax for everyone earning Rs.5-7.5 lakh against the old tax rate 20%
15% tax for everyone earning Rs.7.5- 10 lakhs against the old tax rate 20%
20% tax for everyone earning Rs.10-12.5 lakhs against the old tax rate 30%
25% tax for everyone earning Rs.12.5-15 lakhs against the old tax rate 30%
30% tax for income above Rs.15 lakh. (Those earning more than Rs.15 lakhs get no exemptions)
The list of other common exemptions and deductions that a taxpayer will have to forego while choosing the new tax regime.
Leave Travel Allowance (LTA), – House Rent Allowance (HRA), – Conveyance, – Daily expenses in the course of employment, – Relocation allowance, – Helper allowance, – Children education allowance, – Other special allowances [Section 10(14)], – Professional tax, – Interest on housing loan (Section 24), Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA),
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