People who choose the new tax regime should be aware of Section 115BAC of the Income-tax Act, 1961. This section was added in Budget 2020 and has been applicable since FY 2020-21, or Assessment Year 2021-22. It is commonly referred to as the new tax regime.
If individuals choose to pay taxes at reduced rates under the new tax regime, they must select Section 115BAC when filing their income tax returns. However, selecting Section 115BAC implies giving up around 70 tax exemptions and deductions that are otherwise available under the old tax regime.
Deductions And Exemptions: If an individual chooses the new tax regime under Section 115BAC, he/she will not be able to claim certain common deductions. These include deductions of Rs 1.5 lakh for specified investments or expenses under Section 80C, deductions of Rs 25,000 for medical insurance premiums paid under Section 80D, and deductions of Rs 50,000 for investment in the National Pension System (NPS) under Section 80CCD (1b), among others.
In addition, there are certain tax exemptions that individuals cannot avail of under the new tax regime. These exemptions include allowances, such as house rent allowance and leave travel allowance.