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Income tax: Taxpayers have two options for filing Income Tax Returns (ITR) in the country – old tax regime and new tax regime. Taxpayers can choose either of the two options as per their convenience. Although the new tax regime will be applicable by default from the current financial year, but if one wants to go with the old tax regime then he will have to opt for the old tax regime.
In such a situation, if you want to avail the benefit of income tax exemption by giving investment documents, then carefully select the old tax regime during proof submission. Because the benefit of investment deduction is not available in the new tax system.
Let us tell you, during Budget 2023, the Central Government had made a major change in the new tax system and announced to make the amount up to Rs 7 lakh tax free. Along with this, standard deduction benefit of Rs 50 thousand is also available in both the old and new income tax systems. In such a situation, there will be no tax on income up to Rs 7.50 lakh in the new tax slab. But if the annual income is more than Rs 7.5 lakh by even one rupee, then income tax will have to be paid as per the new rates.
Let us know about the new tax system
According to the new tax system, 0 percent income tax will be levied on annual income of Rs 0 to 3 lakh, 5 percent on income of Rs 3 to 6 lakh, 10 percent on income of Rs 6 to 9 lakh, and 15 percent on income of Rs 15. Tax will have to be paid at the rate of Rs 10 to 12 lakh, 20 percent on income less than Rs 15 lakh and 30 percent on income above Rs 15 lakh.
Tax will be levied on salary more than one rupee also
Suppose someone's salary is Rs 7.60 lakh per year. In the new tax regime, income up to Rs 7.5 lakh including standard deduction of Rs 50 thousand is tax free. But the annual earning here is Rs 7.60 lakh i.e. more than Rs 7.5 lakh.
According to the new tax system, there will be no tax on income up to Rs 3 lakh. Tax will be levied on the remaining Rs 4 lakh 60 thousand. Income of Rs 3 lakh to Rs 6 lakh will be taxed at the rate of 5 percent, which will be Rs 15,000. After this, after deducting the standard deduction of Rs 50 thousand from the remaining Rs 1 lakh 60 thousand, Rs 1 lakh 10 thousand comes under the tax net, which will be added to the 10 percent tax slab. Income tax on this is Rs 11,000. In this way, total income tax of Rs 26,000 is payable on income of Rs 7,60,000. But here a different rule of the Income Tax Department applies. Income of more than Rs 7 lakh and the tax applicable thereon, whichever is less, will be taxed.
According to this rule, income up to Rs 7.50 lakh including standard deduction is tax free, if the income is Rs 7.60 lakh then only Rs 10,000 is coming under the ambit of tax. Whereas the tax from the ordinary new tax slab is Rs 26000. Income Tax Department rules say that the minimum amount of these two will be payable as income tax. That means the amount of tax on income of Rs 7.60 lakh will be Rs 10 thousand.
This is mathematics…
Suppose your annual income is Rs 7.60 lakh. A benefit of Rs 50 thousand is available as standard deduction. (7,60,000-50,000 = Rs 7,10,000).
According to the rules, there is no provision of any tax on income of Rs 3 lakh. Therefore, out of seven lakhs, three lakhs will be tax free. (7,10,000- 3,00,000 = Rs 4,10,000).
Now tax will be levied on an amount of Rs 4 lakh 10 thousand. But this amount will come under the ambit of two tax slabs. Five percent tax will be levied on Rs 3 lakh. (3,00,000%5= Rs 15,000).
The remaining amount of Rs 1 lakh 10 thousand will come under 10 percent tax slab. 1,10,000%10= Rs 11,000. In this way (15,000 + 11,000 = 26,000) the total income tax becomes Rs 26,000. But the amount of income is only 10 thousand rupees more than the income tax limit, in such a situation only 10 thousand rupees income tax will have to be paid.