Employees Have To Inform Employers About Intention To Opt For New Tax System, Says CBDT

The income tax department on Monday said employees will have to inform their employers about their intention to opt for the new optional tax regime to enable the latter to deduct TDS while paying salaries. The new income tax regime, announced in Budget, provide an option to individuals and Hindu Undivided Families (HUFs) to be taxed at lower rates if they do not avail specified exemptions and deductions, like house rent allowance (HRA), interest on home loan, investments made under Section 80C, 80D and 80CCD. Under this, total income up to Rs 2.5 lakh will be tax exempt..A 5 per cent tax will be levied on total income between Rs 2.5 lakh and Rs 5 lakh, 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh, 25 per cent on Rs 12.5 lakh to Rs 15 lakh, and 30 per cent on above Rs 15 lakh..In a circular, the Central Board of Direct taxes (CBDT) said an employee intending to opt for concessional rates of income tax as provided in the Budget 2020 may intimate the deductor or his employer of such intention.."The deductor shall compute his total income and make TDS (tax deducted at source) thereon in accordance with the provision of Section 115 BAC of the (Income Tax) Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of Section 115 BAC of the Act," it said..The CBDT has, however, said that the employee can change the option of tax structure at the time of filing income tax return and the amount of TDS payment will get adjusted accordingly. Nangia Andersen Consulting Director Shailesh Kumar said there was no clarity to the employers, whether they should deduct TDS under the new option or should continue deducting TDS under the old regime, since there was no corresponding change in the TDS provisions enabling them to deduct TDS under the new option..This circular will remove the confusion amongst employers and will also ensure there are minimum mismatch in the TDS and ITR (income tax return) of employees, if they adopt a consistent position while making declaration to the employer as well as in their ITR, regarding option (new or old) opted by them..AKM Global Partner Amit Maheshwari said, "Now, it's clear that the employee (only those not having income from business or profession) cannot change the option once exercised for the purpose of getting TDS deducted but can always change it at the time of filing the tax return.".Under the old tax system, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5 lakh and Rs 5 lakh attracts 5 per cent tax, while that between Rs 5 lakh and Rs 10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent.

Employees Have To Inform Employers About Intention To Opt For New Tax System, Says CBDT

NDTV Profit

NDTV Profit

Follow Us

DOWNLOAD THE APP