The recent budget brought welcome news for taxpayers, with increased exemptions and a revamped new tax regime. Understand the recent income tax changes: higher allowance, reformed new tax schedule, senior citizens’ concessions, and others. Select the correct regimen and save money! For the most recent and credible advice, consult an expert.
Income Tax Updates
Filing tax returns annually to become a daunting challenge in understanding the income tax code. However, this year, there is some good news! Changes to the recent Indian budget may bring relief to many in the form of tax relief. From higher exemptions to a new tax structure for the fiscal year 2006-07, it is important to know about these changes to reduce your tax burden.
This detailed guide dives into the core of the major shifts while providing insights into their effects on people, senior citizens, and women. We will compare the old and the new tax regimes, identify investment opportunities, and provide knowledge for informed decision-making. The changes might seem daunting, but let’s attempt to demystify them and face this tax season with confidence.
Higher Basic Exemption:
- Good news for everyone: The basic exemption limit, the income tax-free amount, has gone up from Rs 2.5 lakh to Rs 3 lakh for individuals under the old tax regime.
- Aged above 60 to 80 years can still get a Rs 3 lakh exemption, whereas, citizens above 80 still have the higher Rs 5 lakh exemption.
New Tax Regime Gets Sweeter
- Tax-free zone expands: Under the new regime, an increased rebate under Section 87A makes salaried individuals exempt from income tax even up to Rs 7.5 lakh.
- Non-salaried individuals also benefit: Their 87A rebate has been increased to Rs 7 lakh, while their tax-free income has been through an upsurge.
- Standard deduction boost: The new regime has also adopted the standard deduction of Rs50,000 through which many are now able to lower their taxes due to reduced liability.
Old vs. New Regimes:
Old regime: Provides multiple deductions and exemptions under chapters such as 80C and 80D, which could be of interest to those with many investments or expenses.
New regime: Easier calculations and possibly lower tax rates for some income categories, particularly with higher rebates and standard deductions.
Beyond Basic Changes:
- Senior citizens and Monthly Income Scheme: The limits for investments have also been enhanced to Rs 30 lakh and Rs 9 lakh, respectively, leading to saving, and income incomes.
- Mahila Samman Savings Certificate: An innovative program that would offer a 7.5% rate of interest on investments up to 2 lakhs for women, encouraging women’s financial inclusion.
- PF withdrawal TDS reduced: As a relief to the famine without a PAN card, the TDS on PF withdrawals has now been changed from 30% to 20%.
Making the Right Choice:
Assess your income, deductions, and a range of investment options before determining the best regime to minimize the tax liability.
Seek advice from a tax consultant to help you make informed decisions according to your situation.