Nirmala Sitharaman, the finance minister, has concentrated on making this tax regime more appealing in her Budget 2023 by altering income tax slabs. With effect from the financial year 2020–21, the New Tax Regime (NTR), also known as the simplified personal tax regime, was implemented. Although the tax rates were lower under this regime, none of the exemptions or deductions existed outside of the deduction for employer contributions to the NPS.
In addition, the government has permitted some deductions that qualified people may use beginning on April 1, 2023, in the new tax system. The following deductions are proposed in Budget 2023 to be made available to qualified persons under the new tax system beginning on April 1, 2023.
1. Introduction of standard deduction for salaried individuals, pensioners:
A standard deduction is essentially a tax deduction that is permitted regardless of the investment or expense that the individual has undertaken. This form of income tax standard deduction is allowed at a standard rate, thus no disclosures, investment proofs, or expense bills are necessary.
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Under the new tax system starting in FY 2023–2024, salaried taxpayers are now qualified for the standard deduction of Rs. 50,000. To encourage salaried people to choose the new tax system, the government made a wise decision by extending the standard deduction benefit to the new tax system.
2. Employer contribution to New Pension System:
As a salaried employee, you are qualified to claim a deduction for the contribution made from gross income if your company makes contributions to your NPS account. According to Section 80CCD (2) of the Income-tax Act of 1961, this deduction is requested.
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Under section 80CCD (2) of the Income-tax Act, central and state government employees are currently eligible for the enhanced deduction of 14 per cent of basic pay on employer contributions to NPS. For those working in the private sector, the cap is merely 10%.
3. Contribution made to Agniveer Corpus Fund:
The Agniveer Corpus Fund contribution received by Agniveers registered in the Agnipath Scheme, 2022 is planned to be exempt from income tax in Finance Bill 2023. It is also suggested that Agniveer members be permitted to deduct from their gross income any donations made to their Seva Nidhi accounts by taxpayers or the Central Government.
