Budget 2020: Full list of exemptions and deductions you will miss out on under new income tax slabs regime

Budget 2020: The new income tax regime proposed by the Finance Minister in her Budget 2020 speech has led to a lot of confusion among taxpayers. FM Nirmala Sitharaman said that while the new regime will have lesser rates, taxpayers opting for it won't be able to avail exemptions and deductions under different sections of the income tax. Since the government has decided to continue the old regime as well, the taxpayers need to assess their options carefully to find out which system allows them to save more.

Who will benefit in new tax regime?

"As per the newly inserted section-115BAC, a taxpayer being Individual or HUF claiming more deductions/exemptions shall be more beneficial in opting for the existing tax regime only. On the other side, a taxpayer having no or comparatively lower tax-saving deductions/exemptions shall be beneficial in opting for the new optional tax regime," CA Abhishek Soni, CEO of Tax2win explained.

He said that for instance, a taxpayer having gross total income of Rs 8 Lakh with deductions less than Rs 1.38 lakh will be beneficial in opting for the new tax regime. At the same time, if he/she has the deductions more than Rs 1.38 lakh will be beneficial in the old tax regime.

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What Income Tax Deductions & Exemptions will not be available in the new regime?

According to Soni, the person opting for the new scheme under section 115BAC shall not be entitled to the following exemptions/ deductions:

(i) Leave travel concession u/s section 10(5);

(ii) House rent allowance u/s section 10(13A);

(iii) Some of the allowance as contained in section 10(14);

(iv) Allowances to MPs/MLAs as contained in section 10(17);

(v) Allowance for income of minor as contained in section 10(32);

(vi) Exemption for SEZ unit contained in section 10AA;

(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in section 16;

(viii) 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);

(ix) Additional depreciation under section 32(1)(iia);

(x) Deductions under section 32AD, 33AB, 33ABA;

(xi) Various deduction for donation for or expenditure on scientific research contained in section 35(2AA) or 35(1)(ii) or (iia) or (iii);

(xii) Deduction under section 35AD or section 35CCC;

(xiii) Deduction from family pension under section 57(iia);

(xiv) Any deduction under chapter VIA (like 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 section 80CCD(2) (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.

(xv) It is also proposed to amend rule 3 of the Rules subsequently, so as to remove the exemption in respect of free food and beverage through vouchers provided to the employee, being the person exercising option under the proposed section, by the employer.