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There are 4 days left to file Income Tax Return (ITR) for the financial year 2023-24. You have to complete this work by July 31. There are 2 tax regime options available for filing ITR. If you choose the first or old tax regime, only your income up to Rs 2.5 lakh will be tax free. On the other hand, if you choose the new tax regime, you will not have to pay tax on income up to Rs 3 lakh.
Today we are telling you about these two tax regimes available for filing ITR. So that you can save tax by choosing the right tax regime for yourself…
Understand the new tax regime
This time in the budget, there is no tax on annual income up to Rs 3 lakh. Whereas, 5% tax will have to be paid on income between Rs 3 lakh and Rs 6 lakh.
Suppose, someone’s annual income is Rs 7 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 3 lakh. That is, he will have to pay tax of Rs 15,000. But in this regime, the government waives tax on income up to Rs 7 lakh under section 87A.
There is a catch in this too. If your income is even one rupee more than 7 lakh rupees, then you will have to pay tax not on one rupee but on 4,00,001 rupees. Now after the tax of 3 lakh rupees is waived, out of the remaining 4,00001 rupees, 15,000 rupees will have to be paid at the rate of 5% on 3 lakh rupees and 10,000.10 rupees at the rate of 10% on the remaining 1,00,001 rupees. That means the total tax liability will be 25,000.10 rupees.
What is special in the new tax regime
- There is no discount of any kind in this.
- Income up to Rs 7 lakh can be made zero tax.
- If you do not invest in any scheme, then you should choose the new tax regime.
Understand the Old Tax Regime
Indore’s Chartered Accountant (CA) Anand Jain explains that suppose, if someone’s annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2.5 lakh. That is, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act.
There is a catch in this. If your income is even one rupee more than 5 lakh rupees, then you will have to pay tax not on one rupee but on 2.5 lakh rupees and 1 rupee. Now, at the rate of 5% on 2.5 lakh rupees, the tax liability will be 12,500 rupees. On the remaining 1 rupee, you will have to pay tax at the rate of 20%. That is, you will have to pay tax of 12,500.20 rupees.
What is special in the old tax regime
- You can avail tax exemption on expenses incurred on investments, health insurance, children’s school fees and house rent.
- In such a situation, if your money is spent on these things then the old tax regime will be right for you.
Which tax regime will be right for you?
If you are a salaried person and your annual income is up to Rs 7.75 lakh, then you can choose the new tax regime. In this, you will not have to pay any tax. On the other hand, if your annual income is more than Rs 7.575 lakh and you have made many investments in which you can get the benefit of tax exemption, then you can choose the old tax regime.
Apart from this, an income tax calculator is provided on the official website of the Income Tax Department. With its help, you will be able to easily calculate how much tax you will have to pay under which tax regime. After this, you will be able to choose the right tax regime for yourself according to your needs. Apart from this, you can also take the help of a CA.
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