India introduced a new income tax regime in the Union Budget 2023. The new income tax regime in India is basically a simplified tax system.
The new tax regime offers lower tax rates but fewer deductions compared to the old regime. This has to be noted that, the new regime has now become the default option for all the taxpayers, meaning taxpayers who do not actively choose either regime will automatically be placed under the new one.
Key Deductions & Allowance Under New Tax Regime
- Standard deduction of Rs 50,000 can be claimed.
- Deductions on long-term capital gains from equity shares or mutual funds are capped at Rs 1 lakh.
- Various exemptions apply to allowances such as transport, conveyance, travel, and employer contributions to employees' NPS accounts, among others.
- Contributions your employer makes towards your National Pension System (NPS) account are exempt from tax.
- Deductions under Section 80D for health insurance premiums for yourself, spouse, parents, and dependent children are still allowed.
- If you are differently-abled, any transport allowance received from your employer is exempt from tax.
- Retirement Benefits: Gratuity and leave encashment upon retirement are non-taxable.
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