The tax season is here, and everyone is preparing to file Income Tax Returns (ITR). Given the government's changes for this fiscal, income up to Rs 12 lakh stands free from taxes in the new regime.
That doesn't mean you don't have to file ITR. One must always maintain their tax record to ensure compliance. They also help in claiming refunds and verification by the Income Tax Department.
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What People With Rs 12.5 Lakh Salary Should Know?
Under the revised rules, salaried taxpayers are entitled to a standard Rs 75,000 deduction. With new rebate limits, this makes income up to Rs 12.75 lakh effectively tax free.
For someone with a salary of Rs 12.5 lakh, the standard deductions brings taxable income to Rs 11.75 lakh. Under Section 87A, a full rebate ensures zero tax liability for incomes up to Rs 12 lakh. In this regime, the basic exemption limit stands till a salary of Rs 4 lakh.
In the new tax regime, certain benefits remain available despite limited exemptions. Taxpayers can claim Section 80CCD(2) for employer NPS contribution up to 14% of basic pay, Additionally, Section 24 allows deductions for home loan interest on let-out property. To be clear, the new regime does not allow for any other deductions. Popular tools such as 80C, which allow up to Rs 1.5 lakh deductions on some investments, are still only available in the old regime.
While taxpayers have the choice to choose between the default new regime and the old tax regime, for incomes up to Rs 12.75 and even more, the old regime may not offer many benefits. This is because the old regime, while allowing for many exemptions, comes with higher tax rates and lower rebate limits. Its basic exemption limit is also only up to Rs 2.5 lakh, making it less attractive.
Ultimately, the new tax regime offers simplicity, convenience and lower slab rates, making it an attractive option for salaried individuals.
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According to financial experts, individuals may be able to benefit from the old regime only if their deductions range in the Rs 3 to 4 lakh bracket. Otherwise, the new regime stands more beneficial even in cases of income up to Rs 20 lakh.
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