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Filling ITR: The Income Tax Department has recently released ITR-1, ITR-2 and ITR-4 forms for online return filing. Taxpayers can file tax returns for 2023-24 online or offline till July. However, the biggest question for taxpayers is whether they should file returns as per the new tax system or as per the old system… which of the two systems will be beneficial and suitable for them? Let us know what is the difference between the two and how they are useful.
In the new system Rs. No tax on income up to Rs 7.5 lakh
The tax exemption limit in the new income tax regime in the Budget 2023 presented by Finance Minister Nirmala Sitharaman is Rs 20,000. Increased from Rs 2.5 lakh. 3 lakh. That is, a person whose annual income is Rs. 3 lakh or less, they will be exempted from tax. Also, under Section 87 (A) of the Income Tax Act 1961, Rs. Standard deduction of Rs 50 thousand is also available. Meaning, if a person's annual income is Rs 7 lakh, then he will not have to pay any tax as per the new system.
new and old method
The taxpayer can file tax returns as per both the new and old systems, however, it has to be noted that under the new system the annual income should not exceed Rs. 7 lakh, you can claim exemption under section 87(A). The exemption amount is 100 percent of the income tax or Rs. 25 thousand (lesser of both the amounts) will be applicable.
In the old system, if the annual income of a person was Rs. If it is Rs 5 lakh, he gets the benefit of exemption under Section 87 (A). The exemption amount is 100 percent of the income tax or Rs. 12500 (lesser of both amounts) will be applicable.
How do both benefit?
According to a tax expert, if a person does not save and does not claim deductions and tax exemptions then the new system is beneficial for him. If a person is specifically saving in tax-saving schemes or paying children's tuition fees, then the old method is suitable for him. You can claim deduction under Section 80C on tax-saving investments and tuition fee payments for both children. This reduces the tax liability.
Benefit of multiple deductions and tax exemption in the old system
Tax rates are lower in the new tax system. But most deductions and tax exemptions are not availed of. Whereas in the old system many types of deductions and tax exemptions are available. However, tax rates are higher in the old system. Therefore, taxpayers can adopt any method depending on their investments and salary.