Income Tax Deduction: No 7 in the new system, tax exemption of Rs 7.5 lakh, check details
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In Budget 2023, the government has increased the income tax exemption limit to Rs 7 lakh to make the new tax regime attractive. This is a big relief for the middle class and employed people.
Those whose annual income is less than Rs 7 lakh can save tax on their entire income in this arrangement. But, you will not believe if I tell you that this range is not Rs 7 but Rs 7.5 lakh.
Actually, after many years in the financial year 2023-24, the government has given direct exemption regarding income tax slab. The new tax regime may have come into effect two years ago, but in true sense its days are over. In the budget, it has been announced to implement the new tax system by default.
Till now the old tax system was applicable by default. This means that if you no longer tell your HR which regime to choose, then by default your income tax calculation will start with the new regime. If you want to pay tax from the old system, then you must first inform your employer about it.
Who will get tax exemption of 7 lakhs
In the budget, the Finance Minister had told that in the new tax system, the direct exemption of income tax will be Rs 7 lakh. However, tax exemption will not be available on any kind of investment in this arrangement. That is, such employed people who are not able to make any investment, now they will not have to pay tax on income up to Rs 7 lakh. But, in the new regime also, the total income tax exemption rules apply, giving you a chance to avail tax exemption even beyond the threshold of 7 lakhs.
How to save 50 thousand more In the new system, you will have to claim standard deduction to increase the scope of tax exemption to more than 7 lakhs. Under the Income Tax Act, every salaried person is given a rebate of Rs 50,000 in the name of standard deduction. But, only hardworking people get its benefit. So, if you are opting for the new tax regime this year, do not forget to claim standard deduction while filing the next ITR.
Earning is more than this, so if someone’s annual income is more than Rs 7.5 lakh and he is adopting the option of savings, then he should stay away from the new tax regime. Actually, in the old system, tax exemption is given only up to 5 lakhs. Tax is saved in the form of investment on more than this income.
Those who are not able to invest in rising inflation, they should adopt the new system. In this, even after taking tax exemption of 7.5 lakhs, if your income is more, then the tax rate on it will be less. Apart from this, tax up to 3 lakh has been kept zero in the new system, due to which you will be able to save several thousand in the form of tax.
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