The number of taxpayers choosing the new tax system is continuously increasing. The biggest reason for this is that there is no tax on annual salary income up to Rs 12.75 lakh. However, many people feel that no tax exemption or deduction is available in the new system. Whereas this is not completely correct. Some important deductions are still available in the new tax regime, with the help of which taxable income can be reduced and tax liability can be relieved. Let us know about three such big deductions.
You will get direct relief from standard deduction
Under the new tax system, salaried employees and pensioners get a standard deduction of up to Rs 75,000. No investment, bill or document is required for this discount. This deduction is directly deducted from the salary income. For example, if the annual salary of an employee is Rs 15 lakh, then after getting the standard deduction of Rs 75,000, his taxable income will be Rs 14.25 lakh. In Budget 2024, this deduction was increased from Rs 50,000 to Rs 75,000, so that the savings of the employees can increase.
Employer’s contribution to NPS will provide additional benefit
In the new tax system, tax exemption is also available on the contributions made by the employer to the Tier-I account of the National Pension System (NPS). Employees can claim deduction on employer contribution up to 14 per cent of their basic salary and dearness allowance (DA). This exemption is available in addition to the standard deduction, which further increases the tax savings. For example, if the basic salary of an employee is Rs 10 lakh and his employer deposits Rs 1.4 lakh in the NPS account, then he can get tax benefit on the entire amount. However, the employer’s total contribution to NPS, EPF and superannuation fund is limited to Rs 7.5 lakh in a financial year. Different tax rules may apply on contributions more than this.
Rebate on home loan interest on rented property
In the new tax regime, exemption on home loan interest on self-occupied property is not available, but this benefit continues in case of property given on rent. The interest paid on loan taken to purchase, construct or repair such property can be claimed as tax deduction.
The special thing about this exemption is that there is no fixed upper limit on interest deduction for property given on rent. That is, the actual interest paid can be deducted while calculating income. However, under the new tax regime, losses from house property are not allowed to be set off against other income sources. Despite this, this provision can prove beneficial for those people who have bought a house and given it on rent for investment purposes.
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