The new tax regime, applicable from April 1, 2020, is optional, in the new tax regime, anyone can benefit from most of the deductions available under the Income Tax Act, such as section 80C, 80D. However, the government has left some deductions available on some income in the new tax regime without any change. If you choose a new tax regime, you should know about the income which is exempt from income tax even in the new tax regime.
1) Gratuity received from the employer:
The gratuity income received from the employer to a certain extent in the new tax regime has been exempted. For private-sector employees, gratuity up to Rs 20 lakh in a lifetime is exempt from income tax. But gratuity for government employees is exempt from tax up to any amount. It may be mentioned that gratuity received due to the death of an employee in the private sector will be tax-free in spite of any amount.
2) The amount received from life insurance policy maturity:
The maturity income from the life insurance policy in the old tax regime is exempted from tax to capital gains under section 10 (10D) of the I-T Act 1961. This deduction is also available in the new tax regime.
3) Employer's contribution to EPF/NPS account:
The employer's contribution to the employee's EPF, NPS, and any other pension fund has been exempted from tax. However, unlike the old tax regime, this deduction has an upper limit of Rs 7.5 lakh a year. Contributions of over Rs 7.5 lakh a year to EPF, NPS, and pension funds will be added to the employee's income and taxed as per his slab. In addition, any interest or benefit earned from additional contributions will be subject to tax.
4) Interest received from Post Office Savings Account:
The interest received on the Post Office Savings Account is exempt from income tax under section 10(15)(i) of the I-T Act, 1961. In the case of individual accounts, this exemption is available up to Rs. 3,500 in a year. The limit for the joint account is Rs. 7,000 per annum.
5) Interest received from EPF and PPF:
The interest received from the Employees' Provident Fund (EPF) account has also been exempted from income tax in the new tax regime, provided it does not exceed 9.5% per annum. However, there is no exemption of annual contribution to PPF for a reduction in the new tax regime, PPF contribution or interest earned on maturity income from PPF has also been exempted from tax in the new tax structure.
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