Many of the deductions and exemptions available in the old tax regime are not there in the default tax regime.
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Finance Minister Nirmala Sitharaman, in the Union Budget 2023-24, announced various changes in the new tax regime with an aim to make it more attractive for taxpayers. The tax slabs in the new tax regime were revised while the rebate limit was increased from Rs 5 lakh to Rs 7 lakh. These changes are set to come into force on April 1.
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The new tax regime will also become the default tax system for everyone in the new financial year. It means that if you don’t specify your choice, your income tax will be calculated as per the new tax regime. The old tax regime will remain available to taxpayers.
While the new tax regime may offer some benefits, you will have to let go of many tax deductions and exemptions that are available in the old tax regime.
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Here, we have simplified all exemptions and deductions you can claim in the old and new tax regimes.
Old Tax Regime
The old tax regime offers various exemptions and tax deductions which help reduce the tax burden on individuals. Some deductions are given under Sections 80C, 80CCC, AND 80CCD of the Income Tax Act. These include equity-linked savings scheme (ELSS) funds, National Pension Scheme, Unit-Linked Insurance Plan (ULIP), Tax Saving fixed deposits, Public Provident Fund, Senior Citizen Savings Scheme, and Sukanya Samriddhi Yojana.
If you opt for the old tax regime, then you can also save tax using your home loan. Section 80C of the IT Act also provides tax deductions of up to Rs 1.5 lakh on the principal repayment of your home loan. You can also claim tax deduction of up to Rs 2 lakh on interest payable towards your home loan under Section 24 of the IT Act. In addition, first-time home buyers can also reduce their tax liability by Rs 50,000 by claiming deductions under Section 80EE of the IT Act.
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New Tax Regime
Many of the deductions and exemptions available in the old tax regime are not there in the default tax regime. You can still avail of certain benefits. You can claim a standard deduction of Rs 50,000 while a rebate of up to Rs 7 lakh is also available under Section 87A. Family pensioners, meanwhile, can claim a standard deduction of Rs 15,000 in the new tax regime. If your employer is contributing to your NPS account then you can claim deductions under Section 80CCD (2) of the IT Acct.
