Tax exemptions that will continue to be available in the new tax system.

A new tax system was announced by finance minister Nirmala Sitharaman in the budget 2020 which gave relief to the income tax payer. But, the govt. has also placed a condition with this new tax slab. The condition is that the Taxpayers will have the choice to settle on between the new tax system and the old tax system. Income taxpayers adopting the new tax regime won't be able to benefit of the tax deduction and exemption found under Chapter VI-A of the income tax Act like standard deduction, home loan, LIC, health insurance etc. However, there are some tax exemptions which will continue within the new tax system. Lets take a look at which investments the tax exemptions that will continue n the new tax system.

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The amount of interest and maturity in PPF

In the new tax system, you'll not be able to avail tax exemption under Section 80C on contribution to PPF account. However, tax rebate will continue in the new tax regime on the amount of interest or maturity received from PPF account.

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Interest received on post office savings account

Tax rebate is offered to a specific extent under Section 10 (15) (i) of the income tax Act on the interest received on the amount deposited in the Post Office savings account. As per the notification issued on 3 June 2011, interest earned on post office savings accounts is not subject to tax. Up to Rs 3,500 in case of single account and up to Rs 7,000 in case of joint account. You'll be able to take exemption up to this amount within the new tax system.

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VRS amount

The rebate will also continue in the new tax system on the amount received on voluntary retirement.

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Amount received on maturity in NPS account

Tax rebate on lump sum amount received on maturity of a person's NPS account will also continue in the new tax regime.

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Employer's contribution to EPF / NPS account

According to the proposal made in the budget, the employer's contribution on EPF, NPS will get tax exemption.

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Interest up to 9.5% per annum in EPF

In the new tax system, tax rebate will continue on the interest received on your EPF account, but it should not be more than 9.5 per cent per annum.

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Gift received from Employer

In the new tax system, the tax exemption will continue on the gifts received from the employer.

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Gratuity received from the employer

If you get gratuity from your employer, you'll get tax rebate in line with the limit fixed on that amount. An employee gets gratuity when he has worked in the organization for a period of over five years. According to income tax rules, up to twenty lakh exemption is given on gratuity for non-government employees. There's a tax exemption on all gratuity received for government employees, there's no limit on the amount.

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Interest and payment received in Sukanya Samriddhi Yojana

The person investing in Sukanya Samriddhi Yojana will continue to have tax rebate on interest in the new tax system. With this, the total amount received on completion of the maturity period will also be tax free in the new system.

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Amount received on maturity of life insurance

In the new system of income tax, tax benefit is not available on the payment of life insurance premium under section 80C. But, under Section 10 (10D), you will get tax exemption on the amount received on maturity.

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