The new tax regime allows taxpayers to access certain benefits despite the common misconception that all deductions and exemptions have been eliminated. One of the most significant benefits remains the standard deduction. Salaried individuals can claim a standard deduction of Rs 75,000 from their gross income. This deduction reduces taxable income directly and does not necessitate any additional documentation or investments.

For employed individuals, this deduction represents a straightforward way to minimise the overall tax liability. The ease of claiming this benefit makes it particularly appealing, as it does not require any complex processes and can be taken advantage of with minimal barriers.

Interest Deductions for Homeowners

Homeowners who have financed properties for rental purposes can continue to benefit from deductions on interest payments for home loans. Under Section 24(b), there is no cap on the amount that can be deducted against rental income. This provision allows taxpayers to claim full interest paid, thus lowering their taxable income significantly.

However, it should be noted that any losses incurred in the ‘Income from House Property’ category cannot be adjusted against income from other sources or carried forward to subsequent years in the new tax structure. This limitation is crucial for property owners to consider when assessing their overall finances.

Taxpayers who manage to derive rental income may find this provision especially useful as it contributes to reducing the effective rate of tax they encounter, thereby allowing for better financial planning.

Employer Contributions to the National Pension System

Another significant benefit available to taxpayers is the allowance for deductions related to employer contributions to the National Pension System (NPS). Under Section 80CCD(2), employees can receive a deduction of up to 14 per cent of their salary for contributions made by their employer. This benefit applies to both public and private sector employees.

This aspect of the new tax regime creates an incentive for individuals to save for retirement, as the deductions can substantially impact the overall tax burden. For employees participating in an NPS scheme as a part of their compensation, the tax relief can enhance their financial outlook considerably.

Deductions on Family Pension and Retirement Benefits

Individuals receiving a family pension can still obtain tax relief under the new tax framework. They can claim a deduction of either Rs 25,000 or one-third of the received pension, whichever is lower. This provision aims to decrease the taxable income of family pension recipients, thus ensuring continued financial support in a taxable manner.

Moreover, several exemptions related to retirement benefits have been preserved under the new tax regime. This includes exemptions on gratuity amount under Section 10(10), encashment of leaves under Section 10(10AA), and compensation received through the Voluntary Retirement Scheme (VRS) under Section 10(10C), given certain conditions are satisfied.

These exemptions can significantly alleviate the tax burden for individuals receiving retirement benefits. Thus, while the new tax structure may provide fewer deductions compared to the old regime, taxpayers still retain several options to lower their taxable income effectively.

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