New Tax Regime: Are Your Allowances Fully Taxable?

Under the new income tax regime, most allowances like HRA, LTA, and special pay are fully taxable. A Delhi HC case on judges' allowances is spotlighting this gap — and salaried employees everywhere should pay attention.

Here's what happened: Delhi High Court is examining whether allowances paid to High Court and Supreme Court judges are taxable under the new income tax regime.. The Delhi Tax Bar Association challenged a CBDT memo, arguing certain allowances should remain exempt even under the new regime.. The case is adjourned to July 16 — but it raises a wider question every salaried Indian must reckon with: are your allowances protected?.

What you should do: Check your salary slip: identify every allowance (HRA, LTA, transport, meal) and confirm whether you are on the old or new tax regime.. Calculate your break-even: if your total exemptions and deductions exceed ₹3.75 lakh, the old regime may still save you more money.. Ask your HR or payroll team to run a tax comparison for both regimes before the next financial year declaration deadline..

If you live in a metro and pay rent above ₹15,000/month, staying on the old tax regime purely for HRA exemption can save you ₹25,000–₹60,000 in annual tax — do the math before switching.