Deductions & Exemptions in New Income Tax Regime FY 24-25

income tax deductions and exemptions under new regime

The Union Budget 2020 presented a new tax regime under Section 115BAC. This new tax regime features more tax slabs with reduced income tax rates. However, the Union Budget 2023 proposed a few changes to the new regime and also declared it the default slab from FY 2023-24.

Further, Budget 2024 revised the tax slabs and made other significant changes to the regime. Taxpayers need to forgo tax deductions and exemptions available in the old tax regime if they want to pay concessional taxes under the new tax regime.

The upcoming segment summarises the new tax regime deductions and exemptions that individuals can and cannot claim. So, interested readers can keep scrolling to know more about it.

Team Digit

Deductions & Exemptions Allowed
Deductions & Exemptions NOT Allowed
Comparison Between FY 2023-24 & FY 2024-25
Frequently Asked Questions

List of Tax Deductions and Exemptions Allowed Under the New Tax Regime for FY 2024-25 for Salaried Individuals & Pensioners

They can claim a standard deduction of ₹75,000 under the head 'Income from salaries' only on their salary/pension income. Family pensioners can avail of a standard deduction of ₹25,000 or 1/3rd of family pension, whichever is less, under the head 'Income from other sources.'

Given below is the new tax regime exemption list for both FY 2023-24 and FY 2024-25:

1. Section 80CCD (2)

Under Section 80CCD (2) of the Income-tax Act, 1961, a salaried individual can claim the benefit of standard deduction of ₹75,000 and any NPS (National Pension Scheme) contribution by the employer to employee's NPS account.

However, there are no tax benefits on the employee's own contribution. The maximum deduction amount that all private sector and government employees can claim is 14% of their salary.

2. Agniveer Corpus Fund

Any contribution made to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-Tax Act can be claimed as a deduction. This contribution can be made by the Agniveer or the Central Government to the Agniveer’s Seva Nidhi account.

3. Section 80JJAA

Under Section 80JJAA, up to 30% of additional employee cost will be deductible.

4. Home Loans

Deduction on the interest component of a home loan borrowed for a rented property.

5. NPS, PPF and EPF

Employers' contributions to their employee's NPS and EPF and superannuation accounts are applicable for tax exemption. However, the contributions made in a financial year to all the employee accounts should not be above ₹7.5 lakhs to qualify for the tax exemption.
Taxpayers receiving interest from their Employees' Provident Fund account can claim tax exemptions on that interest, given the latter is not above 9.5%.
The lump-sum maturity amount received from the NPS account is eligible for tax exemption, and the partial fund withdrawal from the Tier I NPS account is also exempted from taxation.
Interest or the maturity amount received from the PPF account is eligible for tax exemption.

6. Savings Schemes

According to Section 10(15)(i), taxpayers receiving interest on their Post Office Savings Account can claim exemptions up to ₹3,500 and ₹7,000 in the case of individual and joint accounts, respectively.
According to Section 10(10D), funds received from Life Insurance Company after maturity of the account are eligible for tax exemption.
Interests and maturity amounts received from the Sukanya Samriddhi Account are exempted from being taxed.

7. Gratuity

Non-government employees receiving gratuity from their employer can claim exemption up to ₹20 lakh on that gratuity amount. In the case of government employees, the entire gratuity received by them is exempted from being taxed.

8. Retirement

The leave encashment during retirement is eligible for tax exemption.
Monetary benefits received from employers for the cause of voluntary retirement are eligible for tax exemption. The maximum exemption limit is up to ₹5 lakh.
Education scholarships, retrenchment compensation, and monetary benefits for retirement cum death qualify for tax exemption.

9. Allowances by Employers

Travel allowances provided to disabled employees, conveyance allowance, allowances provided to cover the travel cost or transfer of an employee, perquisites, and daily allowances are eligible for tax exemption under this new tax regime.
Employers providing allowances to employees for performing official duties are exempt from being taxed.
If non-government employees receive a commuted pension, then 1/3rd of it qualifies for tax exemption if the employee receives gratuity. If employees do not receive gratuity, then ½ of commuted pensions will be exempted from tax.
Gifts received from employers, which do not exceed ₹5,000, are eligible for tax exemption.

List of Tax Deductions and Exemptions Not Allowed Under the New Tax Regime

Go through the following list of income tax new regime deductions and exemptions under the new tax regime, which eligible taxpayers CANNOT claim from April 1, 2023.

Tax Deductions and Exemptions Not Allowed for FY 2024-25

The Union Budget 2023 removed up to 70 exemptions and deductions from the new tax regime for individual taxpayers. Here is the list of some revised ones that taxpayers cannot claim.

1. Home Loans

Deduction on payment of interest and principal amount towards housing loans up to ₹1.5 lakhs under Sections 80C and 80EE/ 80EEA.

2. Section 80C

Investments made in Employees’ Provident Fund, life insurance premium and Public Provident Fund under Section 80C.

3. Section 80E

Interest paid on the student loan debt under Section 80E can no more be claimed for tax relief.

4. Charity

Donation or expenses in scientific research are not deductible.
Deductions under section 80G including National Defense Fund, Prime Minister’s National Relief Fund, The National Foundation for Communal Harmony, National/State Blood Transfusion Council.

5. Salary Deductions

House rent allowance, based on the rent payments and salary structure.
The professional tax of ₹2,500.
Leave travel allowance.
Deductions on professional tax and entertainment allowance (applicable for government employees).

6. Savings Account

Interest received from Savings Account under Section 80TTA and 80TTB (Interest on deposits to senior citizens are taxable.
Special allowances under Section 10(14).
Business professionals and owners in the Special Economic Zone cannot claim tax exemption under Section 10AA.

7. Home Loans

Deduction of the interest payment of home loan for self-occupied/ vacant property under Section 24(b).
Deduction of the interest payment up to ₹2,00,000 for the purchase/construction/ repair/reconstruction of house property under section 24(b).

8. Other Exemptions

Tax deduction under Section 35(1)(ii), 35(2AA), 32AD, 33AB, 35(1)(iii), 33ABA, 35(1)(ii), 35CCC(a), and 35AD of the IT Act.
Additional depreciation as specified under Section 32(ii) (a).
The option to adjust the unabsorbed depreciation of previous years.
Deductions as specified under Chapter VI-A such as 80IA, 80CCC, 80C, 80CCD, 80D, 80CCG, 80DDB, 80EE, 80E, 80EEA, 80DD, 80EEB, 80GG, 80IB, 80IAC, and 80IAB.
Minor child, helper allowances and allowances for children's education.

Taxpayers must note that there is an opportunity for them to choose between the old and new tax regimes to pay their taxes according to their convenience. So, if they choose to pay their taxes under the new tax regime, it is essential to go through the list of new regime deductions and exemptions. This will help them understand under which circumstances they can claim such exemptions and deductions and reduce their tax liability accordingly.

Comparison of Exemptions and Deductions Available for New Tax Regimes for FY 2023-24 and FY 2024-25

Taxpayers can go through the following table to get an overall idea of all the common exemptions and deductions available under both the tax regimes and for financial years 2023-24 and 2024-25.

Particulars	New Tax Regime for FY 2023-24	New Tax Regime for FY 2024-25
Rebate eligibility up to income level	₹7,00,000	₹7,00,000
Standard Deduction	₹50,000 for salaried people ₹15,000 for family pensioners	₹75,000 for salaried people ₹25,000 for family pensioners
Effective Tax-Free Salary income	₹7,50,000	₹7,75,000
Rebate u/s 87A	₹25,000	₹25,000
All contributions to Agniveer Corpus Fund under 80CCH	Yes	Yes
HRA Exemption	No	No
Leave Travel Allowance (LTA)	No	No
30% of additional employee cost (under Section 80JJAA)	No	No
Other allowances including food allowance of Rs 50/meal subject to 2 meals a day	No	No
Entertainment Allowance Deduction and Professional Tax	No	No
Perquisites for official purposes	Yes	Yes
Interest on Home Loan u/s 24b on self-occupied or vacant property	No	No
Interest on Home Loan u/s 24b on let-out property	Yes	Yes
Deduction u/s 80C (EPF, LIC, ELSS, PPF, FD, Children’s tuition fee, etc.)	No	No
Employee’s (own) contribution to NPS	No	No
Employer’s contribution to NPS	Yes (10% for private and 14% for public sector employees)	Yes (14% for all sector employees)
Medical insurance premium – 80D	No	No
Disabled Individual – 80U	No	No
Interest on education loan – 80E	No	No
Interest on Electric vehicle loan – 80EEB	No	No
Donation to Political party/trust etc. – 80G	No	No
Savings Bank Interest u/s 80TTA and 80TTB	No	No
Other Chapter VI-A deductions	No	No
Deduction on Family Pension Income	Yes	Yes
Gifts up to Rs 5,000	Yes	Yes
Exemption on voluntary retirement 10(10C)	Yes	Yes
Exemption on gratuity u/s 10(10)	Yes	Yes
Exemption on Leave encashment u/s 10(10AA)	Yes	Yes
Daily Allowance	Yes	Yes
Transport Allowance for a specially abled person	Yes	Yes
Conveyance Allowance	Yes	Yes

FAQs about the Deductions & Exemptions in New Tax Regime

All

Is standard deduction available under the new tax regime?

Salaried individuals can claim a standard deduction of ₹50,000 if they opt to pay taxes under the new tax regime. (source)

Can a taxpayer claim deduction on interest paid towards an education loan under the new tax regime?

No, taxpayers cannot claim a tax deduction on the interest paid towards an education loan if they choose to pay taxes under the new tax regime.

Can I claim Section 80D deduction under the new tax regime?

No, you cannot claim a deduction under Section 80D for payment of insurance premium if you opt for the new tax regime.

Are Section 80C exemptions allowed in new tax regime?

No, investments like PF and ELSS that come under 80C cannot be claimed as Section 80C is not available under the new regime.

What is the standard deduction limit for family pensioners under new regime?

Starting April 1, 2024, the standard deduction for family pensioners has been increased to ₹25,000 for FY 2024-25 under new regime.

Am I eligible for standard deduction in the new tax regime?

Yes, you get a standard deduction of ₹75,000 under the new tax regime, starting April 1, 2024.

How much rebate under new tax regime can I get?

You get a rebate of ₹25,000 under Section 87A if you opt for the new tax regime.

Can I claim NPS deduction under new tax regime?

Yes, under the new tax regime you can claim the NPS benefit only under Section 80CCD (2) but only on employer’s contribution to NPS, which is 14% of salary for all employees. However, no deduction is allowed for your (employee) own contribution to NPS.

How to reduce tax in a new regime?

To reduce tax liability under the new tax regime, you can invest in the limited options available for exemptions under new tax regime.

How much is the new tax regime exemption for interest earned on savings account?

Yes, for an individual (age of 60 years or less) taxpayer or HUF interest on your savings bank account is taxable under the head ‘income from other sources’ at the applicable tax slab rates.

Which exemptions and deductions under new regime are not allowed for business income?

Additional depreciation under Section 32
Investment allowance under Section 32AD
Sector-specific business deductions under Section 33AB and 33ABA
Expenditure on scientific research under Section 35
Capital expenditure under Section 35AD
Exemption under Section 10AA