New Income Tax Bill: Deductions Available For Salary Earners
As the government is all set to table thenew Income Tax 2025 Bill in the parliament, bringing significant overhaul, there have been multiple relaxations and relief expected. If passed, the new income tax bill will replace the existing one, which has been there since 1961.
The Union Budget 2025-2026 had announced income up to Rs 12 lakh annually tax-free under the new tax regime.
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Income Tax Deductions On Salaries
The new bill has outlined specific deductions under Section 19: the tax on employment will be fully deductible under Article 276(2) of the Constitution. The standard deduction will be Rs 50,000 or the salary amount, whichever is less.
The gratuity received under the Payment of Gratuity Act, 1972, on retirement, incapacity, or death will be entirely deductible, while the retiring gratuity for defense service members will also be fully deductible.
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The other fully deductible taxes include death-cum-retirement gratuity and other gratuity upon retirement or termination: deductible up to Rs 75,000 or salary amount, whichever is lower.
As per the New Bill, the losses and depreciation claims from previous years will not be carried forward, and taxpayers can opt for these deductions before filing their income tax returns. After choosing, the option will remain in place unless withdrawn.
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The other major deduction from income tax is the pension commutation. Taxes will be completely deductible for civil, defense, and other government service pensioners. Compensation on retrenchment will be deductible up to Rs 50,000 or as per Section 25F(b) of the Industrial Disputes Act, 1947.
The income chargeable under the head “Salaries” shall be computed after making the deductions of the nature as mentioned.
The incomes that are chargeable to income tax under the head salaries include any salary due from an employer to an assessee in the tax year, whether paid or not; any salary paid or allowed to him in the tax year by or on behalf of
an employer though not due or before it became due to him; any arrears of salary paid or allowed to him in the tax year by or on behalf.
The salary part includes wages, any annuity or pension, any gratuity, any fees or commission, perquisites, profits in lieu of, or in addition to, any salary or wages, any advance of salary, and any payment received by an employee in respect of any period of leave not availed of by him.
