New Tax Regime: Can You Claim LTA, Professional Tax? Check Deductions And Exemptions Available

New Tax Regime Deductions: While the new tax regime has removed most of the deductions that were available under the old regime, there are minor deductions one must be aware of. Under the New Tax Regime, Leave Travel Allowance (LTA), House Rent Allowance (HRA), education allowances, and hostel allowances are now taxable, unless there is strong evidence that they are required for professional work.

The government introduced a new tax plan in 2020 with lower tax slabs, but it does not allow for as many deductions on reported income as the old plan did. Here are some frequently asked questions and their answers:

Can one get a tax break for professional tax and for allowances for school and workplace uniforms under the new regime?

The new tax regime removes deductions mentioned in Chapter VIA, such as those for life and health insurance premiums (like 80C and 80D) and for interest income from savings accounts (such as 80TTA and 80TTB).

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The tax slabs for salaried individuals have been changed, and in some cases, new taxes have been imposed where there were none before. For instance, LTA, HRA, and children's school and hostel allowances are now taxed if you choose the new plan. The basic exemption of about Rs 1,500 for including a minor child's income, which was available in the earlier regime, has also been removed.

Here are the deductions that are allowed in both plans:

Standard Deduction from Salary: With the new tax regime, the standard deduction from an employee's salary is Rs 75,000, which was Rs 50,000 in the old regime.

National Pension System (NPS): Under the new tax regime, companies can now contribute a higher tax-deductible portion of up to 14 per cent of an employee's basic pay to their NPS account. This is an increase from the 10 per cent limit under the old regime.

Further, allowances paid to employees for their official duties are still allowed under the new regime.

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Now, to address some frequently asked questions:

Q1. Is professional tax allowed under the new regime?

A. No, professional tax is not a way to get a deduction under Section 16(III) of the new tax regime.

Q2. Are there any allowances given for uniforms or for academic purposes?

A. Uniform and academic allowances are not listed under Rule 2BB. However, if an individual genuinely incurred these costs while performing their duties, they can be exempted under the new tax regime, provided they submit proof of all expenses to the employer.

As per CBDT Guidelines, uniforms required by an individual for completing a job, such as for corporate jobs (airline crew, hotel employee, retail worker) or government jobs (such as a police officer or army personnel), are exempted from any taxes, as long as they are being used to fulfill official duties.