A new income tax law would require a single taxpayer to ignore 70 tax exemptions and deductions. These include the following deductions: section 80C for cumulative Rs 1.5 lakh reported by expenditure in specified financial products, section 80D for health insurance premiums charged, the 80TTA excluded from interest on savings deposits from a bank or post office, etc.
The following is a list of incomes that under the new income tax system proposed in Budget 2020 are excluded from income tax:-
1) Interest received on post office savings account balances:-
1.1) Interest earned on the postal savings account balance is exempt to a certain degree pursuant to section 10(15)(i) of the Income Tax Act. Income earned from postal savings accounts has, by notification dated 3 June 2011, been exempted from tax for up to Rs 3,500 for individual accounts and Rs 7,000 for joint accounts for each financial year.1.2) A deduction from the profit earned in the savings account held by a bank or the Post Office under section 80TTA cannot be given, but a taxpayer with post office savings account may still use the exemption from the interest in a post office savings account to the extent defined. To take advantage of this gain, a taxpayer is permitted to deduct interest on his / her gross taxable income from the post office savings bank account (as per the saving account held by them) from the revenue under the heading of other sources.
2) Gratuity received from your employer:-
2.1) If you adopt your business free of charge, the value you earn will be exempt from the tax in keeping with defined limits. An employee is eligible for free if he/she has served in a company for more than five years.2.2) Under income tax law gratuities for non-governmental employees up to Rs, 20 lakh in a lifetime are exempt. All gratuities received from public servants are tax-free, regardless of the amount received by them.
"While a person gets a free payment in FY2020-21, the maximum tax-exempt allowance is Rs 20 lakh in its lifetime for NGO workers. The payments earned due to the death of an employee remain tax-exempt both in the new financial system and without a maximum limit".
3) Amount received on maturity of life insurance:-
3.1) In the new income tax burden system, the tax benefit of paying life insurance premiums to lower the tax obligation under Section 80C is not eligible. "The maturity income of a life insurance company, however, remains tax-exempt under subsection 10(10D) in the New Tax Regime".4) Employer's contribution to your EPF/NPS account:-
4.1) According to the Budget proposal to FY2020-21, employer contributions to EPF, NPS and/or superannuation account will be tax-exempt provided that the annual contribution to all accounts (including employee contributions) does not exceed Rs 7.5 lakh for the financial year.4.2) According to current income tax laws, the employer may pay to the employee's EPF account an amount equal to 12% of its regular monthly wage. Likewise, the employer will contribute to the NPS Tier-I account an amount equal to 10 percent of the employee's basic salary. In a superannuation scheme, employees will make a maximum contribution of Rs 1.5 lakh in a financial year free from tax.
"The budget has proposed to limit the employer's tax-exempt superannuation, NPS and EPF account investment to no more than Rs 7.5 lakh in a financial year. However, the Budget proposal notes that any interest or gains arising from the excess contribution will also be taxable on the employees ' hands." To give an example, for a person earning Rs 80 lakh a year as a basic salary, the Rs 7.5 lakh threshold is crossed towards a deduction from the NPS.
4.3) Interest received up to 9.5 percent per annum from EPF:
Money from the EPF portfolio is still exempt from tax under the new tax system, provided it does not surpass 9.5%.
4.4) Interest and maturity amount received from PPF:
Under the new tax law, an individual can not benefit from a contribution to its PPF account under section 80C. Nonetheless, in the new tax structure, any interest accrued or depreciation received from the PPF account is tax-exempt.
"A taxpayer who opts for a new taxation system does not have to pay tax on interest on the PPF account, and any income earned from the PPF account will also be exempt from tax in the new taxation regime".
5) Interest and payment received from Sukanya Samriddhi Yojana:-
5.1) Persons invested in their girl's Sukanya Samriddhi Yojana would continue to receive tax-exempt interest on their portfolio under the new tax regime. In fact, the reimbursement proceeds earned from the scheme's budget remain tax-exempt. Investment in this scheme will, however, not be liable in the current tax environment for tax cuts under section 80C.'Sukanya Samriddhi's tax treatment of incoming interest and maturity sums is close to that in PPF account.'
6) Payment received from NPS account:-
6.1) The lump sum collected at the time the NPS account matures remains tax-free in the new tax regime, too.The tax rules authorize the exemption of up to 60 percent of the accrued body tax-free on maturity from the Tier-I NPS portfolio. The remaining 40% of the accumulated fund must be appropriate for the acquisition of NPS maturity pension plans.
However, any partial deduction from the Tier-I NPS program is still tax-free under the new tax system. Under compliance with the current income tax law, a person can subtract no more than 25% of his own contribution from the tax-exempt NPS account.
"The tax regime introduced does not provide any tax benefits for employee's NPS account contribution, but a deduction under Section 80CCD(2) may be sought for employer's employer's contribution to the employee's account. However, the reimbursement earned from the NPS account at the date of closure or partial withdrawal up to the stated amount remains tax-exempt under the new schemes." The Tier-I NPS maximum contribution of Rs 1.5 lakh is subject to the general ceiling of Section 80C.
7) Gift from employer:-
"Although the new tax law deletes various tax exemptions and benefits obtained from the employer, no changes have been made in the taxation of gifts from the contractor."The contribution received by the employer is excluded from both new and existing taxes for up to Rs. 5,000."
8) Food coupons:-
"The Budget Document's explanatory memorandum states: "It is also suggested to modify Rule 3 of the Rules later in order to address an exception from free food or beverage by the employee, as the employer is the exerciser of the right offered under the proposed rule.""There is no amendment in the Finance Bill in this regard, it is expected that the tax rules on food coupon earned from an employer will be changed and that such incentives will not be eligible under the new tax regime. if an employee has such food coupons under his / her salary structure and tax statements, this would mean that.
Nevertheless, since the Finance Bill does not actually change food vouchers, "Employees receiving food vouchers from their employers will remain exempt from tax to the degree of Rs 50 a meal for 2 dinners a day within the proposed tax system."
It appears that some clarification is needed on this matter from the government.
9) Commutation of pension:-
Commutation of compensation includes allocation, in lieu of future regular payments, of half of the benefit as lump sum payment."If gratuity is paid, for NGO employees one-third of the commuted pension earned will be tax-exempt under current income tax law. Furthermore, if no benefit exempts an employee, half of the commuted pension received will be tax-exempt. While the taxpayer opts for the new system, commuted pension tax stays the same."
10) Leave encashment on retirement:-
"Many employers offer bonuses instead of leaves that are notrequired at the time of retirement. "The lay-offs obtained from non-government workers are exempt from tax up to Rs 3 lakh. When an employee opts for a new tax regime, the lay-off received at retirement time will stay tax-free under the new tax regime."
11) VRS amount:-
"The monetary benefits received upon early retirement are exempt from tax in accordance with the new system. ' The monetary benefit earned by an employee by opting for his employer's voluntary retirement program is exempt from tax up to a maximum limit of Rs 5 lakh in both the existing and new tax scheme.'You can find more articles on at https://thetaxsupport.com/blog/
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