New Income Tax Bill: Check Here Which Deductions Have Been Omitted
New Income Tax Bill: Check Here Which Deductions Have Been Omitted
The Income Tax Bill 2025 introduces significant reforms in India’s tax system, including the elimination of several deductions that were previously available to taxpayers. The government aims to simplify the tax structure, remove outdated provisions, and streamline compliance. This article provides a detailed look at the deductions that have been omitted under the new tax regime.
1. Standard Deduction for Salaried Employees
The standard deduction of ?50,000 that was available to salaried individuals has been omitted. This means employees will no longer be able to claim this automatic deduction, potentially increasing taxable income for many middle-class taxpayers.
2. House Rent Allowance (HRA) Deduction
Under the new tax bill, the HRA deduction for employees living in rented accommodations has been removed. This will impact taxpayers who relied on HRA exemptions to lower their taxable income, particularly in metropolitan cities where rent is a major expense.
3. 80C Deductions for Investments
One of the biggest changes in the new bill is the omission of Section 80C deductions, which allowed taxpayers to claim deductions of up to ?1.5 lakh for investments in:
- Public Provident Fund (PPF)
- Employee Provident Fund (EPF)
- Life Insurance Premiums
- Equity Linked Savings Schemes (ELSS)
- National Savings Certificate (NSC)
Without this deduction, taxpayers may need to reconsider their investment strategies.
4. Interest Deduction on Home Loans (Section 24b)
Previously, taxpayers could claim deductions of up to ?2 lakh on home loan interest under Section 24b. This deduction has now been omitted, making home loans potentially more expensive for individuals planning to buy property.
5. Deduction for Education Loans (Section 80E)
The deduction on interest paid for education loans under Section 80E has been removed. This will particularly affect students and parents who relied on this benefit for higher education financing.
6. Medical Insurance Premium (Section 80D)
The popular Section 80D deduction for health insurance premiums, which allowed deductions up to ?25,000 for individuals and ?50,000 for senior citizens, has been omitted. This move may discourage taxpayers from purchasing health insurance, affecting overall financial security.
7. Deduction for Savings Bank Interest (Section 80TTA & 80TTB)
Previously, taxpayers could claim deductions of up to ?10,000 (for individuals) and ?50,000 (for senior citizens) on interest earned from savings bank accounts. These deductions have now been scrapped, increasing tax liabilities for individuals relying on bank savings.
8. Agricultural Income Exemption
Agricultural income, which was previously exempt from tax, has now been brought under the tax net for individuals earning above a specified threshold. This could impact large-scale farmers and agribusiness owners.
9. Deductions for Donations (Section 80G)
The new tax regime eliminates deductions for donations made to charitable organizations under Section 80G. This could discourage philanthropy and reduce funding for non-profit organizations.
10. Deduction on Gratuity and Leave Encashment
The exemption on gratuity and leave encashment at retirement has been removed. Employees will now be required to pay tax on amounts received as gratuity and leave encashment, affecting their retirement benefits.
Impact of the Omissions
- Higher Taxable Income: With the removal of these deductions, individuals will see a rise in their taxable income.
- Increased Tax Liabilities: The omission of major deductions means taxpayers will pay higher taxes unless compensatory measures, such as reduced tax rates, are introduced.
- Changes in Investment Strategies: Many taxpayers relied on Section 80C for tax-saving investments. With its removal, alternative strategies will be needed.
- Housing Sector Impact: The omission of home loan interest deductions may impact real estate purchases.