February 18, 2020

New Tax Regime – Complete list of exemptions and deductions disallowed

Do you know under the New Tax Regime, which are the exemptions or deductions not allowed? Let us discuss the New Tax Regime – List of exemptions and deductions disallowed in detail.

During the Budget 2020, Finance Minister introduced the new tax regime. However, an option has been given to pay tax at lower rates, if you fulfill certain conditions. One such condition is you are not eligible for a few exemptions and deduction.

Below is the new tax regime tax slabs applicable:-

Latest Income Tax Slab Rates for FY 2020-21 AY 2021-22

New Tax Regime – Complete list of exemptions and deductions not allowed

Let us now look into the exemptions and deductions not allowed under the Sec.115BAC,

  1. Leave travel concession (LTC) applicable for salaried employee
  2. House Rent Allowance (HRA) applicable for salaried employee
  3. The standard deduction applicable for persons in employment against salary income cannot be claimed when the taxpayer who opts for section 115BAC.
  4. Deduction of entertainment allowance and professional tax.
  5. Deductions under Sec.80C like Life Insurance Premium, Sum Paid towards deferred annuity plans, your contributions towards EPF, PPF, Superannuation Scheme, SSY, NSC, ELSS Mutual Funds, Tuition Fees, Principal Payment towards your home loan, Tax Saving FDs, SCSS, Contribution to NPS Tier 2 by Central Government Employees, NPS contribution by you (Under Sec.80CCD(1) and Sec.80CCD(1B). But employer contribution under Sec.80CCD(2) will continue to be eligible for deduction.
  6. Deduction under Sec.80D- Amount paid (in any mode other than cash) by an individual or HUF to LIC or other insurers to effect or keep in force an insurance on the health of a specified person.
  7. Section 80DD – Deduction in respect of maintenance including medical treatment of a dependant who is a person with a disability.
  8. Section 80DDB – Expenses actually paid for medical treatment of specified diseases and ailments.
  9. Section 80E – Amount paid out of income chargeable to tax by way of payment of interest on loan taken from financial institution/approved charitable institution for pursuing higher education
  10. Section 80EE – Interest payable on loan taken up to Rs. 35 lakhs by the taxpayer from any financial institution, sanctioned during the FY 2016-17, for the purpose of acquisition of a residential house property whose value doesn’t exceed Rs. 50 lakhs
  11. Section 80EEA – Interest payable on loan taken by an individual, who is not eligible to claim deduction under section 80EE, from any financial institution during the period beginning from 01/04/2019 ending on 31/03/2020 for the purpose of acquisition of a residential house property whose stamp duty value doesn’t exceed Rs. 45 lakhs
  12. Section 80EEB – Interest payable on loan taken by an individual from any financial institution during the period beginning from 01/04/2019 and ending on 31/03/2023 to purchase an electric vehicle.
  13. Section 80GG – Rent paid for furnished/unfurnished residential accommodation (Subject to certain conditions).
  14. Section 80G- Deduction in respect of donations to certain funds, charitable institutions etc
  15. Section 80GGA- Deduction in respect of certain donations for scientific research or rural development
  16. Section 80GGC- Deduction in respect of contributions given by any person to political parties
  17. Section 80JJA- Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste
  18. Section 80QQB- Royalty income of authors of a certain specified category of books other than text books.
  19. Section 80RRB- Royalty in respect of patents registered on or after 01.04.2003 (subject to certain conditions)
  20. Section 80TTA- Interest on deposits in savings account with a banking company, a post office, co-operative society engaged in the banking business, etc. (Subject to certain conditions)
  21. Section 80TTB- Interest on deposits with a banking company, a post office, co-operative society engaged in the banking business, etc. (Subject to certain conditions)- for senior citizens
  22. Section 80U- A resident individual who, at any time during the previous year, is certified by the medical authority to be a person with a disability
  23. Section 24(b) – In the case of personal taxpayers who have self-occupied the property for own residence or who cannot occupy the property owing to employment, business or profession carried on at any other place he has to reside at that other place in a building not belonging to him, the annual value of the property shall be taken to be `nil’. However, interest on money borrowed is deductible up to a maximum of Rs.2 lakhs.
  24. Allowances (Under Sec.10(14)) like Travelling/Transfer Allowance, Conveyance Allowance, Helper Allowance, Research Allowance or Uniform Allowance
  25. Any allowance granted to meet the expenditure incurred on a helper where such helper is engaged for the performance of the duties of an office or employment of profit;
  26. Any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;
  27. Any allowance granted to meet the expenditure incurred on the purchase or maintenance of uniform for wear during the performance of the duties of an office or employment of profit.
  28. Any Special Compensatory Allowance in the nature of [Special Compensatory (Hilly Areas) Allowance] or High Altitude Allowance or Uncongenial Climate Allowance or Snow Bound Area Allowance or Avalanche Allowance
  29. Any Special Compensatory Allowance in the nature of Border Area Allowance, Remote Locality Allowance or Difficult Area Allowance or Disturbed Area Allowance
  30. Special Compensatory (Tribal Areas/Schedule Areas/Agency Areas) Allowance
  31. Any allowance granted to an employee working in any transport system to meet his personal expenditure during his duty performed in the course of running of such transport from one place to another place provided that such employee is not in receipt of daily allowance
  32. Children Education Allowance
  33. Any allowance granted to an employee to meet the hostel expenditure on his child
  34. Compensatory Field Area Allowance
  35. Compensatory Modified Field Area Allowance
  36. Any special allowance in the nature of counter-insurgency allowance granted to the members of armed forces operating in areas away from their permanent locations
  37. Underground Allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines
  38. Any special allowance in the nature of high altitude (uncongenial climate) allowance granted to the member of the armed forces operating in high altitude areas
  39. Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance
  40. Any special allowance granted to the member of the armed forces in the nature of Island (duty) allowance
  41. Section 10(17) – In the case of persons being Member of Parliament or any State Legislature or of any committee thereof any income by way of daily allowance or any allowance shall not be eligible for exemption when such person opts for section 115BAC.
  42. Section 10(32) – In case, the income of minors is clubbed with the income of the parent under section 64(1A), a sum of Rs.1500 is deducted by virtue of section 10(32). This deduction cannot be claimed by the parent who opts for section 115BAC.
  43. The standard deduction applicable for persons in employment against salary income cannot be claimed when the taxpayer who opts for section 115BAC.
  44. Deduction of entertainment allowance and professional tax.

List of tax deductions and allowances retained in the New Tax regime (section 115BAC)

Allowanes retained under Sec.115BAC are as below:-

  • Transport Allowance granted to a divyang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty.
  • Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
  • Any Allowance granted to meet the cost of travel on tour or on transfer;
  • Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

List of deductions allowed under new tax regime are as below:-

  1. Retirement benefits, gratuity etc.
  2. commutation of pension
  3. leave encashment on retirement
  4. retrenchment compensation
  5. VRS benefits
  6. EPFO: Employer contribution
  7. NPS withdrawal benefits
  8. Education scholarships
  9. Payments of awards instituted in public interest

Refer the latest tax related posts of the Budget 2020:-

19 Comments

  1. Is car maintenance and fuel reimbursement exempted under new tax regime. What about motor car perquisites under new regime

    Reply
  2. Sir,
    I want to know whether fuel reimbursement exempted in nex tax regime or not

    Reply
    • Dear Rout,
      Refer the list as it is considered as commuting expenses.

      Reply
  3. DEAR BASAVARAJ,

    THANKS FOR YOUR LUCID EXPLANATION OF SECTION 115BAC.

    MY DOUBTS:

    1. IS BENEFIT U/S 87A AVAILABLE IN NEW REGIME ?

    2. IS PPF INTEREST FOR THE YEAR TO BE INCLUDED IN INCOME IN NEW REGIME ?

    3. IS THERE ONLY ONE TAX SLAB + RATES FOR ALL, GENERAL, SENIOR CITIZEN, AND SUPER-SENIOR CITIZEN ASSESSEES IN NEW REGIME ?

    THANK YOU.

    RAJU S. , FCA (RETD.)

    Reply
  4. Sir,
    I have inquired earlier in one of your blogs that there is no column for filing LTCG from Debt funds in ITR 2 for the AY 2019-20. I do not know about ITR 2 for AY 2020-21. How to show this LTCG from Debt Funds in ITR 2. Pl carify.

    Reply
  5. Dear Basavaraj,

    The article clearly shows exemptions and deductions available in New Tax Regime. Thanks for publishing the article.

    Also i wanted know is there any change in “Income from other sources” in New Tax Regime ? will existing sections will continue in New Tax Regime

    Kindly clarify

    Thanks in Advance

    Subramanya

    Reply
    • Dear Subramanya,
      There is no change in sections with respect to “Income from Other Sources”.

      Reply
  6. 1.Whether Ex gratia as VRS benefits is taxable under new regime?
    2.If taxable whether to go for 10C or section 89 for saving tax?

    Reply
    • Dear Prasanna,
      Please refer above post properly. I have already cleared it with respect to VRS.

      Reply
      • You mentioned it under list of deductions allowed at sl no 5 not understood also pls clear my point 2 regarding 10C and 89

        Thanks

        Reply
  7. Will company car lease tax benefits be included in new tax ?

    Reply
    • Thank you very much sir… information is very useful..

      Reply
  8. Excellent and very purposeful for tax payers. My heart felt thanks to you.

    I would be thankful if you could clarify how to declare in ITR for AY 2020-2021
    contribution and earnings under PPF which was withdrawn on completion of term
    during April 2019. Contribution and interest earning works out 7.06 lacs and 5.68lacs
    respectively. Please note I am a senior citizen aged 68 years.

    Reply
    • Dear Sudharsanam,
      There is no change in that. PPF maturity amount is still tax-free for you. Hence, irrespective of which tax regime you adopt, you can show this maturity proceeds under exempt income.

      Reply

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