Income tax return (ITR) has to be filed by July 31 for the year 2023-24. There are two tax regime options available for filing ITR. If you choose the first or old tax regime, only your income up to Rs 2.5 lakh will be tax free. However, under Section 87A of the Income Tax Act, you can save tax on income up to Rs 5 lakh. On choosing the new tax regime, you will not have to pay tax on income up to Rs 3 lakh. In this also, under Section 87A of the Income Tax Act, salaried persons can get tax exemption on income up to Rs 7.5 lakh and others can get tax exemption on income up to Rs 7 lakh. Today we are telling you about these two tax regimes available for filing ITR. So that you can save tax by choosing the right tax regime for yourself, first understand the old tax regime with an example – According to Karthik Gupta, Chartered Accountant (CA) of Bhopal, suppose, if someone’s annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2.5 lakh. That means, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act. There is also a screw in it. If your earning is more than Rs 5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 2.5 lakh. Now the tax liability on Rs 2.5 lakh at the rate of 5% will be Rs 12,500. Tax will have to be paid at the rate of 20% on the remaining Re 1. That means, tax of Rs 12,501 will have to be paid. Let us understand the new tax regime with an example. Suppose, someone’s annual income is Rs 5 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining Rs 2 lakh. That means, he will have to pay tax of Rs 10,000. But in this regime, the government waives tax on income up to Rs 7.5 lakh under section 87A. There is a catch in this also. If you are salaried and your earning is more than Rs 7.5 lakh by even one rupee, then you will have to pay tax not on one rupee but on Rs 4,50,001. Now after waiving the tax of Rs 3 lakh, out of the remaining Rs 4,50001, Rs 15,000 will have to be paid at the rate of 5% on Rs 3 lakh and Rs 15,000 at the rate of 10% on the remaining Rs 1,50,001. That means the total tax liability will be Rs 30,000. Here let us also tell you that people who are not salaried get the benefit of tax deduction only on the amount up to Rs 7 lakh. In the new tax system, salaried people get the separate benefit of standard deduction of Rs 50,000, hence their income up to Rs 7.5 lakh becomes tax free. Difference between old and new tax regime, new option given in 2020. There are 2 options for filing income tax return. A new option was given on 1 April 2020. In the new tax slab, the range of tax free income was increased from Rs 2.5 lakh to Rs 3 lakh, but tax deductions were taken away. At the same time, if you choose the old tax slab, you can take advantage of many types of tax deductions. Deduction of up to Rs 1,50,000 is available under Section 80C of Income Tax Act in the old tax regime. Apart from this, many other types of tax deductions can be availed in the old regime. Another big difference is that in the old regime, after rebate under Section 87A, income up to Rs 5 lakh is tax free, whereas in the new regime, income up to Rs 7.5 lakh becomes tax free. Which tax regime will be right for you? If you are salaried and your annual income is up to Rs 7.5 lakh, then you can choose the new tax regime. There will be no tax on you in this. On the other hand, if your annual income is more than Rs 7.5 lakh and you have made many investments in which you can get the benefit of tax exemption, then you can choose the old tax regime. Apart from this, Income Tax Calculator has been given on the official site of Income Tax Department. With its help, you will be able to easily calculate how much tax will be payable on you under which tax regime. After this you will be able to choose the right tax regime for yourself. Apart from this you can also take help of CA.
