Taxpayers who wish to opt for the old tax regime to retain their tax benefits must make a declaration regarding it.
Income Tax: While presenting the Union Budget on February 1, finance minister Nirmala Sitharaman announced changes in the new regime of personal income tax.
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Nirmala Sitharaman had 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).
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The rebate for the resident individual under the new regime has been raised to Rs 7 lakh.
Taxpayers with an annual income of up to Rs 7 lakh will save Rs 33,800 in taxes after the finance minister increased the rebate under the new income tax regime.
While the new tax regime may offer some benefits, you will have to let go of many tax deductions and exemptions that are available in the old tax regime.
Deductions available under old tax regime
1. Standard deduction: Rs 50,000 for salaried individuals (Also available in new tax regime)
2.Section 80 CCD (1B): Additional deduction of up to Rs.50,000 for deposited amount in NPS account.
3.Section 80TTA: This section provides deduction for an individual or an HUF of maximum Rs.10,000 against interest income from savings account with a bank, co-operative society or post office.
4.Section 80D: It allows deduction on health insurance premium
5. Section 80G: Donations to eligible trusts and charities qualify for deductions
6.Section 80C: Investments you make in EPF and PPF, ELSS, life insurance premiums, home loan payment, SSY, NSC and SCSS.
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Taxpayers must note that if you are an employee, and fail to choose between the new and old tax regime, you will have 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.
