New Tax Regime: It is anticipated that a significant portion of salaried individuals, as well as pensioners, will migrate to the new tax regime in the current financial year (2025-26). The new regime boasts of increased tax slabs and a tax-free income of Rs 12 lakh on a yearly basis. Nevertheless, the new regime does not come with the benefits of deductions and exemptions like the old regime does. That said, some deductions and benefits are still granted under the new regime. Corporate NPS Contribution This is a tax benefit that is underutilized. Still, this benefit exists in both old and new regimes. In the old regime, deduction of up to Rs 1.5 lakh can be claimed in NPS under section 80C. Also, a deduction of Rs 50,000 can be claimed under section 80CCD (1B). These benefits are not available in the new regime. However, deduction on employer’s contribution to the employee’s NPS account is available in the new regime.An employer’s contribution of up to 14 percent of the basic pay and dearness allowance (DA) can be claimed as a deductible contribution under section 80CCD(2) to the employee's NPS account. Also, it is important to note that there is a tax free cap of Rs 7.5 lakh in a year for the total cumulative benefits from the employer. After reaching this limit, any additional contributions the employer makes will be taxable.Tax benefit on home loan interest on rented house It is now possible to claim tax benefit on home loan interest for a house that is rented under the new income tax regime. However, under the new regime, the Rs 2 lakh limit of deduction on home loan interest for a self-occupied house under section 24(B) is not available.Under the previous income tax regime, the interest expenditure is subtracted from the rent received (after deducting property tax and a standard deduction of 30 percent) to determine the income from house property. This also lowers the taxable income from the property. This also lowers your tax obligations. If this calculation results in a loss, of income to be less than income from house property and is less than two lakh, then it can be offset against other income. It can be offset in the same financial year to decrease the tax burden. If the loss from rental property exceeds two lakh, the loss can be carried forward and claimed against tax in the next eight financial years.The new tax regime does this tax benefit slightly differently. Loss from house property can only be offset Income from house Property. It cannot be offset against other income.Employer's contribution to EPF is capped at 12% of the basic salaryYour employer’s contribution to your EPF is fixed at 12% of your basic salary. Similar to the employer’s contribution towards the NPS account, this contribution remains non-taxable provided the total retirement benefits received from the employer does not exceed Rs 7.5 lakh in a financial year.In addition to this, gratuity, leave encashment, and amounts received upon the maturity of an insurance policy are tax-free, subject to certain conditions.
Around the web
