Government has introduced a totally new income tax regime under which there are better income tax slabs but doesn’t allow almost all of tax deductions. Most commonly used deductions like HRA, Housing loan, insurance and tax saving mutual funds will not allowed.
Points to consider if you want to opt into New Income Tax Regime.
- New and better income tax slabs will apply.
- Deductions on contribution to National Pension Scheme will apply.
- No other deductions will apply. Ex: HRA, Housing loan benefits, Section 80C benefits etc.
- This is fairly simple tax calculation system without any overhead of multiple deductions with complex rules.
- This new income tax regime doesn’t benefit individuals who are in 30% tax slab and have total deductions of at least ₹2,00,000/-
- Individuals with income from salaries can switch between new and old tax regimes any time. But those with income from business can only switch once.
NPS deduction on new tax regime.
There is only one deduction that is allowed in new income tax regime is ‘National Pension Scheme’. This is a fairly new pension scheme that came into effect in the year 2009. Before that, it was available to Govt. employees on a voluntary contribution basis. Read more about NPS on 80c.in