ITR Filing: The new tax regime is the default from 1 April 2024, which offers a lower tax rate along with some limited but useful exemptions and rebates. Using them correctly while filing ITR can help save tax.
ITR Filing: The new tax regime has become the default tax system from April 1, 2024. Now if a taxpayer wants to adopt the old tax system, he will have to fill Form 10-IEA every year. The government claims that the new tax system is simple, transparent and has low tax rates. However, many people are still in the old tax regime, because the list of exemptions and deductions available in it is long. But, there are some tax deductions and rebates in the new tax regime as well, which most people do not know about.
What is available in the new tax system?
The new tax regime does not have popular exemptions like HRA, LTA, 80C, home loan interest, but some important deductions and a big tax rebate are still available. Let us understand about them in detail:
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Standard deduction of ₹75,000
Finance Minister Nirmala Sitharaman made a big change in Budget 2024. She increased the standard deduction on salary and pension to ₹75,000, which was earlier ₹50,000. This means that the tax liability of ₹75,000 on income from salary and pension will be directly reduced.
Exemption on employer contribution in NPS
If your employer has contributed to your NPS account, then that part will be tax-free under section 80CCD(2). However, it is important to note that the employee’s contribution i.e. your contribution is not covered for tax exemption.
Exemption on Agniveer Corpus Fund
In the new tax regime, tax exemption is also available under section 80CCH. This exemption is available on the amount received in the Agniveer Corpus Fund by the youth recruited under the ‘Agneepath Yojana’.
Tax deduction on family pension
If you get any kind of family pension, then in the new tax regime also you can get a deduction of up to ₹ 25,000. This can also help you reduce your tax liability.
Exemption on LTA, HRA, Allowances
HRA, LTA, and many Special Allowances are also tax exempted in the new regime. Actually, like NPS contribution, these are also allowances given by your employer. Therefore, tax exemption is available on this. Apart from this, if you get a gift of up to ₹ 50,000 in a year from a friend or relative, then you do not have to pay tax on that too.
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Rebate under section 87A
Till the financial year 2023-24, if your taxable income is ₹ 7 lakh or less, then you get a rebate of up to ₹ 25,000. But from the financial year 2025-26, this exemption has been increased to ₹ 60,000. This means that if your tax liability is ₹ 60,000 or less, then you will not have to pay a single rupee tax.
New vs Old Tax Regime: Which is the best?
| Old tax system | New tax regime | |
| Tax Rates | More | Less |
| Deductions | Various (80C, 80D, HRA etc.) | Limited (5 only) |
| The intricacies | More (documents, investments etc.) | Less (straightforward and clean process) |
| Best For | Investors, HRA claimants | Tax savers without investing |
Tax experts believe, “If you are taking full advantage of deductions like 80C, 80D, home loan interest, then the old tax system can be beneficial for you. But if your income is simple, and you do not invest much, then the new system can prove to be better for you.”
