Budget 2020 : Exemptions Not Available Under New Tax Regime

Exemption as per budget 2020

Union Budget 2020 was presented in parliament by honorable Finance Minister on 01.02.2020. In our last article, we have discussed the new changes made in the taxability of Non-resident. In this article, we will understand the exemptions and deductions available to an assessee under the new tax regime. So, this article will not only cover the new exemption but it will give you the glance of all the exemptions and deductions which can be claimed by an assessee under the normal conditions however all these exemptions shall not be allowed to the assessee if he has chosen the new tax slab rates.

First let understand about the new tax slab structure in which an option has been given to individuals and HUF to pay tax at lower rates, however, it is subject to a certain condition wherein one of the condition is that assessee who is opting for the scheme, he shall not eligible for various exemptions and deduction. Following are the comprehensive list of Exemption and those deductions which will not be available under the new regime.

Those deductions which are phased out as per the new regime u/s 115BAC as per Budget 2020

1. Section 10(5): Leave travel concession (LTA) applicable for salaried employee
2. Section 10(13A): House Rent Allowance (HRA) applicable for salaried employee

Section 10(14): Other Certain allowances applicable for salaried employees.

3. Any allowance which is granted to meet the cost of travel on tour or on transfer;
4. Any allowance, which is granted on tour in connection with the transfer,  and to meet ordinary daily charges incurred by the employee in the absence from his normal place of duty;
5. Any allowance which is granted to meet the expenditure incurred on the conveyance in performance of duties of an employment or office of profit;
6. Any allowance which is granted to meet the expenditure incurred on a helper where such helper would be engaged for the performance of the duties of an office or employment of profit;
7. Any allowance which is granted to encourage the academic, training pursuits, research and in educational and research institutions;
8. Any allowance which is granted for meeting the expenditure incurred on the purchases or maintenance of uniform at the time of performance of the duties of an office or employment of profit;10 (14)(ii)

9. Any of the Special Compensatory Allowance which would be in the nature of [Special Compensatory (Hilly Areas) Allowance] or Uncongenial Climate Allowance or High Altitude Allowance or Avalanche Allowance; 
10. Any Special Compensatory Allowance which is in the nature of Border Area Allowance, Difficult Area Allowance or Remote Locality Allowance or Disturbed Area Allowance
11. Any Special Compensatory (Tribal Areas/Agency Areas /Schedule Areas) Allowance]
12. Any allowance which is granted to an employee, who is working in any transport system to meet his personal expenditure during his duty performed 
13. Children Education Allowance (CEA)
14. Any allowance which is granted to an employee for meeting the hostel expenditure on his child
15. Compensatory Field Area Allowance
16. Compensatory Modified Field Area Allowance
17. Any special allowance in the nature of counterinsurgency allowance granted to the armed members of forces operating in areas which are away from their permanent locations
18. Transport allowance granted to an employee, to meet his expenditure from the place of his residence and the place of his duty
19. Any Underground Allowance which is granted to the employee who is working under an unnatural climate in underground mines
20. Any special allowance which is in the nature of high altitude allowance and granted to the armed member of forces operating in high altitude areas
21. Any special allowance which is granted to the armed members of forces and in the nature of special compensatory highly active field area allowance
22. Any special allowance which is granted to the armed member of forces and in the nature of Island allowance
23. Section 10(17): In case of persons who is a Member of Parliament or any State Legislature or of any committee thereof, any income arises by way of daily allowance or any other allowance shall not be eligible for exemption where such person opts for section 115BAC.
24. Section 10(32): In case, where the income of a minor is clubbed with the income of the parent under section 64(1A), a sum of Rs.1500 is allowed as a deduction under section 10(32). This deduction cannot be claimed by the parent who opts for section 115BAC.
25. In the case of a newly established undertaking which is in the free trade zone, a deduction is allowed in section 10AA. 

Section 16

26. The standard deduction which is applicable for persons who are in employment against salary income, could not be claimed if the taxpayer opts for section 115BAC.
27. No exemption of professional tax and entertainment allowance 
28. Section 24(b): In the case of taxpayers who are having a self-occupied property for own residence or who has not occupied the property due to employment, business or profession carried on at any other place, he has to reside at that other place in a building which is not belonging to him, the annual value of the property shall be taken to be `nil’. However, interest on money borrowed shall be deductible up to a maximum of Rs.2 lakhs. This deduction also could not be claimed when the assessee opts for section 115BAC.
29. Section 32(1)(iia): Additional depreciation in the case of persons who are engaged in the business of manufacture or production of any article or thing or a person engaged in the business of generation, transmission or distribution of power is allowed a deduction equal to 20% of the actual cost of machinery or plant. This shall be allowed in addition to the normal depreciation allowed under section 32(1)(ii). This additional depreciation has not to be allowed by a taxpayer if he opts for section 115BAC.
30. Section 32AD: This section provides for enhanced depreciation at the rate of 15% of the actual cost of new asset being plant or machinery where the assessee is engaged through undertaking or enterprise, in manufacture or production of any article or thing which is in the notified backward area in the States of Andhra Pradesh, Bihar, Telangana or West Bengal. This deduction of accelerated depreciation has to be forgone by the assessee when he opts for section 115BAC.
31. Section 33AB: This section provides to the taxpayer who is carrying on the business of growing and manufacturing tea or coffee or rubber in India for the deduction equal to the lower of the amount of deposit or 40% of the profits of the business. This deduction is also could not be available to the taxpayers when opts for section 115BAC.
32. Section 33ABA: It providing deduction to the taxpayer for site restoration fund of lower of the amount equal to the amount deposited or 20% of the profits of the business of the assessee which is carried on the business consisting of prospecting for or extraction of natural gas or production of petroleum or both in India. This deduction shall not be available to the assessee who opts for section 115BAC.
33. Section 35(2AA):  Assessee cannot claim the deduction as available in this section of the number of donations made to the National Laboratory or a University or an IIT for section 115BAC.
34. Section 35AD: Under this section, there are 14 certain specified businesses in which the entire amount of capital expenditure incurred towards plant and machinery is allowed as deduction. The same shall not be available to the person who opts for section 115BAC.
35. Section 35CCC: This Deduction is given for agricultural extension projects and allowed 150% of the expenditure incurred. Such deduction cannot be claimed when the assessee opts for section 115BAC.
36. Section 57(iia): If a person receiving a pension died then his family would become eligible to take such pension and that pension is then called a family pension. On the family pension amount, lower of the 1/3rd of such income or Rs.15,000 is allowed as deduction. Now such deduction on the family pension cannot be claimed when the assessee opts for section 115BAC.

Deduction under chapter VIA as follows :

Section 80C :

37. Life insurance premium (LIP) for policy:
38. a) In case of an individual:  On assessee, assessee’s spouse and child of assessee
39. b) In case of HUF: Any member’s life of the HUF
40. Sum paid for a contract under a deferred annuity:
41. a) In case of an individual:  On assessee, assessee’s spouse and child of assessee 
42. b) In case of HUF: Any member’s life of the HUF
43. Any sum deducted from salary which is payable to Government servant for securing deferred annuity 
44. Any Contributions by an individual made under Employees’ Provident Fund Scheme (EPF)
45. The contribution made by an assessee to Public Provident Fund Account in the name of:
46. a) In case of an individual:  On assessee, assessee’s spouse and child of assessee
47. b) In case of HUF: Any member’s life of the HUF
48. The contribution made by an employee to a recognized provident fund (RPF)
49. The contribution made by an employee to an approved superannuation fund (SPF)
50. Subscription to the notified security or any notified deposit scheme of the Central Government.

Note: For this purpose, there is a scheme named Sukanya Samriddhi Account Scheme which has been notified vide Notification No. 9/2015, dated 21/1/2015. Under this scheme, any sum deposited during the year in Sukanya Samriddhi Account by an individual shall be eligible for deduction. However, if the person opts for section 115BAC, it cannot be eligible to make such deduction.

45. Subscription to national savings certificates (NSC VIII issue)
46. Contribution to participate in unit-linked Insurance Plan of UTI-
47. a) In case of an individual:  On assessee, assessee’s spouse and child of assessee
48. b) In case of HUF: Any member’s life of the HUF
49. Contribution to a notified unit-linked insurance plan of LIC Mutual Fund:
50. a) In case of an individual:  On assessee, assessee’s spouse and child of assessee
51. b) In case of HUF: Any member’s life of the HUF
52. Subscription to the notified pension fund which is set up by National Housing Bank 
53. Tuition fees paid by an individual assessee to any university, college, the school for full-time education of any 2 of his/her children
54. Certain loan repayments made for the purchase/construction of residential house property
55. Subscription to the notified schemes of (a) public sector companies (PSU) who were engaged in providing the long-term finance for purchase/construction of residential houses in India /(b) authority which is constituted under any law for the purpose of satisfying the need for housing accommodation.
56. Sum paid towards any notified annuity plan of LIC or other insurers
57. Subscription to any units of the notified scheme of Mutual Fund or the UTI 
58. Contribution by an individual towards any pension fund which is set up by any mutual fund or by the UTI 
59. Subscription made by a public company or public financial institutions to the equity shares or debentures forming part of any approved eligible issue of capital.
60. Subscription to the units of any approved mutual fund provided that such amount of subscription to such units should be subscribed only in ‘eligible issue of capital’.
61. Term deposits for a fixed term of not less than 5 years in a scheduled bank, and which shall be in accordance with a scheme framed and notified.
62. Subscription to any notified bonds which were issued by the NABARD.
63. Deposit in the account under the Senior Citizen Savings Scheme Rules, 2004
64. 5-year term deposit under the Post Office Time Deposit Rules, 1981 
65. NPS account by central Government’s employees being Contribution to Tier-II.
66. Section 80CCD: Deduction in respect of the contribution made to pension scheme of Central Government 
67. Section 80D: deduction of health insurance or health checkup by an individual or HUF to LIC or other insurers to effect or keep in force an insurance on the health of the specified person
68. Section 80DD: Deduction of the maintenance in which includes medical treatment of an assessee’s dependent who is a person with a disability
69. Section 80DDB: under this exemption, those Expenses shall be deductible which is actually paid for medical treatment of any specified diseases and ailments
70. section 80E: interest on education loan: deduction available to the taxpayer on interest on loan taken from any financial institution/approved charitable institution for higher education purposes.
71. Section 80EE: Interest payable on the loan amount which is taken up to Rs. 35 lakhs by the taxpayer from any financial institution and sanctioned during the FY 2016:17.
72. Section 80EEA: Interest payable on the loan amount which is taken by an individual, and who is not eligible to claim deduction under section 80EE, from any financial institution for the purpose of acquisition of a residential property and whose stamp duty value has not exceeded Rs. 45 lakhs
73. Section 80EEB: Interest payable on the loan amount taken by an individual being assessee from any financial institution to purchase an electric vehicle. This is a new section which is being introduced in this budget.
74. Section 80GG: Any Rent paid of furnished/unfurnished residential accommodation. It is similar to HRA. If a person fails to claim the deduction in HRA, then he can claim the deduction by using this section. 
75. Section 80G: Deduction of donations to certain funds, charitable institutions as mentioned in this section. 
76. Section 80GGA: Deduction of the certain amount of donations for scientific research or rural development
77. Section 80GGC: Deduction of contributions which is given by any person to political parties
78. Section 80JJA: Deduction of profits and gains from business of collecting and processing of bio-degradable waste
79. Section 80QQB: Any Royalty income of authors being the assessee of certain specified categories of books except textbooks.
80. Section 80RRB: Any Royalty in respect of patents registered on or after 01.04.2003 
81. Section 80TTA: Any Interest income earned on deposits in savings account with a banking company, a post office, co-operative society engaged in the banking business, etc. The deduction is available only in respect of saving bank accounts.
82. Section 80TTB: Interest income earned on deposits with a banking company, a post office, co-operative society engaged in the banking business, etc. for senior citizens
83. Section 80U: At any time during the previous year, a resident individual being assessed who is certified by the medical authority as a person with a disability.