Income Tax: The government has brought in some changes to the new tax regime to make it more attractive to taxpayers.
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Finance Minister Nirmala Sitharaman announced that the new taxation regime put in place by the government would be the default one from the financial year 2023-24. Taxpayers who wish to opt for the old tax regime to retain their tax benefits must make a declaration regarding it. But if you fail to opt between the old and new tax regime, then it will impact your tax deducted at source (TDS).
Employees who fail to choose between the new and old tax regime, will have their TDS cut at the new regime rates. A circular by the Central Board of Direct Taxes has made the matter clear. “If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the new tax regime. Accordingly, in such a case, the employer shall deduct tax at source, on income under section 192 of the Act, in accordance with the rates provided under sub-section (lA) of section 115BAC of the Act,” the notice stated.
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The employer will be liable to deduct TDS at new tax regime rates if the decision is not made by the employee. The employer must seek information of their workers’ intended tax regime and deduct the tax accordingly.
Salaried employees can get a number of benefits under both tax regimes. They need to select the regime which will offer them the maximum amount of tax benefits.
The government has brought in some changes to the new tax regime to make it more attractive to taxpayers. This includes providing a standard deduction of Rs 50,000 in the regime. Earlier, this deduction was only available in the old tax regime.
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Taxpayers can also get a deduction against the employer’s contribution to the central government’s pension plan under both regime.
Employees can also get rebate u/s 87A if their taxable income does not go beyond a specific amount in a financial year. Employees who have income till Rs 5 lakh, will get Rs 12,500 as rebate under the old tax regime. Those opting for the new tax regime will get a rebate of Rs 25,000 if their income is up to Rs 7 lakh.
