The income tax (IT) department is working on a system-driven mechanism that will make calculations of both tax regimes based on income and investment of taxpayers, in order to help them make an informed choice.
The system will compare the old and the new regimes in an easy-to-understand format, Business Standard reported citing a source.
Reportedly, the move will help the government achieve its target of making 50-60% of taxpayers switch to the new regime in the next fiscal year 2023-24.
The government has proposed to increase the income tax rebate limit from Rs 5 lakh to Rs 7 lakh in new tax regime.
Now, 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.
Any individual willing to be taxed under this new regime can opt to be taxed under the old regime.
Recently, finance minister Nirmala Sitharaman has said the new tax regime will leave more money in the hands of people and the measure is aimed at purely reducing tax burden on the middle class.
Moreover, though the old regime offered a large number of deductions like 80C, 80D and 80CCD, the new tax regime also has few deductions that a taxpayer can claim.
Standard Deduction
In the Budget 2023, the government extended the benefit of the Rs 50,000 standard deduction to the new tax regime. An employer while calculating taxes on salary automatically takes standard deduction into account.
If you are a family pensioner, then under the new tax regime you can claim a standard deduction of Rs 15,000. Income for a family pensioner is taxed under the head ‘Income from other sources’.
NPS Contribution by Employer
If your employer is contributing to your NPS account, then as a salaried employee, you are eligible to claim a deduction for the contribution made from gross income. This deduction is claimed under Section 80CCD (2) of the Income-tax Act, 1961.
Contributions to Agniveer Corpus Fund
In the Budget Speech, the finance minister also announced that any amount paid or deposited to the Agniveer Corpus Fund under the newly proposed section 80CCH of the Income-tax Act can be claimed as a deduction from income by the Agniveer.
“The payment received from the Agniveer Corpus Fund by the Agniveers enrolled in Agnipath Scheme, 2022 is proposed to be exempt from taxes. Deduction in the computation of total income is proposed to be allowed to the Agniveer on the contribution made by him or the Central Government to his Seva Nidhi account,” she said in the speech.
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