Tax deductions available in the New Tax Regime from 1st April 2023

Published on / By M. Pattabiraman Twitter: @pattufreefincal

Published: February 3, 2023 at 6:00 am

The following is a list of tax deductions available in the new tax regime from 1st April 2023 (after the budget 2023 announcement).

  1. Family Pension: A deduction of 33.33% or Rs. 15000, whichever is less, is allowed from the family pension in the new tax regime from 1st April 2023.
  2. A standard deduction of Rs. 50,000 is allowed for salaried taxpayers and pensioners in the new tax regime from 1st April 2023.
  3. Employer’s contribution to the NPS  (existing benefit)

List of allowances allowed in the New Tax regime (existing benefits)

  1. Transport allowance for those who are differently abled.
  2. Conveyance allowance or travel or transfer for official purposes.
  3. On-duty daily allowance

FAQ about the new tax regime

Can I switch back to the old tax regime if I choose the new one? Yes, you can each year if you are salaried with no business income. If you have a business income you can switch back to old once but then cannot move to the new regime again in future.

This means salaried people or HUF with no business income (those filing ITR1 and 2) can choose between the old and new regime (section 115BAC) every year.

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Others (with business income) can choose to be in the old regime for as long as they want or can but once they shift to the new tax slab, they will be given an option to withdraw only once. If they switch back to the old regime from the new regime, they cannot come back to the new regime unless their business income is zero.

Do I get to choose this while filing ITR? The New Tax Regime has been made the default choice. This means, if you do no nothing, the system will assume the new tax regime. If you wish to opt for the old tax regime, you must specifically choose it.

List of deductions excluded from New Tax Regime (Section 115BAC)

(i) Leave travel concession as contained in clause (5) of section 10;
(ii) House rent allowance as contained in clause (13A) of section 10;
(iii) Some of the allowance as contained in clause (14) of section 10;
(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;
(v) Allowance for income of minor as contained in clause (32) of section 10;
(vi) Exemption for SEZ unit contained in section 10AA;
(vii) 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 subsection (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 deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions under section 32AD, 33AB, 33ABA;
(xi) Various deductions for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause
(iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Deduction from family pension under clause (iia) of section 57;
(xiv) Any deduction under chapter VIA (like sections 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 sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.