The introduction of the new tax regime in India has brought about significant changes in the way tax deductions are claimed. If you're a taxpayer confused about what deductions you can now claim to reduce your taxable income, you've come to the right place. Let's delve into the intricacies of the new tax regime and explore the deductions you can avail to minimize your tax liability.
The new tax regime, which came into effect from the Financial Year 2020-21, offers taxpayers the option to pay tax at lower rates, provided they forgo certain deductions and exemptions. However, this doesn't mean you can't claim any deductions. Let's look at the deductions you can still claim in the new tax regime.
Deductions Under Section 80IAC
One of the most significant deductions you can claim in the new tax regime is under Section 80IAC, which relates to deposits made under the Pradhan Mantri Vaya Vandana Yojana (PMVVY). If you're a senior citizen, you can claim a deduction of up to Rs.15,000 for deposits made under this scheme.
Besides PMVVY, deductions can also be claimed on deposits made under other specified senior citizen schemes. However, it's crucial to note that these deductions are over and above the basic exemption limit and the standard deduction.
Deductions on Health Insurance Premiums and Medical Expenses
A renewable deduction is allowed for the premiums paid for health insurance schemes, including those providing cover for parents and dependent children. Under the new regime, you can claim a deduction of up to Rs.25,000 for self, and an additional Rs.25,000 for your parents. However, if your parents are senior citizens, you can claim up to Rs.50,000 for their medical insurance premiums.
Additionally, you can claim deductions for medical expenses incurred for specified diseases, provided the amount exceeds 5% of your total income. The deduction is capped at Rs.1,00,000 for self and Rs.75,000 for your parents. For senior citizens, the limit is increased to Rs.1,50,000.
Deductions on Contributions to Provident Funds
Contributions to provident funds, including the National Pension Scheme (NPS) and the Employee's Provident Fund (EPF), qualify for deductions under Section 80C. While the overall limit for deductions under Section 80C remains Rs.1,50,000, the allowed deductions for NPS have been increased to 10% of the contribution.
Self-employed individuals can also claim deductions up to 20% of their professional income for contributions to the National Pension Scheme, subject to a maximum of Rs.1,50,000.
Deductions for Educational Loans
Deductions are also allowed for payment of interest on educational loans. If you have taken an education loan for higher education for yourself, your spouse, or your children, you can claim deductions for the interest paid under Section 80E.
There is no upper limit on the deduction you can claim for interest on education loans. However, it's important to note that the loan must be taken from a financial institution or a bank.
Deductions on Rent Paid
If you're paying rent for a house that you own, you can claim a deduction under Section 80GG. The maximum deduction allowed is Rs.2,000 per month, or 25% of your total income, whichever is lower.
However, to claim this deduction, you must not own any residential property in India and should not be receiving any House Rent Allowance (HRA) from your employer. Additionally, your total income should not exceed Rs.5,00,000.
Navigating the new tax regime and understanding which deductions you're eligible for can seem daunting. However, with a clear understanding of the laws and regulations, you can effectively manage your tax liabilities. Always consult with a tax professional or use reliable online tools to ensure you're making the most of the deductions available. Happy tax planning!