New Tax Regime: There may not be any deductions in the New Tax Regime, but many tax free incomes of Section 10 are still valid. Therefore, use these schemes not for saving tax, but for financial planning and stay tax-free.
Even though most deductions have been abolished in the New Tax Regime, there are still some incomes and schemes on which there is no tax at all, that is, they are Tax Exempt. You will continue to get the benefit of all these, whether you are in the New or Old Regime. These exemptions come under Section 10 of the Income Tax Act. The government has protected these tax exemptions not as deductions, but as income exemptions. Therefore, these can be availed even in the New Tax Regime, even if you do not get deductions like 80C/80D.
1. PPF (Public Provident Fund)
2. Sukanya Samriddhi Yojana
3. EPF (with conditions)
4. LIC Maturity under 10(10D)
5. NPS (60% lump sum)
6. Agricultural Income
7. Gratuity
8. Savings Certificate
Is this the rule of Income Tax?
Yes, this has been clarified repeatedly on the Income Tax Department website and CBDT’s Tax Slabs FAQ. Some exemptions of section 10 still remain applicable in the New Regime. Some cases like NPS employer contribution, LIC maturity under 10(10D), PPF, Sukanya Samriddhi Yojana, agricultural income remain tax free.
| Schemes / Income | Tax Status in the Old Regime | Tax Status in the New Regime |
|---|---|---|
| PPF (Public Provident Fund) | Interest and maturity tax free (80C + 10(11)) | Interest and maturity tax free (Only Rs 10(11)) |
| Sukanya Samriddhi Yojana (SSY) | Interest and maturity tax free (80C + 10(11A)) | Interest and maturity tax free (10(11A)) |
| EPF (Employee Provident Fund) | Tax free after 5 years (80C + 10(12)) | Tax free after 5 years (10(12)) |
| LIC (Life Insurance – 10(10D)) | If premium limit is followed then maturity is completely tax free | The same rules apply (10(10D)) |
| NPS (60% withdrawal) | 60% withdrawal tax free, 40% pension taxable (CCD(2) + 80CCD(1B) deduction) | 60% withdrawal is tax free, 40% pension is taxable-but no deduction is available |
| Agricultural Income | Completely tax free (10(1)) | Completely tax free (10(1)) |
| Gratuity (retirement benefits) | Tax free up to ₹20 lakh (10(10)) | Tax free up to ₹20 lakh (10(10)) |
| NSC (Post Office Saving Certificate) | Principal is tax free, interest can be claimed under 80C | Principal is tax free but interest is taxable |
In which section of Income Tax will this exemption be available?
The exemptions under Section 10(10D), 10(1), and some savings instrument maturities remain tax-free under both regimes.
Section 10 clauses– Income Tax Act
- 10(11): PPF
- 10(12): EPF
- 10(10D): LIC
- 10(15): Sukanya
- 10(1): Agriculture
1: PPF- Public Provident Fund
- Interest and maturity both are tax free.
- Government guarantees.
- Tax free return of up to ₹22 lakh in 15 years.
- Section 10(11)
2: Sukanya Samriddhi Yojana
- The most trusted scheme in the name of daughter.
- Interest 8.2%, maturity completely tax free.
- Section 10(15)
3: EPF- Employee Provident Fund
- Entire amount tax free on completion of 5 years of service.
- Interest on contribution above ₹2.5 lakh is taxable.
- Section 10(12)
4. LIC Maturity- Section 10(10D)
- Maturity amount of policy is tax free if premium is ≤10% of sum assured.
- Policy is 5+ years old.
- Section 10(10D)
5: NPS Final Withdrawal (60%)
- 60% lump sum is completely tax free.
- 40% annuity is taxable, but tax is applicable every year.
6: Agriculture Income
- No tax on agricultural income.
- Tax free in all regimes.
- Section 10(1)
7. Gratuity
- If you are a government employee, then the entire gratuity is tax free.
- Private employees get gratuity up to ₹20 lakh tax free.
- This exemption is available in both tax regimes under section 10(10).
8. Savings Certificate
- The principal received on maturity is tax free.
- The interest is taxable. In the New Regime, tax will have to be paid on the interest.
- It is considered a scheme with safe and guaranteed returns.
There may not be any deduction in the New Tax Regime, but many tax free income of Section 10 are still valid. Therefore, use these schemes not for saving tax, but for financial planning and stay tax-free.
