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The date for filing Income Tax Return i.e. ITR is very near and to avoid late fees and penalty, ITR for the financial year 2023-24 must be filed before July 31. Now the biggest dilemma or dilemma that the common taxpayer is facing is whether any relief will be given in the full budget coming on July 23 or not. So the answer to this is that even if any relief is given in the interim budget to be presented in February before the general elections or in the General Budget 2024 to be presented on July 23, then ITR will have to be filed for the financial year 2023-24 i.e. assessment year 2024-25 on the basis of last year's rules, slabs and rates.
Changes were made in the income tax system last year
Now let us remind you what changes were made by Union Finance Minister Nirmala Sitharaman in the rules related to income tax in the general budget presented last year i.e. in the year 2023. The Finance Minister had declared the new tax regime i.e. New Tax Regime, which was first announced in the year 2020, as default, but did not abolish the old tax regime i.e. Old Tax Regime. So this means that taxpayers can still choose the old tax regime as per their wish. This means that apart from life insurance, PPF, Sukanya Samriddhi Account (SSA), children's school fees etc., those wishing to avail exemptions like interest paid on home loan taken from the bank to build their house, amount deposited in NPS i.e. National Pension System or House Rent Allowance i.e. HRA Exemption will be able to deposit income tax by calculating tax at the old, unchanged rates in the Old Tax Regime.
Who will get how much benefit in which tax system…?
So let us tell you today who will benefit from the changes made in the new income tax system last year or who will have to pay more tax in which system. In the two charts given below, we have calculated the tax payable in the old tax system and the new tax system and from the table you can also see how much income tax you will have to pay in which system.
In these two charts, we have included examples of four salaried people whose annual income is ₹7,00,000, ₹10,00,000, ₹12,00,000 and ₹15,00,000 respectively. All four of them also get exemption under Section 80C of the Income Tax Act, exemption on House Rent Allowance (HRA exemption) and exemption under NPS, so let's see who will have to pay how much tax under which regime.
Tax liability under the old tax regime
In the first table of the old tax regime, you can see that all four taxpayers have been given the benefit of standard deduction, all four have saved the maximum of ₹1,50,000 under Section 80C of the Income Tax Act, all four taxpayers have deposited ₹50,000 in NPS, and have claimed HRA exemption or exemption on interest paid on home loan.
In the same table, the taxable income of the first taxpayer earning ₹7,00,000 per annum is ₹3,70,000 after availing all exemptions, on which his tax liability becomes zero despite being ₹6,240 due to exemption available under section 87A of the Income Tax Act. The taxable income of the second taxpayer earning ₹10,00,000 is reduced to ₹6,00,000 after deductions and exemptions of ₹4,00,000, on which he will have to pay income tax of ₹33,800. Similarly, after calculating deductions and exemptions, taxpayers earning ₹12,00,000 and ₹15,00,000 per annum under the old tax system will also have to pay ₹75,400 and ₹1,06,600 as income tax respectively.
Tax Liability in New Tax Regime
In the second table i.e. the new tax system, the income tax of these four taxpayers has also been calculated. Under the changes announced last year (on February 1, 2023), this time these four will be able to get the benefit of standard deduction and apart from this, due to changes in slabs and rates and increase in the exemption limit of section 87A of the Income Tax Act, a taxpayer with an annual income of ₹ 7,00,000 will not have to pay any tax this time also. A taxpayer earning ₹ 10,00,000 annually will have to pay ₹ 54,600 income tax, a person earning ₹ 12,00,000 annually will have to pay ₹ 85,800 income tax and a taxpayer earning ₹ 15,00,000 annually will have to pay ₹ 1,45,600 income tax.
So, with the help of these two charts you can clearly see that if a taxpayer gets more than ₹2,75,000 exemption from tax in the form of exemptions and deductions, then it will be beneficial for him to remain in the old tax regime, otherwise any taxpayer who does not save will benefit in the new tax regime.