Taxpayers may find the new income tax regime easier and with less paperwork. But, this also includes some tax-relief. This will become the default tax system from the financial year 2023-24.
This means that if you want to use the old regime of income tax, then you have to tell. If you do not do this, it will be assumed that you want to use the new tax regime. There are various types of exemptions in the old tax regime. The Income Tax Department has recently launched the official tax calculator. With the help of this, taxpayers can find out in which regime they will have to pay less tax.
Before taking a decision on this, it is important to know about the exemptions that you will get in the new tax regime as well. There are six such tax exemptions. Let us know about them in detail.
Standard deduction of Rs 50,000
The government has tried to make the new income tax regime attractive in the Union Budget 2023 . In this, standard deduction of Rs 50,000 has been allowed. This benefit is available by default. This means that you do not have to make any kind of choice for this. You do not even need to present any proof. However, this benefit is not available to all taxpayers. Like the old regime, this benefit is available only to salaried individuals and pensioners. Businessmen or self-employed people cannot claim this benefit. This benefit is also available to family pensioners.
Employer’s contribution to the employee’s NPS
Few people know about this tax benefit. It is available in both New and Old regime. If the employee contributes up to 10% of the employee’s basic salary and DA in NPS, then deduction is available under section 80CCD(2). “This employer’s contribution is not taxable like house rent and other allowances,” said Kuldeep Kumar, former national leader, PwC India and personal tax expert. However, there is a limit on tax-free contribution. This limit is Rs 7.5 lakh in a year. After the total benefit exceeds this limit, the excess amount will be treated as taxable perquisites of the employee.
Sudhir Kashik, CEO of Taxspanner.com, said that people starting new jobs should pressurize HR to include this benefit in their cost-to-company (CTC). People who are already employed can also talk to HR for this.
Employer’s contribution to EPF
Your employer (company) contributes 12% of your basic salary to your EPF account. This amount also does not come under the purview of tax. However, the condition is that the total tax-benefit you get from the employer should not exceed Rs 7.5 lakh annually.
Maturity amount of life insurance policy
The amount received on maturity of life insurance policy does not come under the purview of tax. This benefit is available to taxpayers using both the new and old tax regime. But, there is a condition in this that the annual premium of life insurance policy (except ULIP) should not exceed Rs 5 lakh.
This rule will come into force from April 1, 2023. In case of ULIP, this limit of premium is Rs 2.5 lakh per annum. This rule is applicable from February 1, 2021. However, it is important to note that in both the policies, the amount received by the nominee on the death of the policyholders is not taxable.
Standard deduction on rental income
If you have given your property on rent, you can claim a deduction of 30% on the annual value of the property. Annual Value means the Gross Annual Value (Actual Rent or Reasonable Rent) less the municipality taxes paid.
Maturity amount of PPF or Sukanya Samriddhi Yojana
If you invest in PPF or Sukanya Samriddhi Yojana, then you will not have to pay any kind of tax on the amount you get on its maturity. However, if you are going to use the new tax regime, then the 80C deduction available under 80C in the old tax regime will not be available to you for investing in PPF and Sukanya Samriddhi.
