Complete List of Tax Deductions & Exemptions Under the New Tax 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, taxpayers need to forgo tax deductions and exemptions available in the old tax regime.

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

List of Exemptions & Deductions Allowed Under New Tax Regime

Go through the following list of deductions and exemptions under the new tax regime which taxpayers can claim to reduce their tax liabilities:

According to Section 10(15)(i), taxpayers receiving interest on their Post Savings Account can claim exemptions up to ₹ 3,500 and ₹ 7,000 in the case of individual and joint accounts, respectively.
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.
According to Section 10(10D), funds received from Life Insurance Company after maturity of the account are eligible for tax exemption.
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 lakh 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%.
Interest or the maturity amount received from the PPF account is eligible for tax exemption.
Interests and maturity amounts received from the Sukanya Samriddhi Account are exempted from being taxed.
The lump-sum maturity amount received from the NPS account is eligible for tax exemption. Moreover, partial fund withdrawal from the Tier I NPS account is exempted from taxation.
Gifts received from employers, which should not exceed ₹ 5,000, are eligible for tax exemption.
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.
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.
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.
Deduction on the interest component of a home loan borrowed for a rented property qualifies for a tax deduction.

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

Here is the list of exemptions and deductions that taxpayers cannot claim under the new tax regime:

Standard deduction of ₹ 50,000 (applicable for salaried taxpayers)
House rent allowance, based on the rent payments and salary structure
The professional tax of ₹ 2,500
Leave travel allowance
Deductions on interest received from Savings Account under Section 80TTB and 80TTA
Deductions on professional tax and entertainment allowance (applicable for government employees)
Deduction of ₹ 15,000 from family pension as specified under Section 57 clause (ii) (a)
Maximum deduction of ₹ 2,00,000 on interest payable towards a housing loan for vacant or self-occupied property
Special allowances under Section 10(14), except for the one mentioned above
Business professionals and owners in the Special Economic Zone cannot claim tax exemption under Section 10AA.
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, 80G, 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 deductions and exemptions under the new tax regime. This will help them understand under which circumstances they can claim such exemptions and deductions and reduce their tax liability accordingly.

Frequently Asked Questions

✓ Is income from agricultural farming eligible for tax exemption under the new tax regime?

Yes, income arising from agricultural farming is eligible for tax exemption under the new tax regime.

✓ Do rebates under Section 87A qualify for tax exemptions under the new tax regime?

The new tax regime focuses on eliminating specific tax deductions and exemptions. Therefore, taxpayers can claim a rebate under Section 87A whether they select a new or old tax regime.