Now Indian taxpayers have two options to pay tax, new tax regime or old tax regime. If you do not choose any tax regime for the new financial year 2024-25, then your ITR will be filed under the new tax regime. You can also avail some tax exemptions in the new regime. Let us know how.
Now taxpayers have two tax regimes to pay taxes. If you do not choose any tax regime, your ITR (Income Tax Return) for the current assessment year 2024-25 will be filed under the new tax regime. Old Tax Regime is considered better in terms of saving tax by investing.
But, if you have chosen the new tax regime, then you can avail some tax exemptions in this also. Let us know about these in detail.
Standard deduction, transport and VRS exemption
Earlier, standard deduction was available only in the old tax regime. But, now it has also been included in the new tax regime. This means that your taxable income will directly reduce by Rs 50 thousand. If the taxpayer falls in the disabled category, he can claim deduction on transport allowance. Employed people can also avail tax exemption on travel, transport and other allowances received for office work.
If someone takes Voluntary Retirement Scheme (VRS), then subject to certain conditions, the benefit of exemption in the new tax regime is also available on gratuity and leave encashment i.e. money received in lieu of remaining leaves.
Claim on home loan, gift and family pension also
If you have given a house on rent and are paying its home loan, then you are allowed to claim deduction on its interest. If you give a gift of Rs 50,000 to your spouse, sibling or any relative, you can get tax exemption on that too. Employees investing in National Pension Scheme (NPS) account can claim tax deduction on contributions.
How much income is tax free in the new tax regime?
In the new tax regime, only income up to Rs 3 lakh is tax free. But, even if you earn up to Rs 7 lakh annually, you will not have to pay even a single rupee tax. Actually, under Section 87A of the Income Tax Act, a direct tax exemption of Rs 12,500 is available.
This means that if your tax liability is Rs 12,500 or less, you will not have to pay even a single penny to the Income Tax Department. Accordingly, in the new tax regime, the tax of those earning up to Rs 7 lakh annually becomes zero.
Tax slabs of new tax regime
In the new tax regime, no tax has to be paid on annual income of Rs 0-3 lakh. At the same time, 5 percent tax has to be paid on income of Rs 3 to 6 lakh, 10 percent on income of Rs 6 to 9 lakh, 15 percent on income of Rs 9 to 12 lakh, 20 percent on income of Rs 12 to 15 lakh and 30 percent on income of more than Rs 15 lakh. Besides, 4 percent is also levied as health and education cess.
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