Deductions allowed under New Tax Regime of Income Tax

The government introduced a new tax regime to make filing taxes easier. The New Tax Regime simplifies compliance by getting rid of the deductions provided to taxpayers instead, they changed the tax rate slab. The New Tax Regime offers lower tax slabs which lead to lower tax liability, especially for individuals in lower income brackets.

Let’s understand the deductions that are allowed in the new tax regime:

Standard Deduction: Salaried individuals now get a standard deduction of Rs.50,000 under the new tax system. Family pensioners can also benefit from a Standard Deduction of Rs.15,000, which was previously available only in the old tax regime.

Employer Contributions to NPS or PF: Contributions made by the employer towards NPS (National Pension System) or PF (Provident Fund) are not taxed under the new regime. While the old tax regime allowed tax exemptions on employee contributions under Section 80C, these are not deductible under the new system.

Retirement Benefits: Both gratuity and leave encashment received upon retirement remain non-taxable.

Long-Term Capital Gains (LTCG): Taxpayers can still avail themselves of the deduction on long-term capital gains from the sale of equity shares or equity-oriented mutual funds, up to a limit of Rs.1 lakh, under the new tax regime.