- If you are opting for the new tax regime, then you need to know incomes that are exempted from income tax even in the new tax regime.
- In the private sector, gratuity received due to the death of an employee will be tax-exempt irrespective of any amount.
- Interest received on post office savings account is exempt from income tax under Section 10 (15)(i) of the I-T Act 1961.
New Delhi: The new tax regime, which is applicable from April 1, 2020, is optional, anyone opting for the new tax regime will have to forego most of the deductions available under the income tax law such as Section 80C, 80D, 80TTA for deduction on savings account interest earned from a bank account. However, the government left unchanged some deductions available on some income in the new tax regime. If you are opting for the new tax regime, then you need to know incomes that are exempted from income tax even in the new tax regime.
1) Gratuity received from employer
The new tax regime has exempted gratuity income received from employer to a certain limit. For private-sector employees, gratuity up to Rs 20 lakh in a lifetime is exempt from income tax. But for government employees, gratuity is exempt from tax irrespective of any amount. Worth mentioning here is that in the private sector, gratuity received due to the death of an employee will be tax-exempt irrespective of any amount.
2) Amount received from life insurance policy maturity
In the old tax regime, maturity proceeds received from a life insurance policy are exempt from capital gains tax under Section 10(10D) of I-T Act 1961. This deduction is still available in the new tax regime.
3) Employer’s contribution to EPF/NPS account
Employer’s contribution to the employee’s EPF, NPS and to any other superannuation fund will be exempt from tax. However, unlike the old tax regime, there is an upper limit of Rs 7.5 lakh in a year on this deduction. Any contribution to EPF, NPS and superannuation fund beyond Rs 7.5 lakh in a year will be added to the income of the employee and will be taxed as per his slab. In addition to this, any interest or gains earned from the excess contribution will be subject to tax in the hands of the employee.
4) Interest received on post office savings account
Interest received on post office savings account is exempt from income tax under Section 10 (15)(i) of the I-T Act 1961. In case of individual accounts, this exemption is available up to Rs 3,500 in a year. For joint accounts, this limit is Rs 7,000 per year. This exemption is available in the tax regime as well.
5) Interest received from EPF & PPF
Interest received from Employees’ Provident Fund (EPF) account is exempted from income tax even in the new tax regime, provided it does not exceed 9.5% per annum. Although the new tax regime disallows annual contribution to PPF for deduction, interest earned on PPF contribution or maturity proceeds from PPF are exempt from tax in the new tax structure as well.
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2 thoughts on “New Income Tax Slab (FY 2020-2021): Five Incomes Are Exempted”
Very nice information