Exemptions & Deduction under New Tax Regime for FY 2023-24 (AY 2024-25)

Exemptions and Deduction allowed under New Regime

As the fiscal year 2023-24 unfolds, taxpayers across the nation find themselves navigating a new landscape of taxation regulations. With the implementation of the New Tax Regime, there arises a crucial need to comprehend the nuances of deductions allowable within this framework. In this article, we delve into the intricacies of deductions permitted under the new regime, shedding light on what taxpayers can leverage to optimize their financial strategies. Join us on a journey to unravel the complexities and unveil the opportunities presented by the latest tax regime, empowering individuals and businesses alike to make informed decisions and maximize their tax efficiency in the upcoming assessment year.

Under the New tax regime, you can claim tax exemption for the following:

• Transport allowances in case of a specially-abled person.
• Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
• Any compensation received to meet the cost of travel on tour or transfer.
• Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
• Perquisites for official purposes
• Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA)
• Interest on Home Loan on let-out property (Section 24)
• Gifts up to Rs 50,000
• Deduction for employer’s contribution to NPS account [Section 80CCD(2)]
• Deduction for additional employee cost (Section 80JJA)
• Standard deduction of Rs 50,000 under New Tax Regime applicable from FY 2023-24
• Deduction under Section 57(iia) of family pension income
• Deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2)

Exemptions and deductions not claimable under the new tax regime

The following are some of the major deductions and exemptions you cannot claim under the new tax regime:

• The deduction under Section 80TTA/80TTB (Interest on Savings account)
• Professional tax and entertainment allowance on salaries
• Leave Travel Allowance (LTA)
• House Rent Allowance (HRA)
• Allowances to MPs/MLAs 
• Minor child income allowance
• Helper allowance
• Children education allowance
• Other special allowances [Section 10(14)]
• Additional depreciation under section 32(1)(iia)
• Deductions under section 32AD, 33AB, 33ABA
• Various deductions for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii)
• Deduction under section 35AD or section 35CCC
• Interest on housing loan on the self-occupied property or vacant property (Section 24)
• Chapter VI-A deduction (Section 80C, 80D, 80E and so on, except Section 80CCD(2) and Section 80JJAA)
• Exemption or deduction for any other perquisites or allowances including food allowance of Rs 50/meal subject to 2 meals a day
• Employee’s (own) contribution to NPS
• Donation to Political party/trust, etc
• Budget 2023 update- Deduction from family pension income up to FY 2022-23 (From FY 2023-24, it is allowed as deduction)
• Budget 2023 update- Standard deduction of Rs.50,000 up to FY 2022-23 (From FY 2023-24, it is allowed as deduction)

Option for choosing between the new tax regime and the existing regime

A salaried taxpayer has the option to select the old tax regime at the outset of FY 2023-24 by informing their employer, as the new regime is now the default. However, this choice remains fixed for the entire financial year and cannot be altered until the filing of income tax returns in July 2024.

The deadline for filing taxes for FY 2023-24 (AY 2024-25) is July 31, 2024, unless there is an extension. If an employee does not opt for the old tax regime initially, their employer will deduct tax (TDS) according to the default new tax regime. Salaried taxpayers have the flexibility to switch between the new and regular tax regimes from one year to the next.

Non-salaried taxpayers must select the new regime when filing their tax returns, without the need to declare or communicate their choice during the year. However, non-salaried taxpayers (those with income from business or profession) cannot switch in and out of the new tax regime annually. Once a non-salaried taxpayer opts out of the new regime, they are ineligible to opt back in for future tax years.

Conclusion: Navigating the new tax regime for FY 2023-24 (AY 2024-25) requires a comprehensive understanding of the exemptions and deductions available. By exploring the intricacies of these provisions, taxpayers can make informed decisions to maximize their tax efficiency. Whether choosing between the old and new tax regimes or optimizing deductions, taxpayers have the opportunity to navigate the evolving tax landscape strategically and ensure compliance with the latest regulations.