Within the new tax regime, particular person taxpayers won’t be allowed to take advantage of sure exemptions and deductions obtainable within the Earnings Tax Act,1961. Though non-obligatory, the taxpayers will weigh the benefit of sticking to the outdated regime or to go for the brand new tax regime. Whereas most tax-saving investments corresponding to PPF, life insurance policy and so on will now not be obtainable to the taxpayers choosing the brand new regime, will they have the ability to avail the opposite tax advantages obtainable to them?
Part 80C profit on the premium paid in life insurance coverage insurance policies or the investments made in PPF won’t be obtainable within the new tax regime. Nonetheless, even when one opts for the brand new tax regime, the maturity proceeds of the life insurance coverage insurance policies won’t lose their current tax profit. “Underneath Part 10(10D) of the Earnings Tax Act, the sum assured and any bonus paid on maturity or give up of the life insurance coverage plan is tax-free. Maturity proceeds proceed to be exempt below Part 10(10D) even within the new regime,” says Harsh Jain, Co-founder, and COO, Groww.
Additionally, the curiosity earned and the maturity proceeds of the Public Provident Fund (PPF) will proceed to be tax-free. “The quantity obtained on the maturity of PPF Account and the yearly curiosity credited on the PPF stability one can nonetheless declare tax exemptions for revenue earned,” informs Archit Gupta, Founder, and CEO, ClearTax.
The gratuity as much as the restrict of Rs 20 lakh obtained by staff of the non-public sector and authorities sector can even stay tax-exempt. “You require a minimal of 5 years of eligibility and qualifying service to get the gratuity as a one-time lump sum profit,” says Jain. For workers who’ve obtained VRS cash, the identical will proceed to be tax-exempt below part 10(10C) of the I-T Act. “The VRS proceeds as much as Rs 5 lakh is tax-exempt. You need to obtain this when it comes to a scheme as voluntary separation,” says Jain.
As per the Act, the least of the next is exempt from tax:
1) The precise quantity obtained as per the rules i.e. least of the next
a) three months wage for every accomplished yr of providers
b) Wage on the time of retirement multiplied by No. of months of providers left for retirement; or
2) Rs. 5,00,000
One other necessary deduction nonetheless obtainable below the brand new tax regime would be the contributions in direction of NPS. Nonetheless, such contributions should be made by the employer in direction of worker’s NPS account. “Underneath the brand new regime, a taxpayer can declare a deduction for the employer’s contribution to NPS below part 80CCD(2) as much as 10 per cent of fundamental wage,” says Gupta.
Nonetheless, not staff shall be ready to take pleasure in such a profit. “In a case the place the employer doesn’t contribute to NPS, the worker can not declare any deduction below 80CCD(2). Therefore, the worker can not declare any deduction or exemption listed within the 70 deductions and exemptions withdrawn below the brand new tax regime. The staff could, nonetheless, select to go for the present regime and declare all tax deductions if the identical is helpful to them,” says Gupta.