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:-
Note – For latest tax slab rates based on Budget 2023, refer our latest posts –
- Revised Latest Income Tax Slab Rates FY 2023-24
- Budget 2023 – 12 Key highlights impacting personal finance
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,
- Leave travel concession (LTC) applicable for salaried employee
- House Rent Allowance (HRA) applicable for salaried employee
- The standard deduction applicable for persons in employment against salary income cannot be claimed when the taxpayer opts for section 115BAC. Note – As per Budget 2023, effective from 1st April 2023, this deduction is available under the new tax regime. Refer to the latest post in this regard at “Revised Latest Income Tax Slab Rates FY 2023-24” and “Budget 2023 – 12 Key highlights impacting personal finance“.
- Deduction of entertainment allowance and professional tax.
- 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.
- 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.
- Section 80DD – Deduction in respect of maintenance including medical treatment of a dependant who is a person with a disability.
- Section 80DDB – Expenses actually paid for medical treatment of specified diseases and ailments.
- 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
- 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
- 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
- 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.
- Section 80GG – Rent paid for furnished/unfurnished residential accommodation (Subject to certain conditions).
- Section 80G- Deduction in respect of donations to certain funds, charitable institutions etc
- Section 80GGA- Deduction in respect of certain donations for scientific research or rural development
- Section 80GGC- Deduction in respect of contributions given by any person to political parties
- Section 80JJA- Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste
- Section 80QQB- Royalty income of authors of a certain specified category of books other than text books.
- Section 80RRB- Royalty in respect of patents registered on or after 01.04.2003 (subject to certain conditions)
- 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)
- 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
- 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
- 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.
- Allowances (Under Sec.10(14)) like Travelling/Transfer Allowance, Conveyance Allowance, Helper Allowance, Research Allowance or Uniform Allowance
- 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;
- Any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;
- 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.
- 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
- Any Special Compensatory Allowance in the nature of Border Area Allowance, Remote Locality Allowance or Difficult Area Allowance or Disturbed Area Allowance
- Special Compensatory (Tribal Areas/Schedule Areas/Agency Areas) Allowance
- 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
- Children Education Allowance
- Any allowance granted to an employee to meet the hostel expenditure on his child
- Compensatory Field Area Allowance
- Compensatory Modified Field Area Allowance
- 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
- Underground Allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines
- 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
- Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance
- Any special allowance granted to the member of the armed forces in the nature of Island (duty) allowance
- 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.
- 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.
- The standard deduction applicable for persons in employment against salary income cannot be claimed when the taxpayer who opts for section 115BAC.
- 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:-
- Retirement benefits, gratuity etc.
- commutation of pension
- leave encashment on retirement
- retrenchment compensation
- VRS benefits
- EPFO: Employer contribution
- NPS withdrawal benefits
- Education scholarships
- Payments of awards instituted in public interest
Refer the latest tax related posts of the Budget 2020:-
- Budget 2020 Highlights – 5 Changes you must know
- Latest Income Tax Slab Rates FY 2020-21 (AY 2021-22)
- Mutual Fund Taxation FY 2020-21 (AY2021-22)
- Taxation on Side Pocketed or Segregated Mutual Funds
Is Education Loan interest taxable under new tax regime??
How it can be taxable as it is an expenses but not income.
Driver salary/Fuel & maintenance exemption is allowed in new tax regime
The above list is exhaustive one. You can refer the same.
Sir, Under new Tax Regime(2023), perquisites for official purpose is non taxable, can you have list of perquisites which may be considered for official purpose?
Sure, let me write a detailed separate post on this.
How about benefits under new tax regime on company car lease if the car is registered in company name?
Sadly no benefit is allowed under new regime for car lease policy.
70 deductions were disallowed in new tax regime. You have listed 44. Which are other 26.
Can you list please.
I have listed only those who are relevant to majority.
Section 80TTB of the Income Tax Act allows tax benefits on interest earned from deposits with banks, post office or co-operative banks. The deduction is allowed for a maximum interest income of up to ? 50,000 earned by the Senior Citizen (60 Plus less than 80 years).
Is this allowed un der FY2022-23 under new Regime
Sadly it is not available.
What about standard reduction of house rent (30% standard) in the new tax scheme
Except for the list I have provided, the rest of all deductions continue.
Is tha leave encashment on retirement for a retired PSU employee non taxable
Not taxable if the employee is state or central government. Otherwise, it is taxable.
Is RMA available for deduction in new tax regime?
RMA stands for?
I would like to know whether telephone or internet reimbursement amount is having tax exemption in new regime.
Whether standard deduction is allowed in new tax regime in fy 2022_2023
I have already cleared it. It is not available. Please read the above post.
Thank you for the detailed list. This is a request from a pensioner, as I could not infer it from your list. Could you please clarify if the Section 89 relief (upon submission of arrear details through Form 10E) applicable even under new tax regime?
As far as I know, the answer is NO.
Can senior citizen claim deduction of Bank interest up to Rs.50000/
It is not available under new tax regime.
Wonderfully explained the nitty-gritty New Tax regime. One more clarification, can one claim carry forward Long Term Capital Loss from equity sale in New Tax Regime?
Thanks for your egieast explanation. You also clarified that professional tax is not deductible. But why..?? I think this is the tax which the employee already paid to the govt.
Thanks for your kind words. For your WHY, I have no answer as it is the rules set by Govt.
Is car maintenance and fuel reimbursement exempted under new tax regime. What about motor car perquisites under new regime
I want to know whether fuel reimbursement exempted in nex tax regime or not
Refer the list as it is considered as commuting expenses.
THANKS FOR YOUR LUCID EXPLANATION OF SECTION 115BAC.
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 ?
RAJU S. , FCA (RETD.)
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.
Refer the recently launched ITR2.
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
Thanks in Advance
There is no change in sections with respect to “Income from Other Sources”.
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?
Please refer above post properly. I have already cleared it with respect to VRS.
You mentioned it under list of deductions allowed at sl no 5 not understood also pls clear my point 2 regarding 10C and 89
Refer above post again.
Will company car lease tax benefits be included in new tax ?
I think NO.
Thank you very much sir… information is very useful..
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.
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.