Details of Income Tax rebate and deductions available both under New and Old tax regimes

Updated on 02.02.2023

For the financial year 2023-24, salaried individuals, who have no business income, have the option to choose between the existing and new tax regimes. The new income tax slab rates are lower compared to the 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.  For the taxpayer who opts for the old tax rule for FY 2023-24, income tax slabs remain the same as the previous financial year 2022-23. The details of deductions/rebates available under the old tax regime are available below in ANNEXURE-1.

The taxpayers who opt for a  New regime are still eligible to claim certain tax exemptions.  Here are the details of incomes that are as well exempted from income tax in the event you opt for the new tax regime.

•  In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced that the rebate under Section 87A will be hiked from Rs.5 Lakh to Rs.7 Lakh under the new tax regime. It means a tax rebate of Rs 25,000 under section 87A is available under the new tax regime (applicable for FY 2023-24) and persons in the new tax regime, with income up to Rs.7 Lakh will not have to pay any tax.
•  The Standard deduction of Rs 50,000 is allowed to salaried individuals/pensioners and deductions from family pensions up to Rs.15000 are allowed in the budget 2023.  Rebate under Section 17(2)(viii) is allowed for both types of taxpayers.  For the salaried class and pensioners, a standard deduction of Rs.50000/- is allowed if the total taxable income does not exceed Rs.5 lakh and Rs.7 lakhs respectively for the old-tax and new tax regimes.
• Post office savings account interest up to Rs.3,500 for single accounts and up to Rs.7,000 for joint accounts under 10(15)(i) of the Income Tax Act. The balance interest amount if any needs to be included in the gross income. Note: Individuals opting for the new tax regime are not eligible to claim deduction under section 80 TTA or 80TTB but exemption under 10(15)(i)  is available to them in the new tax regime as well.
• Interest received from EPF & PPF:  EPF or PPF is one investment vehicle that falls under the Exempt-Exempt-Exempt (EEE) category. In the new tax regime, the annual contribution made to PPF accounts is not eligible for deduction under sec 80c. However, interest earned on PPF contributions or maturity proceeds from PPF is exempt from tax in the new tax structure as well.
• The amount received from life insurance policy maturity: U/S 10(10D) of Income Tax Act 1961 maturity proceeds received from the life insurance policy are exempt from capital gain tax. This exemption is still available in the new tax regime.
• Gratuity received from employer: For private-sector employees, gratuity up to Rs.20 lakh in a lifetime is exempt from income tax even in the new tax regime. Nevertheless, gratuity received due to the death of a private sector employee will be tax-exempt irrespective of any amount.  In the case of Government employees, gratuity is exempt from tax irrespective of any amount.
• Employer’s contribution to EPF/NPS account:  Contribution made by the employer towards the employee’s EPF, NPS, and to any other superannuation fund will be exempt from tax up to Rs.7.5 lakh in a year. Any contribution over Rs.7.5 lakhs per year or interest or gains earned from the excess contribution by the employer over Rs.7.5 lakh per year on EPF, NPS, and to any other superannuation fund will be subject to tax in the hands of the employee

ANNEXURE- I

 Here are the details of incomes that are exempted from income tax in the event you opt for the old tax regime.

1. Section 17(2)(viii): For the salaried class and pensioners, a standard deduction of Rs.50000/- is allowed u/s17(2)(viii) of the Income-tax Act, 1961.
2. Section 80 C:      Individuals are eligible for the tax rebate on their investments u/s 80 (C) of the IT Act to the maximum limit of Rs. 150000.00 (Rupees one lakh and fifty thousand) in a financial year (applicable for FY 2015-2016). Contribution to EPF, NPS, PPF, Senior Citizen Savings Scheme, investments in NSC,/ Equity Linked Saving Schemes (ELSS), Unit Linked Insurance Policies (ULIPs), Sukanya Samriddhi Scheme, Tax Saving term deposits of banks, a premium paid on Life Insurance policy, tuition fee for maximum two children (fees for private tuition/ coaching classes are not eligible) and repayment of Housing Loan,  are the investments eligible for tax rebate under Sec.80 C of IT act.

3). Section 80CCC: Contribution to certain pension funds like the Annuity plan of LIC and other insurers.

4). Section 80 CCD (1A): The deduction under section CCD (1A) is available to both salaried and non-salaried individuals who contribute NPS scheme to the extent of Rs.150000/- (Rupees one lakh and fifty thousand). However, the maximum amount allowed as a deduction is 10% of salary in a financial year and in the case of non-salaried individuals 10% of Gross total income in a financial year.

5). Section 80 CCD (1B): Deduction towards contribution to New Pension Scheme by the employee. In the budget 2015, a contribution of Rs.50000/- to NPS qualifies for a tax rebate in addition to Rs.150000/- u/s.80CCE.

6). Section 80CCE: Total limit of deduction eligible u/s -80C, u/s 80CCC   80 CCD (1) is Rs.150000/-(Rupees one lakh and fifty). In the budget 2015, an additional rebate of Rs.50000/- allowed for the contribution to NPS (u/s. 80CCD (1B) announced by the Finance Minister. Hence, the total limit under 80CCE for the FY 2015-16 is Rs.200000/-.

7). Section 80D:       Deduction under this section is available to an individual or a HUF. A deduction of Rs. 25,000 can be claimed for insurance of self, spouse, and dependent children. An additional deduction for the insurance of parents is available to the extent of Rs 25,000 if they are less than 60 years of age or Rs 50,000/- if parents are more than 60 years old. In case, a taxpayer’s age and parents’ age is 60 years or above, the maximum deduction available under this section is to the extent of Rs. 100,000. The amount spent on preventive health check-ups (maximum of Rs.5000/-.) is subsumed under this limit. Payment for preventive health check-ups is the cost incurred for disease prevention (diagnosis), as opposed to disease treatment like a master check-up, etc.).

8). Section 80 DD: Disability-related tax benefit in case of the dependent spouse, child, parent, or sibling who is disabled. A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed.  The full amount of deduction will be allowed, without insisting on bills/insurance premiums paid by the income tax office.[For conditions for the assessment of partial or full disability, read the paragraph under sec. 80 U]

9). Section 80DDB:  Tax rebate on medical treatment expenditure for treatment of specified diseases like cancer, or AIDS for self and dependents, the deduction allowed up to Rs.40000/-.

From  FY 2018-’19 onwards increase in the deduction limit for medical expenditure for certain critical illnesses increased to Rs.1 lakh for all senior citizens above 60 years under section 80 DDB. (which is at present Rs.60000/- for senior citizen & Rs.80000/-for very senior citizen).

10). Section 80E: An individual can claim an income tax deduction for interest paid on an education loan availed for the self, spouse, or his/her children u/s 80E of the IT Act. The guardian appointed by the Court for a minor student is also eligible for tax deduction under the same section. One more benefit is that no upper limit for claiming a deduction either on the amount of interest paid or the rate of interest paid. The deduction can be claimed for up to 8 years or closure of the loan whichever is earlier. If the interest is paid during the moratorium period, the time limit of 8 years begins from the date of the first repayment of interest on the loan. It is important to note that the tax benefit is restricted for education loans availed from the bank, notified financial or charitable institutions. In other words, the education loan availed from the employer, family, and friends does not come u/s 80E. Education loans availed for studies abroad are also eligible for tax deduction u/s 80E.

11). Section 80 EE: An additional exemption of Rs.50000/- per annum towards interest paid by the first-time house buyers with effect from April 1, 2016, available u/s.80EE. The Housing loans up to Rs.35 lakh were sanctioned by a bank in the financial year 2016-17 and the value of the property purchased under the loan below Rs.50 lakh is eligible for the deduction. (Announced by the Finance Minister in his budget speech on February 29, 2016).

12) Section 80EEA:  A new section 80EEA in the Income Tax Act is proposed in the budget of 2019. This section provides a deduction in respect of interest up to Rs 1.5 lakh on a loan taken for residential house property from any financial institution subject to the following conditions:
(i) the loan has been sanctioned by a financial institution during the period beginning on April 1, 2019, to March 31, 2020;
(ii) the stamp duty value of the house property does not exceed Rs 45 lakh;
(iii) the assessee does not own any residential house property on the date of sanction of loan. This will result in enhanced interest reduction of up to ₹3.5 lakhs on loans for self-occupied properties of affordable homes.

13). Section 80EEE: First-time home buyers (the person who does not already own a house property in his name),   who have availed a housing loan of Rs.25 lakhs or below on or after 01.04.2013, can claim an additional tax deduction of Rs.100000.00 (Rupees one lakh) on interest paid on that loan under section 80EEE subject to the condition that the value of the residential property should not exceed Rs.40 lakh (Rupees forty lakh). If the interest paid is less than Rs.100000.00 (one lakh), in the first year, the unclaimed deduction can be utilised in the subsequent year. (It is important to note that a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income is separately allowed under section 24.

14). Section 80G: Tax rebate can be claimed on specific donations to make prescribed funds and institutions. The tax benefit u/s 80G is eligible for the amount of donation within 10% of gross income. Donations over 10% of gross income in a financial year are not eligible for tax exemption. It is essential to make cash or cheque payments towards the donation to be eligible for tax exemption.

15). Section 80GG: The individual tax assessees who do not get House Rent Allowance from their employers were eligible for the rent paid on their house up to a maximum limit of Rs.2000/- per month (Rs.24000/-per annum). With effect from April 1, 2016, the above limit of deduction allowed is increased from Rs.24000/- p.a to Rs.60000/- p.a.

16). Section 80 U:    Disability-related tax benefit to an individual: A deduction of Rs.75000/- for partial disability and Rs.125000/- for severe disability is allowed in FY 2015-16.  The full amount of deduction will be allowed irrespective of the amount of the expenses incurred or the insurance premium paid. An individual suffering from a disability himself gets tax benefits under Section 80U, while an individual gets tax benefits under Section 80DD if any dependent family member of the individual is suffering from a disability.

[Every individual claiming deduction u/s 80DD or 80U shall produce a copy of the medical certificate issued by the appropriate authority in the form and manner as may be prescribed along with the return of income u/s.139 of the IT act. Where the condition of disability requires the reassessment of its extent after a period is stipulated in the certificate, deductions are allowed after the expiry period mentioned in the certificate only after the new certificate is obtained. The disabled means above 40% of disabilities to a person ( above 80% is considered as severe disability)  due to diseases like blindness, low vision, leprosy-cured, hearing impairment, locomotor disability, mental retardation, mental illness, Autism, cerebral palsy, etc.]

17). Section 80 TTA: A rebate of Rs.10000 available u/s 80 TTA on interest earned only on an SB account held in a bank, co-operative bank, or a post office from the gross total income of individual taxpayer or a HUF. With the introduction of 80TTB exclusively for senior citizens, deductions under section 80TTA are not available to senior citizens.

18) Section 80 TTB:   From the Financial year 2018-19, Senior citizens who have received deposit interest (including SB and  Recurring Deposits interest)  up to Rs.50000/- in a financial year are exempted from tax under Sec.80TTB. However, Senior Citizens whose aggregate annual deposit interest income exceeds Rs 50,000/- need to pay Income tax for the deposit interest income over and above Rs 50,000/-. Further, aggregate annual deposit interest income up to Rs 50,000/- for Senior Citizens is also exempted from TDS and they need not submit form 15 H for the annual deposit interest income up to  Rs 50,000/-. With the introduction of Sec 80 TTB, Sec 80 TTA will not apply to Senior Citizens –ie SB interest exemption of Rs 10,000/-  is not separately available to senior citizens. Exemption under Section 80 TTA is available to others who are not Senior  Citizens.

19)Section 10(13): The amount of HRA exemption is deductible from the total income before arriving at a taxable income under section 10(13). The exemption for HRA benefit is the minimum of;

A). Actual House Rent received from the employer

B). Actual House rent paid to the landlord minus 10% of basic salary*

C). 50% of the employee’s basic salary if he/she lives in Metro cities or 40%of basic salary* in non-metro areas.

 *Basic Salary is inclusive of DA (wherever commission received by the employee based on a fixed percentage of turnover achieved by the employee that income is also to be included in basic salary).

The deduction will be available only for the period of occupying the rented house, not for the entire year.  At least two rent receipts are to be produced as evidence of rent- paid, one rent receipt at the beginning of the financial year, and another receipt at the end of the financial year. The rent-paid receipts should be duly on the revenue stamp by the landlord. People who pay rent less than Rs.3000/-per month need not produce rent receipts. Section 87(A)

19). Section 87(A): An assessee whose taxable income is less than Rs.5 lakh was eligible for a tax credit up to Rs.12500. This means, if your total tax payable is less than Rs.5 lakh then you will not have to pay any tax. This rebate of Rs.12500 is now available to new tax regime taxpayers up to taxable income of Rs.7 lakh.

20). Section 24:         In addition to the rebate on repayment of the housing loan principal amount under section 80 C, the interest portion paid on the housing loan offers a deduction up to Rs.200000.00 (Rupees two lakh) on taxable income separately under section 24.

 If the house is not self-occupied:  The entire amount of interest paid on the housing loan is eligible for deduction under section 24 for the FY 2016-17. For the year 2017-18, the claim under this head is restricted to Rs.2 lakh.

Section 24: The method of computation of Income/Loss from House property under Sec 24(If the house is not self-occupied): In the case of non-self-occupied property, the interest paid is reduced from the rent received for computation of Income from House Property. In some cases, the Interest paid may be more than the Rent earned which will result in a loss from House Property. This Loss is allowed to be a set-off with Income from any other head.

Net Annual Value (Actual rent or expected rent whichever is higher) minus [Muncipal tax and local taxes paid + Statutory deduction @30% + Interest on borrowed capital]= Income chargeable under head house property. From the Financial Year 2017-18 onwards, a loss of a maximum of Rs. 2 Lakhs only is allowed to be set off under section 24 even for the house which is not self-occupied.

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