An individual taxpayer thinking of opting for the new tax regime would have to forgo 70 tax exemptions and deductions.
Some deductions that will not be available are as under:
- u/s 80C for a maximum amount of Rs 1.5 lakh can be claimed by investing in some specified products,
- u/s 80D for health insurance premium paid by individuals,
- u/s 80TTA for a deduction on savings account interest earned from a bank or post office etc.
List of incomes that are exempted from income tax under the new tax regime as proposed in Budget 2020:
1. Interest received on post office savings account balances
Interest received on post office savings account balance is exempted under section 10(15)(i) of the Income-tax Act up to a certain limit. Interest received from post office savings account was exempted from tax via a notification dated June 3, 2011, for up to Rs 3,500 in case of individual accounts and Rs 7,000 in case of joint accounts per financial year.
2. Gratuity received from your employer
If you receive gratuity from your employer, then the amount received by you will be exempt from tax as per specified limits. An employee is eligible to receive gratuity if he/she has worked for more than five years in an organisation.
3. Amount received on maturity of life insurance
The tax benefit on paying life insurance premiums to lower the tax liability under section 80C is not available in the new income tax slab structure. “However, maturity proceeds received from a life insurance company continues to be exempted from tax under section 10(10D) in the new tax regime,” says Wadhwa.
4. Employer’s contribution to your EPF/NPS account
As per the Budget proposals, from FY 2020-21, contributions made by the employer to the employee’s EPF, NPS and/or superannuation account will be exempted from tax provided the annual contribution to all the accounts (with reference to the employee) does not exceed Rs 7.5 lakh in a financial year.
5. Interest received up to 9.5 per cent per annum from EPF
The interest received from EPF account continues to be exempted from tax in the new tax regime as well, provided it does not exceed 9.5 per cent.
6. Interest and maturity amount received from PPF
Under the new tax regime, an individual cannot avail tax benefit under section 80C on the contribution made to his/her PPF account. However, any interest accrued or maturity amount received from the PPF account continues to be tax-exempt in the new tax structure as well.
7. Interest and payment received from Sukanya Samriddhi Yojana
Individuals investing in Sukanya Samriddhi Yojana for their girl child will continue to receive tax-exempted interest in the account under the new tax regime. Further, the payment proceeds received from the scheme’s account will remain exempted from tax. However, investment under this scheme will not be available for tax-break under section 80C under the new tax regime.
8. Payment received from NPS account
The lump-sum amount received at the time of maturity of one’s NPS account will remain tax-free in the new tax regime as well.
9. Gift from employee
Through various tax exemptions and deductions received from the employer have been removed under the new tax regime, no changes have been made in the taxation of a gift received from an employer.
10. Food coupons
The explanatory memorandum to the budget document states: “It is also proposed to amend rule 3 of the Rules subsequently, so as to remove the exemption in respect of free food and beverage through vouchers provided to the employee, being the person exercising option under the proposed section, by the employer.”