What is the tax deduction for the new regime?

Gefragt von: Swetlana Lang
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The new tax regime (default for the Financial Year 2025-26 in India) offers fewer deductions and exemptions compared to the old regime, but compensates with lower tax rates and a higher standard deduction for salaried individuals. Most common deductions like those under Section 80C and 80D are not available.

Does the new tax regime have any deductions?

The new tax regime has its set of exemptions and deductions that taxpayers can use. However, it has removed many of the deduction that were available in the old regime. In the financial year 2024-25, both the new tax regime and the old tax regime option certain advantages to taxpayers.

What is the standard deduction as per new tax regime?

As per the changes announced in the Union Budget of July 2024, salaried individuals can now claim a Standard Deduction of ₹75,000, an increase from the previous limit of ₹50,000 in 2023. Additionally, family pensioners are also eligible to claim a Standard Deduction of ₹25,000, up from ₹15,000 in the previous year.

What are the deductions in the new tax regime for AY 2025-26?

New regime (FY 2025–26): Wider income tax slabs, ₹75,000 standard deduction for salaried/pensioners, Section 87A rebate on taxable income up to ₹12,00,000 (effective for gross income up to ~₹12.75 lakh for salaried individuals), and marginal relief for taxable incomes slightly above ₹12,00,000 up to ~₹12.70 lakh ( ...

What exemptions are there in the new tax regime?

Partial withdrawals of up to 25% of your self-contribution are also tax-free. Interest earned from EPF: If the interest generated in a year from your EPF does not exceed 9.5%, it will not get taxed. Gratuity: If you receive gratuity from your employer, you can avail of exemptions on it up to a specified limit.

Don’t ❌ Ignore 20+ Deductions in New Regime |New Tax Regime Deductions to claim in Income Tax Return

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What are the drawbacks of the new regime?

A key feature of the new regime is the limited scope for deductions. Taxpayers cannot claim most common deductions available under the old regime, including Section 80C (investments in LIC, PPF, ELSS, etc.), Section 80D (health insurance premiums), Section 80E (education loan interest), and House Rent Allowance (HRA).

What is the difference between the old and new tax regime?

What is the difference between the old and new tax regimes? The old tax regime allows you to claim exemptions and deductions (e.g., HRA, 80C investments) to reduce your taxable income. The new tax regime offers lower tax rates but eliminates most exemptions and deductions.

What are the rebates under new tax regime?

Under the new regime, a rebate of Rs.25,000 is allowed for an income up to Rs. 7 lakhs. Under the old regime, a rebate of Rs. 12,500 is allowed for an income up to Rs. 5 lakhs. For FY 2025-26, rebate of Rs. 60,000 is allowed under the new regime for an income up to Rs. 12 lakhs.

How to calculate tax in new regime with example?

Tax Calculation (New Regime):

  1. ₹0 - ₹4 Lakh → Nil.
  2. ₹4 Lakh - ₹8 Lakh → ₹20,000.
  3. ₹8 Lakh - ₹12 Lakh → ₹40,000.
  4. ₹12 Lakh - ₹16 Lakh → ₹60,000.
  5. ₹16 Lakh - ₹20 Lakh → ₹80,000.
  6. ₹20 Lakh - ₹23.25 Lakh → ₹81,250. Total Tax: ₹2,81,250. Cess (4%): ₹11,250. Total Tax Payable (New Regime): ₹2,92,500.

How is 12 lakh tax free?

The new regime is beneficial as there is zero tax liability for income upto Rs. 12 lakhs for FY 2025-26. Can you pay zero tax on Rs 12 lakhs salary ? Yes , You can pay Zero tax on Rs 12 lakhs salary by claiming deduction and exemption like HRA exemption , 80C deduction , Standard deduction , Housing loan interest etc.

What is claimable in the new tax regime?

Let's explore what deductions are allowed in the new tax regime. While the individual's contribution to PPF is not deductible, the employee's contribution to EPF and NPS remains deductible under Section 80 CCD(1). The employer's contribution to NPS is also deductible up to 10% of the salary.

Is new tax regime good for everyone?

The new tax regime benefits individuals with minimal deductions or those who prefer a simpler filing process. On the other hand, the old tax regime is ideal for those who can claim significant deductions and exemptions.

How much tax is deducted under the new regime?

The income tax slab rates under the new tax regime for FY 2025–26 are as follows: income up to ₹4 lakh is tax-free; ₹4 lakh to ₹8 lakh is taxed at 5%; ₹8 lakh to ₹12 lakh at 10%; ₹12 lakh to ₹16 lakh at 15%; ₹16 lakh to ₹20 lakh at 20%; ₹20 lakh to ₹24 lakh at 25%; and income above ₹24 lakh is taxed at 30%.

What are the benefits of the new tax regime?

Let's find out.

  • Lower Tax Rates. ...
  • Lesser Exemptions. ...
  • Comparison Between Old and New Regimes. ...
  • Eligibility for Senior Citizens. ...
  • Impact on House Rent Allowance (HRA) ...
  • No Deductions for Life Insurance Premiums. ...
  • Standard Deduction in New Tax Regime. ...
  • Switching Between Regimes.

Can I return from a new tax regime to an old tax regime?

Any individual with an income from a business or profession is not eligible to switch regimes more than once. For instance, once you choose the new tax regime, you can only switch back to the old regime once in your lifetime.

Can NRI opt for a new tax regime?

NRIs have the same tax slab rates as residents. Both NRIs and residents have the flexibility to choose between the old tax regime and the new tax regime slabs. Each option offers distinct advantages and understanding them can help you make an informed decision that aligns with your financial goals.

How to avoid 40% tax?

How to avoid paying higher-rate tax

  1. 1) Pay more into your pension. ...
  2. 2) Reduce your pension withdrawals. ...
  3. 3) Shelter your savings and investments from tax. ...
  4. 4) Transfer income-producing assets to a spouse. ...
  5. 5) Donate to charity. ...
  6. 6) Salary sacrifice schemes. ...
  7. 7) Venture capital investments.

What are the deductions for the new tax regime 2025?

Tax-free income in new tax regime (Financial Year 2025-26)

This means that individuals earning up to Rs. 12 lakh will have their tax liability effectively reduced to zero. For salaried employees, an additional standard deduction of Rs. 75,000 elevates the tax-free income threshold to Rs. 12.75 lakh.

Is superannuation exemption in the new tax regime?

The maximum contribution an employer can make for an approved superannuation fund for each employee in a year is Rs. 1.5 lakh. Such contributions are exempted from tax in the employee's hand. Returns of investments in approved superannuation funds are tax-free.

What happens if I choose a new tax regime?

The old regime allows various deductions and exemptions, while the new regime offers lower tax rates but no deductions. Key differences include tax rates and availability of deductions. Can I switch between the old and new tax regimes every year? Salaried individuals can switch annually by informing their employer.

Do we get a refund in the new tax regime?

Rebates under the new tax regime

Additionally, under the new tax regime, you can avail a tax rebate of Rs. 25,000. However, it only applies to individuals whose annual income does not exceed Rs. 7 lakh after deductions.

What is not allowed under the new tax regime?

Amount deductible from gross salary (except standard deduction), which is not allowed under the new regime i Following are not allowed to be deducted in new regime: Exemption with respect to travel concession or assistance as covered in section 10(5); HRA exemption as covered in section 10(13A);