In the new tax regime, taxpayer will have to do without 70 tax deductions and exemptions including deductions provided under Section 80 C up to the extent of Rs. 1.5 lakh for various investments in specified financial avenues and some of the allowed expenses, 80TTA for deduction on bank or post office savings account interest, 80D in respect of health insurance premium paid.
Nonetheless, in the Budget 2020, some of the tax-exemptions have been maintained as though:
So, for your ready-reference here is a list of incomes that will not be attracting taxation implication as per the new tax regime announced in the Union Budget 2020: list of incomes that are exempted from income tax:
1. Interest earned on post office savings account balance: Under section 10(15)(i) of the Income tax Act, interest earned on post office savings account balance is exempt up to an extent. Vide a notice dated June 3, 2011, income earned on post office savings account was tax exempt in the case of individual accounts up to Rs. 3500 whereas for joint accounts the limit is set at Rs. 7000 for a fiscal year.
So, while the taxpayer in the new tax regime shall not be allowed deduction under section 80TTA i.e. in lieu of savings account interest from bank and post office, he can still avail exemption on interest realized on savings account with the post office up to the allowed limit. Further, this exemption can be claimed prior to final computation of gross taxable income.
2. Gratuity received from your employer: A person becomes eligible to receive gratuity if he has served an organization for more than 5 years. And in case you receive gratuity from your employer, the same will be tax-exempt according to specified limits. In the case of government employees, gratuity is totally tax-exempt irrespective of the amount whereas in the case of non-government workforce the same is tax-exempt up to Rs. 20 lakh received all through the life.
Further in case gratuity is received upon death of an employee then in such a case it shall also remain tax-exempt with no maximum limit.
3. Interest from EPF up to 9.5% p.a.: Also, in the new tax regime, interest earned on EPF account shall continue to be tax-exempt, provided the interest component is not over 9.5% per annum.
4. Amount received on maturity of life insurance: While an individual taxpayer will have to forego Section 80C deduction in the new tax regime, maturity proceeds from life insurance policies shall continue to be tax-exempt as per section 10(10D).
5. Employer's contribution to your EPF/NPS account : As per proposals made in Union Budget 2020, from the next financial year i.e. FY 2020-21, contribution made to an employee's retirement funds including EPF, NPS or/ and superannuation account shall be tax-exempt provided the annual contribution in all accounts does not gets over Rs. 7.5 lakh in a fiscal year.
So, those with basic salary above Rs. 60 lakh per year shall be impacted by the limit put on the contribution amount to EPF and NPS that will be tax-exempt. In accordance with existing tax laws, an employer's contribution to an employee's EPF account remains at 12% of the basic monthly salary of the employee. In a superannuation account, an employer can contribute up to Rs. 1.5 lakh in financial year that is tax-exempt and in the NPS an employer can contribute 10% of the basic salary of an employee towards his or her NPS tier-I account.
6. Both maturity proceeds and interest received from PPF: In the new tax regime, while the taxpayer cannot reduce his tax liability by claiming deduction on the amount invested in PPF as part of Section 80C. Nonetheless, interest as well as maturity proceeds from PPF will continue to be tax-exempt in the proposed new tax structure.
7. Interest and payment received from Sukanya Samriddhi Yojana: Similar to PPF, both interest as well as maturity payment received from SSY scheme opted for the girl child shall be exempt from tax. Nonetheless, tax-break under Section 80C for contribution made to SSY account shall not be available.
8. Gift from employer: Under both current as well as proposed new regime, gift up to Rs. 5000 from the employer remains tax-exempt.
9. Food coupon: On this Tax2win.in CEO and founder says "Though Finance bill has not mentioned any amendment in this regard, however, it is expected that rules regarding taxation of food coupon received from an employer will be revised and such benefit will not be available in the new tax regime. This would mean that if an employee is having such food coupons in his/her salary structure and claiming tax benefit on this will not be eligible to opt for new tax regime."
Nonetheless as there no changes in place currently in Finance Bill on food coupons, employees receiving food coupons from their employer will continue to be tax-exempt up to a limit of Rs. 50/meal for 2 meals for a day.
10. Payment received from NPS account: The proceeds from NPS account on its maturity shall remain tax-exempt under the new proposed tax structure. As per tax rules, maximum of 60% of the accumulated corpus on maturity can be withdrawn tax-free. Remaining 40% has to be compulsorily invested in annuity plans.
Also, under the new tax regime, partial withdrawals made from one's NPS tier-I account will continue to be tax-exempt. In the current regime, NPS account holder can withdraw a maximum of 25% of his NPS balance and the same is tax-exempt.
However, the contribution of NPS up to Rs. 1.5 lakh which was available for tax break under the existing regime shall have to be foregone in the new tax structure.
Also, the employee as per current regime is allowed additional deduction of Rs. 50,000 on one's own contribution to NPS under section 80CCD (1B).
11. Leave encashment on retirement: Some of the company's upon an employee's exit provide payment against leaves that were not taken. In case of non-government employees, leaves encashment up to Rs. 3 lakh is tax-exempt. In the new regime also, leave encashment amount shall continue to be tax-exempt
12. Voluntary retirement scheme monetary benefit: The amount received from the employer on opting VRS is also tax-exempt under the new tax structure. For the same, the upper limit is Rs. 5 lakh for both current and new regime.
13. Pension commutation: In this we receive some amount of pension as lump sum payment in respect of future payments that would otherwise be paid-out periodically. In case of non-govt. employees, if gratuity is received, one-third of the commuted pension obtained is tax-exempt as per current tax laws. And in case gratuity is not received then half of the commuted pension amount will remain tax-exempt. Further, in the new tax structure similar taxation rules on commuted pension would apply.