24/05/2024
The Income Tax Act provides various allowances and deductions for salary income, which differ under the old tax regime and the new tax regime. Below is a comprehensive breakdown of these allowances and deductions under both regimes:
# # # Old Tax Regime (Applicable till AY 2023-24)
Under the old tax regime, individuals can claim several deductions and exemptions, reducing their taxable income.
# # # # Allowances
1. **House Rent Allowance (HRA)**
- Exempt under Section 10(13A), subject to certain conditions.
- Exemption is least of the following:
- Actual HRA received.
- 50% of salary if residing in a metro city (40% for non-metro cities).
- Rent paid minus 10% of salary.
2. **Leave Travel Allowance (LTA)**
- Exempt under Section 10(5).
- Exemption for travel expenses incurred for self and family on leave to any place in India.
- Allowed twice in a block of four years.
3. **Children Education Allowance**
- Exempt up to ₹100 per month per child for a maximum of two children.
4. **Hostel Expenditure Allowance**
- Exempt up to ₹300 per month per child for a maximum of two children.
5. **Standard Deduction**
- Flat ₹50,000 deduction from salary income.
6. **Conveyance Allowance**
- Exempt up to ₹1,600 per month for commuting between home and office.
7. **Special Allowances**
- Exempt for specific purposes such as travel, uniform, etc.
# # # # Deductions
1. **Section 80C**
- Maximum deduction of ₹1,50,000.
- Includes investments like PPF, EPF, LIC premiums, NSC, ELSS, and principal repayment on home loan.
2. **Section 80CCC**
- Deduction for contributions to certain pension funds.
- Maximum deduction of ₹1,50,000 (combined with 80C and 80CCD(1)).
3. **Section 80CCD(1)**
- Deduction for contributions to NPS.
- Maximum deduction of ₹1,50,000 (combined with 80C and 80CCC).
4. **Section 80CCD(1B)**
- Additional deduction of ₹50,000 for NPS contributions.
5. **Section 80D**
- Deduction for medical insurance premiums.
- Up to ₹25,000 for self, spouse, and dependent children.
- Additional ₹25,000 (₹50,000 for senior citizens) for parents' insurance.
6. **Section 80E**
- Deduction for interest on education loan.
- No upper limit on the amount.
7. **Section 80TTA**
- Deduction for interest on savings account.
- Up to ₹10,000.
8. **Section 80TTB**
- Deduction for interest on deposits for senior citizens.
- Up to ₹50,000.
9. **Section 80G**
- Deduction for donations to specified funds and charities.
- Ranges from 50% to 100% of the donation amount.
10. **Section 24(b)**
- Deduction for interest on home loan.
- Up to ₹2,00,000 for self-occupied property.
# # # New Tax Regime (Applicable from AY 2020-21)
Under the new tax regime, taxpayers are given the option to forego various exemptions and deductions for lower tax rates. Here are the details:
# # # # Allowances
1. **Standard Deduction, HRA, LTA, and Other Allowances**
- These exemptions are not available under the new tax regime.
# # # # Deductions
1. **Section 80C, 80CCC, 80CCD, 80D, 80E, 80TTA, 80TTB, 80G, 24(b)**
- These deductions are not available under the new tax regime.
# # # Comparison of Tax Rates
# # # # Old Tax Regime Slabs:
- Income up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹10,00,000: 20%
- Above ₹10,00,000: 30%
# # # # New Tax Regime Slabs:
- Income up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000: 5%
- ₹5,00,001 to ₹7,50,000: 10%
- ₹7,50,001 to ₹10,00,000: 15%
- ₹10,00,001 to ₹12,50,000: 20%
- ₹12,50,001 to ₹15,00,000: 25%
- Above ₹15,00,000: 30%
# # # Choosing Between Old and New Regime
Taxpayers can choose between the old and new tax regimes based on their income, deductions, and exemptions they are eligible for. The new regime offers lower tax rates but no exemptions and deductions, while the old regime offers higher tax rates but allows for multiple exemptions and deductions.
Taxpayers should compute their tax liability under both regimes to decide which one is more beneficial. For those with significant exemptions and deductions, the old regime might be more advantageous. For those without substantial deductions, the new regime could result in lower tax liability.