It’s that time of the year again, the start of a brand-new financial year. And you know what that means? Yep, time to get clued up on all things income tax-related so you can ace that tax planning game and make those tax-saving investments. Let me break it down for you:
Old vs. New Tax Regimes: First up, for TDS, you have to decide whether you’re rolling with the old or the new tax regime. Remember, the new one’s default, so if you want to stick with the old one, speak up when your employer comes knocking.
Basic Exemption Limit: Now, here’s where things get interesting. Under the new regime, you’ve got a sweet exemption of up to Rs 3 lakh irrespective of age. However, under the old tax regime, the basic exemption limit for individuals varies based on their age. Individuals below 60 years old can avail an exemption of Rs 2.5 lakh in a financial year. For senior citizens aged between 60 and 80 years, the exemption is Rs 3 lakh. Super senior citizens, aged 80 years and above, can avail an exemption for income up to Rs 5 lakh in a financial year.
Zero Tax Zone: Who doesn’t love a good tax rebate, right? Well, under Section 87A, both regimes offer a sweet deal. But the new regime gives a rebate of up to Rs 25,000, making incomes up to Rs 7 lakh tax-free. That’s right, zero tax. Income tax regulations provide tax rebates to resident individuals under both tax regimes.
The rebate, accessible under Section 87A, eliminates tax liability if the net taxable income remains below the specified threshold. Notably, the new tax regime provides a higher tax rebate in comparison to the old tax regime. The old tax regime allows a tax rebate of up to Rs 12,500, leading to zero tax payable for net taxable income up to Rs 5 lakh.
Deductions Arena: Now, here’s where you can really make a dent in that tax bill. The old regime offers a buffet of deductions – from Section 80C for investments to HRA and LTA. Meanwhile, the new one keeps it simple with just two deductions. Both the old and new tax regimes provide deductions and exemptions, yet the old regime is more generous in this regard. The old regime offers various deductions such as Section 80C for investments, Section 80D for health insurance premiums, and Section 80CCD (1B) for NPS contributions. Additionally, deductions are available for interest on home and education loans, as well as donations made.
Furthermore, tax exemptions on house rent allowance (HRA) and leave travel allowance (LTA) are accessible. On the other hand, the new tax regime simplifies deductions, offering only two options: a standard deduction of Rs 50,000 and a Section 80CCD (2) deduction for employer contributions to the NPS. Family pensioners are entitled to a standard deduction of Rs 15,000. Despite the reduced options, individuals can still lower their net taxable income and tax liability by leveraging these deductions according to their chosen tax regime.
Beat the Deadline: Don’t snooze on this one, if you’re team old regime, make sure you file that ITR before July 31st rolls around. Otherwise, you’re stuck with the new regime and maybe you don’t want that. If an individual submits their ITR after the deadline, between August 1 and December 31, their tax liability will be computed solely based on the new tax regime.
Surcharge Surprises: Under the new tax regime, high-income earners will face a reduced surcharge rate of 25% for incomes exceeding Rs 5 crore, down from the previous rate of 37%. Conversely, if they choose to stick with the old tax regime, they’ll be subject to a higher surcharge rate of 37%. Ouch!
Other Updates You Should Know About
New EPFO Rule: According to multiple reports in media, the Employees’ Provident Fund Organisation (EPFO) has introduced an automatic transfer system for your provident fund balance when you switch jobs. With this, you no longer need to manually request a transfer when starting a new job.
New Tax Regime: Tax brackets remain unchanged for the financial year 2024-25, and if your annual income is Rs 7 lakh or less, you won’t pay any income tax under the new system. Salaried employees with up to Rs 7.5 lakh income need not pay any tax.
NPS: Two-Factor Authentication: Starting April 1, 2024, the National Pension System (NPS) has implemented an additional security measure involving a two-factor Aadhaar-based authentication for accessing the CRA system via password. This aims to enhance security and mitigate fraudulent attempts.
New FASTag Rule: Ensure your FASTag KYC is done by March 31st to avoid any toll booth troubles. Banks may deactivate your FASTag if it’s not updated, leading to payment issues and potential double toll charges.
Exemption Of Enhanced Leave Encashment: For non-government employees, the tax exemption limit for leave encashment has been raised from Rs 3 lakh to Rs 25 lakh. This provides significant relief and benefits to eligible individuals.
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