Budget 2020: Exemptions & deductions phased out in new Income Tax Rate regime

Finance Minister presented the Union Budget 2020 in parliament on 01-02-2020. The budget proposed a new tax regime for the individuals and HUF’s. Under this regime , an option has been given to individuals and HUF to pay tax at lower rates, subject to fulfillment of certain condition wherein one of the condition is that person opting for the scheme is not eligible for various exemptions and deduction. In order to clear the doubts and confusion among the people , here is the comprehensive list of Exemption and deduction that will not be available under the new regime.

Deduction phased out under new regime u/s 115BAC as per Budget 2020

1. Section 10(5) – Leave travel concession applicable for salaried employee

2. Section 10(13A) – House Rent allowance applicable for salaried employee

Section 10(14) – Certain allowances applicable for salaried employee.

10(14)(i) read with rule 2BB

3. any allowance granted to meet the cost of travel on tour or on transfer;

4. any allowance, whether, granted on tour or for the period of journey in connection with transfer, to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty;

5. any allowance granted to meet the expenditure incurred on con-veyance in performance of duties of an office or employment of profit :

Provided that free conveyance is not provided by the employer;

6. 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;

7. any allowance granted for encouraging the academic, research and training pursuits in educational and research institutions;

8. 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.

10 (14)(ii)

9. 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

10. Any Special Compensatory Allowance in the nature of Border Area Allowance, Remote Locality Allowance or Difficult Area Allowance or Disturbed Area Allowance

11. Special Compensatory (Tribal Areas/Schedule Areas/Agency Areas) Allowance]

12. 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

13. Children Education Allowance

14. Any allowance granted to an employee to meet the hostel expenditure on his child

15. Compensatory Field Area Allowance

16. Compensatory Modified Field Area Allowance

17. 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

18. Transport allowance granted to an employee, who is blind [or deaf and dumb]or orthopaedically handicapped with disability of lower extremities, to meet his expenditure for the purpose of commuting between the place of his residence and the place of his duty

19. Underground Allowance granted to an employee who is working in uncongenial, unnatural climate in underground mines

20. 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

21. Any special allowance granted to the members of the armed forces in the nature of special compensatory highly active field area allowance

22. Any special allowance gran-ted to the member of the armed forces in the nature of Island (duty) allowance

23. 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

24. section 10(32) – In case, the income of minor 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.

25. In the case of newly established undertaking in free trade zone, deduction is bestowed under section 10AA. In the case of personal taxpayer who opts for section 115BAC, this benefit of deduction under section 10AA has to be foregone.

Section 16

26. The standard deduction applicable for persons in employment against salary income cannot be claimed when the taxpayer who opts for section 115BAC.

27. No deduction of entertainment allowance and professional tax

28.. 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 moneys borrowed is deductible up to a maximum of Rs.2 lakhs. This deduction cannot be claimed when the taxpayer opts for section 115BAC.

29. Section 32(1)(iia) – Additional depreciation in the case of persons engaged in the business of manufacture or production of any article or thing or in the business of generation, transmission or distribution of power is deductible at 20% of the actual cost of machinery or plant. This is in addition to the depreciation allowable under section 32(1)(ii). This additional depreciation has to be foregone by a taxpayer who opts for section 115BAC.

30. Section 32AD – Section 32AD provides for accelerated depreciation at 15% of the actual cost of new asset being plant or machinery when the undertaking or enterprise is engaged in manufacture or production of any article or thing in a notified backward area in the States of Andhra Pradesh, Bihar, Telangana or West Bengal. This deduction of accelerated depreciation cannot be claimed when the assessee opts for section 115BAC.

31. Section 33AB- Section 33AB provides for deduction equal to the amount of deposit or 40% of the profits of the business whichever is less of the person carrying on the business of growing and manufacturing tea or coffee or rubber in India. This deduction is also to be foregone by the taxpayers when opts for section 115BAC.

32. Section 33ABA – Section 33ABA providing deduction for site restoration fund equal to the amount deposited or 20% of the profits of the business whichever is less of the person carrying on the business consisting of prospecting for or extraction or production of petroleum or natural gas or both in India. This deduction will not be available when the assessee opts for section 115BAC dealing with concessional rate of tax.

33. Section 35(2AA)-  Donations to National Laboratory or a University or an IIT deductible under section 35(2AA) cannot be claimed when the taxpayer opts for section 115BAC.

34. Section 35AD- In the case of certain specified businesses listed in section 35AD the entire amount of expenditure incurred towards plant and machinery is deductible. Such claim cannot be made when the assessee opts for section 115BAC.

35. Section 35CCC – Deduction under section 35CCC relating to agricultural extension project is allowable @ 150% of the expenditure incurred. This cannot be claimed when the assessee opts for section 115BAC.

36. Section 57(iia)- In the case of person claiming deduction under section 57(iia) i.e. 1/3rd of such income or Rs.15,000 against family pension cannot be claimed when the assessee opts for section 115BAC.

Deduction under chapter VIA as follows –

Section 80C –

37. Life insurance premium for policy:

a) in case of individual, on life of assessee, assessee’s spouse and any child of assessee

b) in case of HUF, on life of any member of the HUF

38. Sum paid under a contract for a deferred annuity:

a) in case of individual, on life of the individual, individual’s spouse and any child of the individual (however, contract should not contain an option to receive cash payment in lieu of annuity)

b) in case of HUF, on life of any member of the HUF

39.. Sum deducted from salary payable to Government servant for securing deferred annuity or making provision for his wife/children [qualifying amount limited to 20% of salary]

40. Contributions by an individual made under Employees’ Provident Fund Scheme

41. Contribution to Public Provident Fund Account in the name of:

a) in case of individual, such individual or his spouse or any child of such individual

b) in case of HUF, in the name of any member there of

42. Contribution by an employee to a recognized provident fund

43. Contribution by an employee to an approved superannuation fund

44. Subscription to any notified security or notified deposit scheme of the Central Government.

For this purpose, Sukanya Samriddhi Account Scheme has been notified vide Notification No. 9/2015, dated 21/1/2015. Any sum deposited during the year in Sukanya Samriddhi Account by an individual would be eligible for deduction.

Amount can be deposited by an individual in the name of her girl child or any girl child for whom such an individual is the legal guardian.

45. Subscription to notified savings certificates [National Savings Certificates (VIII Issue)]

46. Contribution for participation in unit-linked Insurance Plan of UTI:

a) in case of an individual, in the name of the individual, his spouse or any child of such individual

b) in case of a HUF, in the name of any member thereof

47. Contribution to notified unit-linked insurance plan of LIC Mutual Fund:

a) in the case of an individual, in the name of the individual, his spouse or any child of such individual

b) in the case of a HUF, in the name of any member thereof

48. Subscription to notified deposit scheme or notified pension fund set up by National Housing Bank [Home Loan Account Scheme/National Housing Banks (Tax Saving) Term Deposit Scheme, 2008]

49. Tuition fees (excluding development fees, donations, etc.) paid by an individual to any university, college, school or other educational institution situated in India, for full time education of any 2 of his/her children

50. Certain payments for purchase/construction of residential house property

51. Subscription to notified schemes of (a) public sector companies engaged in providing long-term finance for purchase/construction of houses in India for residential purposes/(b) authority constituted under any law for satisfying need for housing accommodation or for planning, development or improvement of cities, towns and villages, or for both

52. Sum paid towards notified annuity plan of LIC or other insurer

53. Subscription to any units of any notified [u/s 10(23D)] Mutual Fund or the UTI (Equity Linked Saving Scheme, 2005)

54. Contribution by an individual to any pension fund set up by any mutual fund which is referred to in section 10(23D)or by the UTI (UTI Retirement Benefit Pension Fund)

55. Subscription to equity shares or debentures forming part of any approved eligible issue of capital made by a public company or public financial institutions

56. Subscription to any units of any approved mutual fund referred to in section 10(23D), provided amount of subscription to such units is subscribed only in ‘eligible issue of capital’ referred to above.

57. Term deposits for a fixed period of not less than 5 years with a scheduled bank, and which is in accordance with a scheme framed and notified.

58. Subscription to notified bonds issued by the NABARD.

59. Deposit in an account under the Senior Citizen Savings Scheme Rules, 2004 (subject to certain conditions)

60. 5-year term deposit in an account under the Post Office Time Deposit Rules, 1981 (subject to certain conditions)

61. Contribution to Tier-II NPS account by central Government’s employees.

62. Section 80CCD- Deduction in respect of contribution to pension scheme of Central Government except u/s 80CCD(2)- in the case of an assessee the Central Government  [or any other employer] makes any contribution to his account referred to in that sub-section, the assessee shall be allowed a deduction in the computation of his total income, of the whole of the amount contributed by the Central Government  [or any other employer] as  [does not exceed ten per cent of his salary in the previous year].

63. Section 80D – Amount paid (in any mode other than cash) by an individual or HUF to LIC or other insurer to effect or keep in force an insurance on the health of specified person

64. Section 80DD – Deduction in respect of maintenance including medical treatment of a dependant who is a person with disability

65. Section 80DDB – Expenses actually paid for medical treatment of specified diseases and ailments

66. 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

67. Section 80EE – Interest payable on loan taken up to Rs. 35 lakhs by 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.

68. 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

69. 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.

70. section 80GG – Rent paid for furnished/unfurnished residential accommodation (Subject to certain conditions)

71. section 80G- Deduction in respect of donations to certain funds, charitable institutions etc

72. section 80GGA- Deduction in respect of certain donations for scientific research or rural development

73. Section 80GGC- Deduction in respect of contributions given by any person to political parties

74. Section 80JJA- Deduction in respect of profits and gains from business of collecting and processing of bio-degradable waste

75. Section 80QQB- Royalty income of authors of certain specified category of books other than text books.

76. Section 80RRB- Royalty in respect of patents registered on or after 01.04.2003 (subject to certain conditions)

77. Section 80TTA- Interest on deposits in saving account with a banking company, a post office, co-operative society engaged in banking business, etc. (Subject to certain conditions)

78. Section 80TTB- Interest on deposits with a banking company, a post office, co-operative society engaged in banking business, etc. (Subject to certain conditions)- for senior citizens

79. Section 80U- A resident individual who, at any time during the previous year, is certified by the medical authority to be a person with disability

FCA Sarvesh Baldi