How To Maximise Your Tax Savings With The New Tax Regime

• June 7, 2024
• CA Chandan Agarwal's Office

The Indian tax system for FY 2024-2025 maintains existing income tax slabs, allowing taxpayers to choose between old and new regimes.

The Indian tax system has evolved alongside the country’s economy. It combines direct taxes like income tax and indirect taxes like GST. For the upcoming financial year 2024-25, the government has opted to maintain the existing income tax slabs. This means taxpayers will continue to have the choice between the old and new tax regimes when filing their returns.

A common concern among taxpayers is how to save taxes under the new regime. A Forbes article offers several strategies to maximise tax savings under the new tax regime for 2024-2025. These insights can help taxpayers navigate the new system and take advantage of available deductions and exemptions to reduce their tax liability effectively.

The new tax system for FY 2024-2025 offers benefits for certain expenses. Here’s a list of some exemptions you can claim:

• Specially Abled Taxpayers: Claim transport allowances up to a specified limit.
• Job Creation Deduction: Section 80JJAA allows employers to claim a deduction of up to 190% of additional employee costs for hiring new, eligible employees.
• Conveyance Allowance: Exempt up to ₹ 1,600 per month or ₹ 19,200 per year under Section 10(14)(ii).
• Gifts/Cash: Up to ₹ 50,000 in a financial year is exempt from tax.
• Travel Reimbursements: Expenses for official tours or transfers are tax-exempt.
• NPS Contributions: Deduction under Section 80CCD (2) for employer contributions to an employee’s Tier-I NPS account-up to 10% of salary for private employees and 14% for government employees.
• Daily Allowance: Covers ordinary daily expenses for employees on tour or transfer.
• Home Loan Interest: Up to a ₹ 2 lakh deduction if the house is occupied by the owner or family or is vacant. The entire interest is deductible if rented out.
• Perquisites Tax: Typically taxed at 30% of the total value.
• Voluntary Retirement Scheme (VRS): Exemption up to ₹ 5 lakhs under Section 10(10C).
• Gratuity: Exemption up to ₹ 20 lakhs under Section 10(10).
• Leave Encashment: Exemption up to ₹ 3 lakhs for private employees; full amount for government employees.
• Standard Deduction: ₹ 50,000 introduced in 2023 for the New Tax Regime.
• Family Pension: Deduction under Section 57(iia) for family pension income.
• Agniveer Corpus Fund: New deduction under Section 80CCH(2) for amounts paid or deposited.

Source: https://www.ndtv.com/india-news/how-to-maximise-your-tax-savings-with-the-new-tax-regime-5833658