Income Tax Return 2024: Taxpayers have started filing income tax returns for 2023-24 as the Income Tax Department recently released ITR-1, ITR-2, and ITR-4 for return filing. Taxpayers will have to choose one of these forms to initiate tax return filling.
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but, before doing this, taxpayers must choose one from the old or new tax regime. Both systems have their advantages and disadvantages. Below are the details.
No tax on earnings up to Rs 7.5 lakh in the new system
Finance Minister Nirmala Sitharaman increased the tax exemption limit from Rs 2.5 lakh to Rs 3 lakh in the new income tax system in the budget for 2023. This indicates that if a person’s annual income is up to Rs 3 lakh or less then he/she does not have to pay any tax. Additionally, the rebate under Section 87A of the Income Tax Act, 1961 has been raised from Rs 5 lakh to Rs 7 lakh. A standard deduction of Rs 50,000 is also available to employed people. This indicates that if a person’s annual income is Rs 7 lakh, they will not have to pay any tax under the new system.
Taxpayers have the option to choose a tax regime
Taxpayers have the option to choose between the new and old tax regimes.
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It is critical to keep in mind, though, that the default tax system is now the new tax system. Under Section 87A, a person with an annual income of less than Rs 7 lakhs under the new tax system may claim a rebate. The rebate will be either 100% of the income tax or Rs 25,000, whichever is lower. A person with an annual income of up to Rs 5 lakhs under the old tax system was eligible for the Section 87A rebate. The rebate will be either 100% of the income tax or Rs 12,500, whichever is lower.
Who Benefits from the New Tax Regime?
According to tax experts, if a person does not make any savings and does not want to claim deductions or exemptions, the new income tax regime is advantageous for him or her. If a person does make savings, particularly in tax-saving schemes, or pays tuition fees for two children, the old tax regime is superior. Under Section 80C, tax-saving investments and tuition fees for two children can be claimed as a deduction. This reduces the tax liability of an individual.
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Various deductions and exemptions under the old system
Tax rates are lower under the new tax system. However, many deductions and exemptions are no longer available. Under the old tax system, many deductions and exemptions were available, but tax rates were higher. Therefore, taxpayers should keep these things in mind and use the system that is most beneficial to them.
