New Income Tax Regime 2023: Finance Minister Nirmala Sitharaman in her Budget 2023 has focused on making this tax regime more attractive. The simplified personal tax regime or the New Tax Regime (NTR) was introduced with effect from the financial year 2020-21. While the tax rates under this regime were lower, no exemptions and deductions were provided, with the exception of a deduction for employer contribution to NPS.
Budget 2023 proposes to make the following deductions available to eligible individuals under the new tax regime from April 1, 2023:
Divya Baweja, Partner, Deloitte India. said: “As was expected, the FM has proposed various changes in the New tax regime to make it more popular. Out of 5 major announcements made under the personal tax, three proposals have been made for middle-class salaried individuals opting for the new tax regime which are – Increase in the rebate under Section 87A for people earning taxable income upto Rs 7 lakhs, change in tax slab rates and introduction of standard deduction and deduction against family pension, making the new tax regime all the more lucrative.”
Introduction of standard deduction of Rs 50,000
This is a positive move by the government to extend the benefit of the standard deduction to the new tax regime, with the objective of encouraging salaried individuals to opt for the new tax regime.
This deduction can be claimed without submitting any document to the employer for the same. An employer while calculating taxes on salary automatically takes standard deduction into account. If you are a family pensioner, then under the new tax regime you can claim a standard deduction of Rs 15,000. Income for a family pensioner is taxed under the head ‘Income from other sources.’
In her budget speech, FM Sitharaman said: “Standard deduction of Rs 50,000 to salaried individual, and deduction from family pension up to Rs 15,000, is currently allowed only under the old regime. It is proposed to allow these two deductions under the new regime also.”
NPS Contribution by Employer
If your employer is contributing to your NPS account, then as a salaried employee you are eligible to claim a deduction for the contribution made from gross income. This deduction is claimed under Section 80CCD (2) of the Income-tax Act, 1961.
Contributions Made by Agniveer to Agniveer Corpus Fund
Finance Minister Nirmala Sitharaman has announced that any amount paid or deposited to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-tax Act can be claimed as a deduction from income by the Agniveer.
According to the Budget speech, “The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 is proposed to be exempt from taxes. Deduction in the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account.”
As per the Budget memorandum, “It is further proposed to insert a new section 80CCH to the Act to provide that an assessee, being an individual enrolled in the Agnipath Scheme and subscribing to the Agniveer Corpus Fund on or after the 1st day of November, 2022, shall be allowed a deduction of the whole of the amount deposited by him and also the amount contributed by the Central Government to his account in the Agniveer Corpus Fund, from his total income.”
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