The budget is about to come. Finance Minister Nirmala Sitharaman will present the last budget of the current tenure of the Modi government on 1 February. In last year’s budget, the new tax regime was made the default tax system. But do you know that you can save income tax even in the new tax system.
This year, due to Lok Sabha elections, Finance Minister Nirmala Sitharaman will present the interim budget. What is the big announcement in the budget this year, will income tax exemption increase? This will be known on the same day, but you should know one thing that you can save income tax even in the ‘new tax regime’ implemented in the country. Let us tell you how?
Prime Minister Narendra Modi’s government had implemented a new income tax system in the country in the budget of 2020. This was called the new tax regime. In this new system, the tax system was simplified for the people. Meaning, if you do not want to avail tax benefits by claiming any kind of savings, loan etc., then most of your income will be tax free under this system. To understand it simply, in this system you do not get any tax benefit on any kind of savings etc.
How to save income tax in the ‘New Tax Regime’
Now income tax can be saved even in the ‘New Tax Regime’. Last year, Finance Minister Nirmala Sitharaman first made the new tax regime ‘default’ in her budget speech. Besides, ‘tax benefit’ was also added to the new tax system. The ‘default’ system means that if you do not choose the ‘old tax regime’ at the beginning of the financial year every year, you will have to pay tax in the new system.
With this, the Finance Minister had started giving the benefit of ‘Standard Deduction’ to the employed people in the new tax system. In this also, employed people started getting the benefit of standard deduction of Rs 50,000. Earlier it was present only in the old tax regime. After this change by the Central Government, under the new tax regime, people’s income up to Rs 7.5 lakh actually became tax-free.
However, no other tax exemption is available in this system. Nevertheless, after the changes in 2023, under the new tax regime, family pensioners were also given the benefit of standard deduction. They can avail tax exemption on Rs 15,000 or one-third of the pension, whichever is less. In the new tax system, an extra exemption has been given to the salaried class. They get tax exemption on their employer’s contribution to NPS.
Purpose of bringing new tax regime
Modi government had brought the new tax system to leave more money in the hands of the people. Its purpose was to increase demand in the economy. Therefore the government stopped giving rebate on savings. The old tax system encourages the people of the country to save as much as possible. In the new tax system, emphasis has been laid on promoting expenditure.
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