What All Deductions are Allowed in New Tax Regime

Private sector workers are entitled to a base salary dearness allowance of 10% of their pay. According to this part of Section 80CCD, the new tax regime deduction for employees of the public sector is up to 14% of base pay plus dearness allowance.

According to Section 10 (10D) of the Income Tax Act, all life insurance benefits received by the taxpayer are free from taxation under both the new and old tax regimes.

Under the new tax law, payments made in place of gratuities after five or more years of uninterrupted service are likewise free from taxation. During the taxpayer's lifetime, the maximum tax-free gratuity payout is limited to Rs 20 lakh.

Salaried people who cash in their accrued leave balance upon retirement are exempt from paying taxes under Section 115 BAC.

Samriddhi Yojana: Under the new tax regime, interest distributions and maturity proceeds from investments like Public Provident Fund and Sukanya Samriddhi Yojana are also exempt from taxation.

Under the new tax law, voluntary retirement scheme (VRS) profits up to Rs 5 lakh are tax-free.

The standard deduction of $50,000 was announced in Budget 2023 to be carried over to the new tax system starting in FY 2023–2024 (AY 24–25). However, those people and HUF who chose to forego the new tax system in FY 2022-23 (AY 2023-24) are not eligible for this incentive.

Deduction on the interest component of a home loan borrowed for a rented property.

Taxpayers who receive interest on their Post Office Savings Accounts are eligible for exemptions up to Rs 3,500 for individual accounts and Rs 7,500 for joint accounts, in accordance with Section 10(15)(i).

Tax exemption is available for the retirement leave encashment. Tax exemption is available for monetary rewards obtained from employers in support of voluntary retirement. The highest exemption amount is 5 lakh rupees.

Under the new tax law, daily allowances, perquisites, travel expenses for disabled employees, conveyance expenses, travel expenses for employees who are transferred, and travel allowances are all free from taxation.