Budget 2023: Here’s How Common Man Can Save Income Tax on Salary In New Tax Regime
Income Tax Saving Latest Update: For salaried employees, the standard deduction of Rs 50,000 is allowed, meaning, they will not pay any tax for Rs 7.5 lakh salary.
Income Tax Latest News Today: During the Budget 2023 presentation on Wednesday, Union Finance Minister Nirmala Sitharaman announced several major changes in the new regime of personal income tax. She proposed to increase the income tax rebate limit from Rs 5 lakh to Rs 7 lakh in new tax regime. Notably, the rebate for the resident individual under the new regime has been raised to Rs 7 lakh.
At present, the standard deduction of Rs 50,000 to salaried individuals, and deduction from family pension up to Rs 15,000 is allowed only under the old regime. The Centre also proposed to allow these two deductions under the new regime.
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With the budget announcements, the maximum income tax rate has been reduced to about 39 per cent from 42.7% after a reduction in the highest surcharge to 25 per cent from 37 per cent.
The salaried employees willing to be taxed in the new regime can opt to be taxed under the old regime.
Now as the income tax rebate was increased to Rs 7 lakh, the next question was how to save tax beyond this income, when you are just above this, supposedly Rs 8 lakh or Rs 10 lakh salary.
For such salaried employees, the standard deduction of Rs 50,000 is allowed, which means, they will not pay tax at Rs 7.5 lakh salary.
“If taxpayers claim deductions and exemption less than Rs 3.75 lakh annually, it would be advised to opt for the new income tax regime and pay less tax than they give in the old regime, PTI quoted as senior finance ministry official as saying.
Now, if an employee is earning Rs 10 lakh in a year, then the total tax liability, including 4 per cent higher education cess (HEC), under the old tax regime will be about Rs 78,000, without any deductions claim. However, under the new tax regime, the tax liability will be Rs 54,600.
The individual employees with an annual income of up to Rs 7 lakh will save Rs 33,800 in taxes after rebate was increased under the new income tax regime.
Speaking to News 18, Vishal Raheja, MD, InvestoXpert.com, said once you know how much tax you will have to pay, you must make a plan to reduce your tax liability by taking advantage of tax deductions allowed by the applicable provisions of the Income Tax Act.
How to save income tax on salary?
- You need to invest in tax savings opportunities such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), Senior Citizen Savings Scheme (SCSS).
- You must utilise Section 80C Benefits Several deductions from taxable income that are available under Section 80C of the Income Tax Act.
- You also try to get Tax Deductions on Home Loans. If you have a home loan, you are eligible for tax deductions for both the interest and principal payments made on the loan.
- You can take benefit from Tax Savings on Retirement Savings on both your contributions and the maturity proceeds if you make payments to a pension fund like the National Pension System (NPS).
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