5 big benefits of the new tax regime: From standard deduction to NPS – great benefits for the salaried class..
New Tax Regime: The new tax system is simple. It has fewer tax slabs, fewer conditions, and limited deductions, but the benefits offered are directly beneficial. Let's explore five major benefits that offer salaried individuals the opportunity for sound tax planning.
Tax rebate up to Rs 60,000 under Section 87A
The biggest benefit of the New Tax Regime is the tax rebate available under Section 87A. If your total taxable income is up to Rs 1.2 million, you receive a maximum rebate of Rs 60,000. This means zero tax on income up to Rs 1.2 million. This is a significant relief, especially for middle-class salaried employees who previously had to pay taxes.
Standard deduction of Rs 75,000
Salaried employees under the New Tax Regime receive a standard deduction of Rs 75,000. This can effectively make an income of ₹12 lakh tax-free (including rebates and deductions) up to ₹12.75 lakh. This means a tax relief of ₹75,000 without having to disclose any investment. This benefit is extremely useful for those who don't want to go through the hassle of investing.
Employer Contribution to NPS – Section 80CCD(2)
Even in the New Tax Regime, employer NPS contributions are eligible for deduction under Section 80CCD(2). This deduction is not included in the 80C limit, thus providing a separate benefit.
Tax Exemption on Gratuity
Gratuity received at the time of retirement is also tax-free under the New Tax Regime. It is completely tax-free for government employees, while a limit of ₹20 lakh has been set for private employees.
Relief on Leave Encashment
Leave encashment received at the time of retirement is also tax-free up to a certain limit. This means that choosing the new system does not eliminate retirement benefits. This is useful for employees who work with the same company for a long time.
Quickly Understand: 5 Benefits of the New Tax Regime
How Much Benefit? Who Will Get It?
87A Rebate Up to 60,000 Income up to 12 lakhs
Standard Deduction 75,000 All Salaries
NPS (80CCD2) 10%-14% NPS Employees
Gratuity Up to 20 lakhs Retiring Employees
Leave Encashment Fixed Limit Retiring Employees
Is the New System Right for Everyone?
It depends on how much you invest. If you make full use of exemptions like 80C, 80D, and HRA, the old system may be beneficial. But if your investment is small or you want a simpler tax process, the new system is more convenient and transparent.
Why is the salaried class getting relief?
The new tax regime aims to simplify the tax system.
Fewer documents, fewer calculations, and less hassle are its hallmarks.
Facilities like zero tax up to Rs 12 lakh leave the middle class with more disposable income. This increases both spending and investment opportunities.
Disclaimer: This content has been sourced and edited from Zee Business. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.
