The New Tax Regime Exemption List is a highly searched topic by employees, pensioners, and financial experts in India. Since the introduction of the new default tax system, many people are unsure about which tax benefits they can still claim and which ones have been removed.
Why Is This List Important?
This list is a helpful tool for taxpayers because it helps them:
- Know exactly what benefits remain available.
- Compare the old and new tax systems.
- Avoid mistakes when planning taxes.
- Calculate their taxable salary correctly.
- Reduce the amount of tax they owe legally.
How Salary Is Taxed
Under the tax rules, your salary is made up of your basic pay, allowances, perks, and retirement benefits. In the new regime, the general rule is that most allowances are fully taxable unless there is a specific exemption mentioned in the list.
Fully Taxable Allowances
According to the document, you must pay tax on the entire amount for the following allowances:
- Dearness Allowance (DA)
- Overtime Allowance
- City Compensatory Allowance
- Medical Allowance
- Transport Allowance (except for specially-abled employees)
- Tiffin and Servant Allowances
Partially Tax-Free Allowances
The document states that some allowances still offer partial tax relief under specific conditions:
- House Rent Allowance (HRA): If you live in a rented house and pay rent, you can claim a deduction. The amount depends on your salary, the rent paid, and the city you live in.
- Children Education & Hostel Allowance: A small amount is tax-free for up to two children.
- Work-Related Allowances: Money given to you for specific work expenses—like traveling for duty, uniforms, or research—is tax-free if you actually spend the money on those tasks.
Special Location Allowances
For people working in difficult locations, such as the armed forces or government officers, certain allowances are exempt up to a limit. This includes:
- Hilly, Border, or Remote Area Allowances.
- High Altitude or Underground Allowances.
- Field Area and Counter Insurgency Allowances.
Deductions from Salary (Section 16)
Contrary to what many believe, the document lists specific deductions that are still allowed:
- Standard Deduction: A flat deduction of Rs. 75,000 is available for all salaried employees and pensioners. You do not need to provide proof for this.
- Entertainment Allowance: This is a small deduction available only to government employees.
- Professional Tax: If you pay this tax, you can deduct the full amount from your income.
Investments and Other Deductions (Chapter VI-A)
The provided text indicates that several popular deductions are permitted:
- Section 80C: Investments in Life Insurance, EPF, PPF, and children’s tuition fees are deductible up to Rs. 1.5 lakh.
- Section 80D: You can claim a deduction for health insurance premiums paid for yourself, your family, and your parents.
- Loans: Deductions are listed for interest paid on education loans (80E), home loans (80EE/80EEA), and electric vehicle loans (80EEB).
- Others: Deductions for donations (80G), savings account interest (80TTA/TTB), and disability (80U) are also mentioned as allowed.
Summary
This list allows taxpayers to see the full picture of their income. By understanding which allowances are taxable and which investments are deductible, you can plan your finances better and ensure you are not paying more tax than necessary.