New Tax Regime: Taxpayers can also claim deductions and exemptions in the new tax system, know how here

The new income tax regime does not offer the same deductions and exemptions as the old regime. However, some deductions and tax benefits are available in the new regime. Taxpayers switching from the old regime to the new regime can avail these benefits.

New Tax Regime: Many salaried taxpayers and pensioners are expected to switch to the new tax regime this financial year (2025-26). The new income tax regime has higher tax slabs, lower tax rates and income up to Rs 12 lakh per annum is tax-free. However, the new regime does not have the benefits of deductions and exemptions like the old regime. However, some deductions and benefits are also available in the new regime.

Corporate NPS Contribution

This is a tax benefit that is less used. However, this benefit is available in both the new and old income tax regimes. In the old regime, deduction of up to Rs 1.5 lakh can be claimed in NPS under section 80C. Apart from this, deduction of Rs 50,000 can be claimed under section 80CCD (1B). These benefits are not available in the new regime. However, deduction on employer’s contribution to the employee’s NPS account is available in the new regime.

An employer’s contribution of up to 14 per cent (basic pay plus DA) to the employee’s NPS account can be claimed as deduction under section 80CCD(2). It is to be noted that there is a tax-free limit of Rs 7.5 lakh in a year for total cumulative benefits from the employer. Once the total benefits reach this limit, any contribution by the employer above this limit will be taxable.

Tax benefit on home loan interest on rented house

In the new income tax regime, tax benefit can be availed on home loan interest on rented house. However, deduction of up to Rs 2 lakh in a year on home loan interest on self-occupied property under section 24(B) is not allowed in the new regime.

In the old income tax regime, interest expenditure is deducted from the rent received (after property tax and 30 per cent standard deduction) for calculation of income from house property. This reduces the taxable property income. This also reduces your total tax. If this calculation results in a loss instead of income from house property and it does not exceed Rs 2 lakh, then it can be set off with other income. It can be set off in the same financial year to reduce tax liability. If the loss from rented property is more than Rs 2 lakh, it can be carried forward and claimed during the next 8 financial years.

However, the rules for this tax benefit are slightly different in the new tax regime. Loss from house property can be set off only with income from house property. It cannot be set off with any other income.

Employer’s contribution to EPF up to 12% of basic salary

Your employer contributes 12% of your basic salary to your EPF account. Like the employer’s contribution to the NPS account, this amount is also out of the scope of tax as long as the aggregate retirement benefit received from the employer does not exceed the limit of Rs 7.5 lakh in a year.

Apart from this, gratuity payout, leave encashment and money received on maturity of insurance policy are also exempted from tax, but there are some conditions for this.

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