Income Tax Saving Options in New Regime 2024 vs Old Tax Regime 2023-24

This article will let you know the Income Tax Saving Exemptions & Deductions as per the New Tax Regime of 2024 as presented in the Union Budget 2024. Also, Old Tax Regime (2023-24) saving options are there so can be of help to those who will file their IT return by the 31st March 2024 deadline. The New Tax Regime has removed around 70 deductions for individual and business taxpayers from the Old Tax Regime! These include the popular 80C (up to Rs 1.5 lakh) and 80D (medical insurance premium). Therefore, most advisors are telling their clients to stay with the Old Tax Regime.

The Union Government introduced a New Tax Regime under Section 115BAC with concessional tax slab rates which are continued as per the Budget 2024 along with some changes. Majorly in the new tax regime, there is Full tax rebate on income of up to Rs. 7 lakhs (compared to Rs. 5 lakhs in the old tax regime) under Section 87A of the Income Tax Act, 1961. Moreover, You will not pay any tax if you are claiming a standard tax deduction of Rs 50,000 on an income limit of Rs 7.5 lakhs.

The basic tax exemption limit of Rs. 2.5 lakhs under the old tax regime was increased to Rs 3 lakhs under the new tax regime. Additionally, Surcharge Rates are lowered from 37% to 25% for High-Income Individuals (Rs 5 crores & above).

The new tax regime is the default choice for an income tax deduction by an employer and the Income Tax Department. You need to ask your employer or IT department to calculate your TDS and other personal taxes as per the new tax regime. For those remaining to file their 2023-24 ITR, are advised to stick to the old tax regime due to more benefits (check ahead).

Below are the Exemptions and Deductions you might have used to save tax via the old tax regime, but these are excluded from the new tax regime of 2024 as declared in the Union Budget by our FM Nirmala Sitharaman.

• Standard Deductions under Section 80TTA

• Deductions under Section 80C, 80D, 80E, 80CCC, 80CCD, 80DD, 80DDB, 80EE, 80EEA, 80G, etc. of Chapter VI-A of IT Act

• Professional Tax

• Entertainment Allowance on Salaries

• House Rent Allowance (HRA)

• Leave Travel Allowance (LTA)

• Helper Allowance

• Child Education Allowance

• Minor Child Income Allowance

• Interest on Housing Loan Self-Occupied/ Vacant Property

• Other Special Allowance under Section 10(14)

• Employee’s Contributions to NPS Account

• Donations to Political Parties/ Trusts

• Exemptions for Free Food & Beverages through Vouchers or Food Coupons

Below are the Income Tax Saving Exemption and Deduction provisions in the New Tax Regime. Only 2 from the old tax regime are seen here (80CCD(2) and 80TTB)!

• Transport Allowances w.r.t. Person with Disabilities (PwD)

• Conveyance Allowance

• Travel/Tour/Transfer Compensation

• Perquisites for Official Purposes

• Exemptions for Voluntary Retirement Scheme: Section 10(10C)

• Gratuity Amount: Section 10(10)

• Leave Encashment: Section 10(10AA)

• Interest on Home Loan on Lent-out Property: Section 24

• Gifts of Up to Rs. 5,000

• Employer’s Contributions to Employees NPS Accounts: Section 80CCD(2)

• Additional Employee Costs: Section 80JJA

• Standard Deductions on Family Pension: Section 57(IIA)

• Deductions on Deposits in Agniveer Corpus Fund: Section 80CCH(2)

• 80TTB Standard Deductions: Salaried individuals are eligible to claim the benefit of standard deductions of Rs. 50,000 under the new tax regime. You can avail of this benefit as Section 80TTB deduction. Besides, Family pensioners can claim the standard deductions of Rs 15,000 under the new tax regime.

• Additional Depreciation: Section 32

• Investment Allowance: Section 32AD

• Sector-wise Deductions for Businesses: Section 33AB and 22ABA

• Expenditure on Research & Development: Section 35

• Expenses on Capital Expansion: Section 35AD

• Exemptions for Units in SEZ: Section 10AA

• Depreciation and Losses in the Business

Here are the ways to save on old regime Income Tax for Individual taxpayers by the 31st March 2024!

A maximum deduction of Rs 1.5 lakh per financial year can be claimed by individuals under section 80C for investments in Public Provident Fund (PPF), Employees Provident Fund (EPF), equity-linked savings scheme (ELSS), tax-saving fixed deposits (FD), National Savings Certificate (NSC), and some more. Actually incurred expenses like life insurance premium, children's school fees, and repayment of home loan principal are also included.

The deduction under section 80CCD(1B) of up to Rs 50,000 (NPS: National Pension Scheme) is over and above the threshold limit of Rs 1.5 lakh under section 80C. Hence combining both the deductions you can claim up to Rs 2 lakh as a tax deduction.

The Deduction under section 80CCD(2) can only be claimed if an individual's employer (government or private) contributes to the individual's NPS account. The maximum deduction that a private sector employee can claim is 10% of his/her salary where salary means basic plus dearness allowance (DA). Besides, Government employees can claim up to 14% of salary as a deduction.

Employer's contribution to NPS, EPF and a superannuation fund is also eligible for deduction but only up to Rs 7.5 lakh in a financial year. However, if the total contribution by the employer exceeds Rs 7.5 Lakh in a financial year, then the excess contribution would be taxable in the employee's hands as perquisites and any interest or dividend earned on it will also be taxable in employee's hand.

Deduction under section 80D is available only if you have purchased a health insurance policy for self, spouse, dependent childrens or parents. Those below the age of 60, can claim up to Rs 25,000 for health insurance premium paid for self, spouse and dependent children. Further, if you are paying health insurance premium for your parents aged below 60 years, then an additional amount i.e. Rs 25,000 can be claimed.

Section 16(iii) allows salaried individuals to deduct the professional tax paid while computing the taxable salary.

Leave Travel Allowance (LTA) is a reimbursement that the employee can claim in connection with himself and his family (spouse, children, parents, brothers and sisters) who are wholly dependent on the employee and traveling on leave to any place in India. The Income-tax act has defined what are the parameters to follow (included: airfare, train ticket, bus fare | excluded: sightseeing, hotel, food) to get the amount which can be claimed as deduction for LTA.

HRA under 80GG allows upto Rs. 5000/month or 25% of total Yearly income or Actual Rent in excess of 10% of total yearly Income. If you are paying rent for living in a house and also get an HRA component as part of your salary structure, then you can claim tax exemption on HRA. Having said that, if an individual does not get HRA as part of his/her salary but pays rent then also he/she can claim tax exemption on HRA after a specified calculation with maximum limit of Rs 60,000 as annual rent.

According to 10(10AA), leave encashment refers to encashment of unutilised earned leave at the time of retirement. Government employees have no monetary limit for claiming deduction of leave encashment. However, Non-government sector employees have a specified calculation to follow in order to know the exact amount of leave encashment that can be claimed as a tax deduction.

Under section 24(b) if an individual is residing in the house for which he/she has taken a home loan then a deduction for interest paid on such a home loan can be claimed as a deduction. The maximum amount that can be claimed as deduction for home loan interest is Rs 2 lakh in a given financial year. It is also available for the principal component deduction of up to Rs 1.5 lakh under section 80C.

Under section 80E an individual can claim deduction for interest component under an educational loan. There is no limit on the maximum amount of deduction that can be claimed under section 80E, and neither is an individual required to upload any documentary evidence for claiming such a deduction. This deduction is allowed for a maximum of 8 years. The loan should have been taken from any financial institution or any approved charitable institution to pursue his higher education or for higher education of his relative.

An individual can claim up to Rs 1.5 lakh per financial year as deduction for interest on an electric vehicle loan. However, the loan must be sanctioned between April 1, 2019 and March 31, 2023.

Income from Deposits up to Rs.50k (For Senior Citizens) and Rs. 10k (Below 60 Years).

The deduction under section 80G can be claimed on the amount donated to eligible institutions or funds. The deduction can be claimed up to a maximum of 50% or 100% of the donated amount, depending on the institution or fund to which the donation has been made.

Section 80QQB of income tax act 1961, states provisions related to Royalty or copyright Income. This section includes deductions for royalty income of authors. The income from the royalty is taxed under profit and gains of business or profession or other source.

As told earlier, it is best to stick to the old tax regime for now especially for taxpayers remaining to file their 2023-24 ITR due to the existing benefits it provides which are not available in the new tax regime.