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Forget HRA, Home Loan Exemptions If You Opt For New Tax Regime

As per the budget document, one will have to forego key exemptions such as health insurance and home loan interest.

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Budget 2020 has brought a new personal income tax regime, where income tax rates will be reduced but several exemptions will be removed.
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Finance Minister Nirmala Sitharaman on Saturday, 1 February proposed to bring a new personal income tax regime, where income tax rates will be reduced but several exemptions will be removed.

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Those opting for the new tax regime will have to forego 70 out of 100 exemptions currently enjoyed by taxpayers. As per the budget document, one will have to forego key exemptions such as health insurance, HRA, LTA, home loan interest.

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Following is the list of exemptions:

People or HUFs will not be entitled to the following deductions if they opt for the new taxation regime:

  • Leave travel concession as contained in clause (5) of section 10;
  • House rent allowance as contained in clause (13A) of section 10;
  • Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;
  • Interest under Section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law);
  • Deduction under Section 35AD or section 35CCC;
  • Any deduction under chapter VIA (such as section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).

However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) is claimable.

The new tax regime will be optional and the taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rate without those exemptions, she said in the Lok Sabha while unveiling the Budget 2020-21.

Exemptions and deductions to continue in new regime.

1. 10(1) Agricultural Income

2. 10(2) Amount received by a member of the HUF from the of income of family estate

3. 10(2A) Share of profit received by a partner from the firm

4. 10(4) I. Interest on certain notified securities or bonds to non-resident II. Interest on money standing in a Non-Resident (External) Account < 1 NI, 1

5. 10(4B) Interest on notified savings certificates issued by the Central Government to NRI before the 1st day of June, 2002

6. 10(4C) Interest on Masala bonds issued to non-resident during 17- 09-2018 to 31-03-2019

7. 10(6) Income of foreign diplomats, foreign crew, foreign trainee, etc.

8. 10(7) Allowance/perquisites to Government employee paid by Government of India to Citizen of India for rendering services outside India

9. 10(8) & (9) Income of employee, consultants & their family members under technical assistance programme entered with foreign government

10. 11.10(10) Death —cum —retirement gratuity — For Government employee no limit- For others up to Rs. 20 lakh

12. 10(10A) Commutation of pension — Government employee no limit — for others 1/3. or 50% depending on whether employee receives gratuity Commutation of pension without limit from pension funds net up by life insurance companies

13. 10(10AA) Leave encashment on retirement —Government employee no limit — for others up to 3 lakh

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14. 10(10B) Retrenchment compensation received by workman under the Industrial Dispute Act, 1947 — up to Rs 5 lakh

15. 10(10BB) Compensation received by victims of Bhopal gas leak disaster

16. 10(10BC) Any amount received from the Central Government or State Government or a Local Authority by an individual or his legal heirs as compensation on account of any disaster

17. 10(10C) Amount received on VRS up to Rs 5 lakh

18. 10(10CC) Tax paid by employer (on behalf of employee) on non-monetary perquisites

19. 10(10D) Amount including bonus received under a life insurance policy subject to certain condition. Amount received on death is exempt without any conditions.

20. 10(11) & (12) I. Employer's contribution to such fund, up to 12% of salary is not treated as income of the employee II. Interest credited to such fund up to 9.5% per annum is exempt in the hands of the employee III. Lump sum amount received from such fund at the time of termination of service, is exempt in the hands of employee IV. Interest on GPF and PPF is also exempt

21 22. 10(11A) Payment received from Sukanya Samriddhi Account

23. 10(12A) Payment received from NPS on closure

24. 10(12B) Partial withdrawal from NPS

25. 10(13) Payment from superannuation fund subject to certain conditions

26. 10(15) Interest on various securities issued/notified by the Government including the tax-free bonds issued by the public sector companies to residents

27. 10(16) Scholarship granted to meet the cost of education

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