Economy

IT rules specify allowances for employees choosing new tax regime

The new tax regime is effective from FY 2020-21. Employees choosing the new tax regime for the FY 2020-21 cannot claim any deductions or exemptions as available under the old regime. The CBDT now notifies specific allowances an employee can claim tax-exempt under the new regime. The rules also report that an employee choosing the new regime cannot claim tax exemption on meal coupons allowance. 

The tax-exempt allowances under the new regime are as below:

  1. Allowance provided to meet the cost of travel on tour or transfer. It includes allowance to meet the cost of travel such as airfare, rail fare and other transportation costs.
  2. Any allowance to meet the ordinary daily charges incurred by an employee on account of absence from his usual place of duty. The allowance should be given on tour or for the period of journey in connection with a transfer. The allowance includes expenses incurred for food and other daily costs incurred while travelling.
  3. Allowance to meet conveyance expense incurred in the performance of duties of an office or employment of profit. However, the employer should not be providing a free conveyance to the employee. The allowance includes travelling expenses incurred while performing official duties.

Also Read: Tax Query: Can I continue with my LIC policy under the new tax regime?

Also, an employee who is blind, or deaf and dumb, or orthopedically handicapped, with a disability of lower extremities can claim transport allowance, to meet expenditure on commuting between residence and the place of duty. The benefit is up to Rs 3,200 per month.

However, the tax rules withdraw the tax-exemption for meal coupons or paid vouchers under the new regime. Thus, an employee choosing the new tax regime cannot claim tax exemption for meal coupons or paid vouchers given by the employer.

For any clarifications/feedback on the topic, please contact the writer at sweta.dugar@cleartax.in

Share

Recent Posts

Mutual Funds: SIP Inflows Breach Rs 19,000-Crore Mark for the First Time in February ’24

The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…

8 months ago

Income-Tax Return: A Brief Note on Annual Information Statement (AIS)

The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…

8 months ago

Mutual Funds: All About SIP and Market Fluctuations

Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…

8 months ago

Income-Tax Saving Through Strategic Life Insurance Planning

Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…

8 months ago

Income-Tax Return: Here’s a Note on Tax-Saving Avenues

A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…

8 months ago

A Quick Take on Equity-Linked Savings Scheme

Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…

8 months ago