April marks the beginning of a new financial year, which is when many new income tax laws come into effect. For FY23-24, in order to make the new income tax regime more attractive, the government has revised the income tax slabs under the new tax regime. Benefits such as introduction of standard deduction, nil tax on taxable income up to ₹7 lakh have also been introduced this year.
Individual taxpayers have the option to select whether they want to be in the old tax regime, which provides for exemptions and deductions or switch to the new tax regime which offers low tax rates but no exemptions.
What will happen if an employee forgets to intimate his/her employer about the preferred tax regime?
In case an employee does not intimate his/her employer about the preferred tax regime, then the employer would be required to deduct TDS from salary income as per the new revamped tax regime announced in Budget 2023-24.
Recent instructions from CBDT has asked employers to consult employees about their preferred tax structure in order to calculate their total income and TDS. Amit Gupta, MD, SAG Infotech said at the end of the month, employees should inform their employers of their preferred tax structure. If they don’t, their employer may withhold TDS under the new income tax system, which might lead to a lower monthly salary for people who have investments that allowed them to claim significant deductions under the old system. Tax shall be withheld at source by the employer at the rates outlined in Section 115BAC paragraph 1(A).
When filing their ITR, employees can change their tax situation, but neglecting to inform their employer before April 15th could cause problems. If you work for a company, the accounting or payroll department may send you an email asking for your preferred tax structure for the fiscal year 2023–2024, he said.
Income tax slabs under new tax regime
Under the new tax regime, there will be no tax for those with an annual income of up to ₹7 lakh. A standard deduction of ₹50,000 has also been allowed and the basic exemption limit hiked to ₹3 lakh.
Income between ₹3-6 lakh would be taxed at 5 per cent; ₹6-9 lakh at 10 per cent, ₹9-12 lakh at 15 per cent, ₹12-15 lakh at 20 per cent and income of ₹15 lakh and above will be taxed at 30 per cent.
Income tax slabs under old income tax regime
The old tax regime, which allows for exemptions and deductions, has a basic exemption limit of ₹2.5 lakh. Also, those having an annual income of ₹5 lakh do not have to pay any tax.
Income between ₹2.5 lakh and ₹5 lakh attracts a 5 per cent tax, while that between ₹5 lakh and ₹10 lakh is levied with a 20 per cent tax. Income above ₹10 lakh is taxed at 30 per cent.
So, all those individuals who have still not opted for the new or old tax regime, please do it now, else, by default it will be new tax regime only for you.