Important Keyword: Due date, Income Tax Filing, ITR Due Date.
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ITR Filing Last Date
The last date for filing Income Tax Returns (ITR) is a critical aspect that taxpayers must adhere to in order to avoid penalties, interest, and other consequences as per the provisions of Section 139 of the Income Tax Act.
What is Income Tax Return Due Date?
The deadline for filing taxes without incurring late fees or penalties is known as the due date.
The CBDT can extend the above due dates via notification. Albeit, the income tax return can also be filed after the due date. But, it will be considered as a belated return u/s 139 (4), and late filing interest or penalty will be applicable u/s 234A and 234F. Hence, it is always advisable to file ITR on or before the due date
Categories of Taxpayers for whom Tax Audit is mandatory
The following table explains the applicability of Tax Audit for taxpayers according to their earnings.
Taxpayer
Condition for Tax Audit
Business
Turnover is up to INR 1 Cr, Income is less than 6% or 8% of Turnover and Total Income exceeds the Basic Exemption Limit Turnover is between INR 1 Cr and INR 2 Cr and Income is less than 6% or 8% of Turnover Income is more than 6% or 8% of Turnover and the taxpayer does not opt for Presumptive Taxation Scheme under Sec 44ADSales or Turnover exceeds INR 10 Crore
Profession
Gross Receipts exceed INR 50 Lakhs Income from the profession is less than 50% of Gross Receipts and Total Income exceeds the Basic Exemption Limit The Income is more than 50% of Gross Receipts and the taxpayer does not opt for Presumptive Taxation Scheme under Sec 44ADA
Income Tax Return due date for previous financial years
The following table explains the due date to file income tax returns for previous financial years.
ITR filing last date for 2022 (AY 2022-23)
Category of Taxpayer
Original Due Date
Extended Due Date
Individuals not requiring Tax Audit
31st July 2022
NA
Individuals requiring tax Audit
31st October 2022
07th November 2022
ITD extended the due date to file ITR as the taxpayers faced technical issues on the original deadline.
ITR filing last date for 2021 (AY 2021-22)
Category of Taxpayer
Original Due Date
Extended Due Date
Individuals not requiring Tax Audit
31st July 2022
31st December 2021
Individuals requiring tax Audit
30th September 2021
15th February 2022
ITR filing last date for 2020 (AY 2020-21)
Category of Taxpayer
Original Due Date
Extended Due Date
Individuals not requiring Tax Audit
31st July 2022
10th January 2021
Individuals requiring tax Audit
30th September 2021
15th February 2021
ITR due date extension for AY 2021-22 & 2020-2021 was in response to the COVID-19 pandemic, which made it difficult for taxpayers to comply with the original deadline.
Due Date to file Belated Return
If an individual fails to file their income tax return by the due date, they have the option to file a belated return under Section 139(4) of the Income Tax Act. Starting from the financial year 2021-22 (assessment year 2022-23) onwards, taxpayers can file a belated return until the 31st of December of the relevant assessment year.
However, it’s important to note that filing a belated return attracts late filing fees under section 234F of the Income Tax Act.
To illustrate this, let’s consider an example: Mr. Jay forgot to file his ITR before the deadline of 31st July 2022. His total income for the financial year 2021-22 amounted to INR 4,50,000. Jay has the option to file his belated return until the 31st of December 2022. Suppose he files his return on 25th November 2022. In this case, his return will be considered as a belated return, and he will incur a late filing fee of INR 1,000, since his income is less than INR 5,00,000.
Due Date to file Revised Return
Starting from the financial year 2021-22 (assessment year 2022-23) onwards, taxpayers have the option to file a Revised Return under Section 139(5) of the Income Tax Act if they discover any mistake, omission, or incorrect statement in their original return. The revised return can be filed on or before the 31st of December of the relevant assessment year.
Additionally, since the financial year 2017-18 onwards, taxpayers can also revise a Belated Return if necessary.
Due date to file Updated Return
Under Section 139(8A) of the Income Tax Act, taxpayers have the provision to file an Updated ITR, also known as ITR-U. This option is available to individuals who have filed their Original ITR under Section 139(1), Revised ITR under Section 139(5), Belated ITR under Section 139(4), or have not filed an ITR at all. Taxpayers can file ITR-U within 24 months from the end of the relevant assessment year, provided they meet the conditions specified under this section.
Consequences of missing the due date
Filing your income tax return on time carries several benefits and avoids potential penalties or consequences:
Interest: Late filing incurs interest under section 234A at a rate of 1% per month or part thereof on the outstanding tax amount.
Late Fee: A penalty of up to INR 5,000 is levied under section 234F if the return is filed after the due date.
Loss Set-off: Timely filing allows you to carry forward losses from various sources like the stock market, mutual funds, or real estate, to offset against future income. Failing to file on time may jeopardize this benefit.
New Regime: Opting for the new tax regime requires filing the ITR on or before the due date.
Claiming Relief: Missing the due date can disqualify you from claiming relief under sections 89E or relief under sections 90/90A, 91.
Interest on Refund: Taxpayers are entitled to 0.5% interest under section 244A on the eligible refund amount. Filing before the due date ensures interest is calculated from April 1st, whereas late filing means interest is calculated from the date of filing to the refund date.
Avoiding Notices: Failure to file may result in receiving notices from the Income Tax Department (ITD), leading to unfavorable consequences.
By adhering to the deadline for filing your income tax return, you can avoid penalties, maintain eligibility for various benefits, and ensure compliance with tax regulations, thus mitigating any potential risks associated with non-compliance.
Important Keyword: e-File ITR, Income Tax Filing, ITR Utility, Slab Rates.
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Who should file Income Tax Return (ITR)?
Filing your Income Tax Return (ITR) is not just about meeting the basic exemption limit; there are specific scenarios where it becomes mandatory, regardless of your income level.
When is it Compulsory to File ITR?
Under certain conditions, filing your Income Tax Return (ITR) is mandatory, regardless of whether your income exceeds the basic exemption limit. One such condition is if your Gross Total Income for a financial year surpasses the basic exemption limit. The Gross Total Income refers to the total income before claiming deductions such as those under sections 80C, 80D, and 80TTA of the Income Tax Act. This means that even if your taxable income after deductions falls below the basic exemption limit, you are still required to file an ITR if your Gross Total Income exceeds the specified threshold. It’s essential to adhere to these guidelines to ensure compliance with tax regulations and avoid any potential penalties or legal consequences.
Category
Basic Exemption Limit
Individual/ HUF (Resident/ NRI)
INR 2,50,000
Resident Senior Citizen Individual (60 years or more but less than 80 years)
INR 3,00,000
Resident Super Senior Citizen Individuals (80 years or more)
INR 5,00,000
Any resident individual or entity falling under the following scenarios must file an Income Tax Return (ITR):
Ownership of Foreign Assets: Individuals possessing assets outside India or holding financial interests in entities located abroad are obligated to file an ITR.
Foreign Income: If an individual earns income from a source outside India during the financial year, they are required to file an ITR.
Signature Authority: Individuals with signature authority in any bank account situated outside India must file an ITR.
Claiming Refund: Taxpayers seeking a refund of excess Tax Deducted at Source (TDS) need to file an ITR.
Loss Adjustment: Taxpayers incurring losses during the financial year and intending to carry them forward to subsequent financial years are mandated to file a return.
Additionally, the following prerequisites must be met before filing an ITR:
General:
Registration on the e-Filing portal with a valid user ID and password.
Active status of PAN.
Others:
Linking PAN with Aadhaar.
Pre-validating at least one bank account and nominating it for refunds.
Valid mobile number linked with Aadhaar, e-Filing portal, bank, NSDL, or CDSL.
Downloading the offline utility or utilizing third-party software if opting for offline mode.
Moreover, certain situations necessitate mandatory e-filing of returns:
Claiming a tax refund.
Gross total income exceeding INR 5,00,000.
Requirement to file ITR-3, ITR-4, ITR-5, ITR-6, or ITR-7.
Important Keyword: DSC, DSC Utility, Income Tax, Income Tax Filing, ITR XML.
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DSC Management Utility: Generate Signature File to Upload XML
DSC, or Digital Signature Certificate, is a secure electronic signature used for signing electronic documents and accessing online services. It contains essential user details like name, pin code, country, issuance and expiry dates, and the certifying authority’s name. To utilize DSC services on the Income Tax E-filing Portal, taxpayers must generate a signature file using the DSC Management Utility. This signature file enables various functions on the portal:
Register DSC: Allows registration of the DSC in the user profile on the Income Tax E-filing Portal.
Reset Password using DSC: Enables password reset using DSC if the taxpayer forgets their password.
Upload XML: Facilitates the upload of XML files for filing Income Tax Returns (ITR).
Upload Tax Audit Report: Permits Chartered Accountants to upload XML files for filing the taxpayer’s Tax Audit Report.
Submit ITR Online: Allows taxpayers to submit ITR online, including approval of Tax Audit Reports filed by Chartered Accountants.
Submit Form Online: Enables taxpayers to upload various forms on the Income Tax E-filing Portal.
Upload Zip File (Bulk Upload): Allows TAN users or ERIs to bulk upload ITRs or other forms in a zip file format.
DSC Management Utility – Steps to Generate a Signature File to Upload XML
Download DSC Management Utility
Firstly, Download DSC Management Utility from the income tax e-filing portal. A zip folder is downloaded
Open the Java Utility
Extract the zip folder. Click on DSC_MGMT_UTILITY.jar to open the utility
Tab – Upload XML
Select tab ‘Upload XML’. Click on ‘Browse XML file’ to select XML file for which you want to generate the digital signature file
When opting for a .pfx file type of DSC, follow these straightforward steps:
a. Choose the option “.pfx file”. b. Select the certificate file from your system’s directory. c. Enter the password associated with the .pfx file. d. Click on the button labeled “Generate Signature File”.
These steps will generate the necessary signature file, enabling you to utilize your DSC for various online services.
If you’re selecting a USB Token type of DSC, here’s how to proceed:
a. Choose the option “USB Token”. b. From the drop-down menu, select the USB Token Certificate. c. Click on the button labeled “Generate Signature File”. d. Enter the USB Token PIN when prompted and click on ‘Ok’.
Following these steps will generate the required signature file, allowing you to utilize your DSC effectively.
Success Message
A success message will appear on the screen and a signature file is generated. Save it in the appropriate folder
You can utilize the generated signature file for various services:
a. To upload the Income Tax Return (ITR) as a taxpayer:
Log in to incometaxindiaefiling.gov.in
Navigate to “e-file” > “Upload Return”
Attach the XML file containing your return
Attach the generated Signature File
b. For filing rectifications as a taxpayer:
Log in to incometaxindiaefiling.gov.in
Go to “e-file” > “Rectification”
Attach the XML file for rectification
Attach the generated Signature File
c. For uploading Tax Audit Reports or other forms as a Chartered Accountant:
Log in to incometaxindiaefiling.gov.in
Visit “e-file” > “Upload Form”
Attach the XML file of the report or form
Attach the generated Signature File
These steps will facilitate the efficient completion of your tax-related tasks using the Digital Signature Certificate (DSC).
Important Keyword: DSC, DSC Utility, Income Tax Filing, ITR XML, PAN, TAN.
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DSC Management Utility: Generate Signature File to Submit ITR or Form
A Digital Signature Certificate (DSC) is an electronic signature used to sign electronic documents or access information and services on the internet. It includes essential user details such as name, PIN code, country, date of issue, date of expiry, and the name of the certifying authority. To utilize DSC services on the Income Tax E-filing Portal, taxpayers must generate a signature file using the DSC Management Utility.
The signature file from the DSC Utility enables users to access various services on the Income Tax E-filing Portal:
Register DSC: Taxpayers can register their DSC in their profile on the Income Tax E-filing Portal, enhancing security and authentication for online transactions.
Reset Password using DSC: If a taxpayer forgets their password, they can reset it using their DSC, ensuring secure access to their accounts.
Upload XML: Taxpayers can upload XML files to file their Income Tax Returns (ITR) electronically, simplifying the submission process.
Upload Tax Audit Report: Chartered Accountants can use DSCs to upload XML files for filing Tax Audit Reports on behalf of taxpayers, streamlining compliance procedures.
Submit ITR Online: Taxpayers can electronically submit their ITRs online, providing a convenient and efficient way to fulfill their tax obligations.
Submit Form Online: Taxpayers can upload various forms and documents required for tax compliance directly on the Income Tax E-filing Portal.
Upload Zip File (Bulk Upload): TAN users or ERIs (Electronic Return Intermediaries) can use DSCs to bulk upload ITRs or other forms, simplifying the submission process for multiple filings.
DSC Management Utility – Steps to generate signature file to submit ITR or Form
Download DSC Management Utility
To download the DSC Management Utility from the Income Tax E-filing Portal.
Open the Java Utility
Extract the zip folder. Click on DSC_MGMT_UTILITY.jar to open the utility.
Tab – Submit ITR / Form Online
To submit your Income Tax Return (ITR) or form online, follow these steps:
Select the tab labeled “Submit ITR / Form Online” on the Income Tax E-filing Portal.
Enter the following details: a. E-filing User ID: Input the username associated with your account on the income tax e-filing portal. Depending on your user type, your User ID may vary.
Type of DSC – Using .pfx file
If you choose the type of Digital Signature Certificate (DSC) as a .pfx file, follow these steps:
a. Select the option “.pfx file” from the available choices.
b. Choose the certificate file from your computer’s directory. Locate the .pfx file containing your DSC.
c. Enter the password associated with the .pfx file. This password is used to access and authenticate the DSC.
d. Click on the ‘Generate Signature File’ button to proceed. This action will generate the signature file required for authentication and digital signing purposes.
Type of DSC – Using USB Token
If you choose the type of Digital Signature Certificate (DSC) as a .pfx file, follow these steps:
Select the option “USB Token” from the provided choices.
Choose the USB Token Certificate from the drop-down menu. This will typically display the available certificates stored on your USB token.
Click on the ‘Generate Signature File’ button to proceed. This action will initiate the generation of the signature file required for authentication and digital signing purposes.
Enter the USB Token PIN when prompted. This PIN is necessary to access and authenticate the DSC stored on your USB token. After entering the PIN, click on ‘Ok’ to confirm.
Success Message
A success message will appear on the screen and a signature file is generated. Save it in the appropriate folder
Use DSC Signature File
You can utilize the generated signature file for various services on the Income Tax E-filing Portal as follows:
a. Submit Form Online:
Log in to incometaxindiaefiling.gov.in.
Navigate to the “Prepare and Submit Online Form” section.
Fill in the required form details.
Attach the signature file to the form.
Proceed to submit the form online.
b. Approve Tax Audit Report:
Log in to the Income tax e-filing website.
Access the “Worklist” section.
Select “For Your Action.”
View the uploaded form.
Review the form and accept it.
Attach the signature file to approve the tax audit report.
c. Submit Refund Re-issue Request:
Log in to the income tax e-filing portal.
Navigate to “My Account” and select “Service Request.”
Important Keyword: Income Tax, Income Tax Filing, New Tax Regime, Old Tax Regime.
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Difference Between Old vs New Tax Regime
In her Budget speech on February 1, 2020, Finance Minister Nirmala Sitharaman introduced significant reforms, including the unveiling of the New Tax Regime.
The objective behind this new regime was to simplify the tax structure and ease the compliance burden on taxpayers. The primary distinction between the two tax regimes lies in the income tax slab rates and the eligibility to claim exemptions and deductions.
Despite being two years since the introduction of the New tax regime under section 115BAC, a large portion of taxpayers continued to file their Income Tax Returns (ITR) under the old tax regime. In a bid to incentivize adoption of the new regime, the Union Budget for 2023-24 proposed revisions to the tax slabs for the new regime, among other changes.
Tax Slab Rates
Under the New Regime, revised tax slab rates were introduced, with existing rates reduced for income up to INR 15 Lakh. The tax slab rates under both the ‘New Income Tax Regime’ and the ‘Old Income Tax Regime’ are as follows:
Income Range
Rates as per Old Regime
Rates as per New Regime (up to AY 2023-24)
Up to INR 2,50,000
Nil
Nil
INR 2,50,001 – 5,00,000
5%
5%
INR 5,00,001 – 7,50,000
20%
10%
INR 7,50,001 – 10,00,000
20%
15%
INR 10,00,001 – 12,50,000
30%
20%
INR 12,50,001 – 15,00,000
30%
25%
Above INR 15,00,000
30%
30%
Income Range
Rates as per New Tax Regime (AY 2024-25 onwards)
Up to INR 3,00,000
Nil
INR 3,00,001 – 6,00,000
5%
INR 6,00,001 – 9,00,000
10%
INR 9,00,001 – 12,00,000
15%
INR 12,00,001 – 15,00,000
20%
Above INR 15,00,000
30%
Basic Exemption Limit
Under the new tax regime, the basic tax exemption limit will remain uniform for all assesses, including senior citizens. Consequently, if you choose the new regime, there will be no increased tax exemption for senior and super senior citizens.
Age
New Regime Exemption Limit (AY 2024-25 onwards)
New Regime Exemption Limit (up to AY 2023-24)
Old Regime Exemption Limit
People Below 60 Years of Age
INR 3,00,000
INR 2,50,000
INR 2,50,000
People Between 60 to 80 Years of Age
INR 3,00,000
INR 2,50,000
INR 3,00,000
People Above 80 Years of Age
INR 3,00,000
INR 2,50,000
INR 5,00,000
Changes in Deductions and Exemptionsunder the New Tax Regime
The Budget 2020 introduced significant changes in tax exemptions and deductions, aiming to simplify tax compliance. Here’s a breakdown of deductions that have been retained and those that have been removed under the new tax regime:
What is not covered in New Tax Regime
What is covered in New Tax Regime
Leave Travel Allowance
Income from Life Insurance
House rent allowance
Money received as a scholarship for education, etc.
Standard deduction of Rs 50,000 available for salaried individuals (up to AY 2023-24)
Leave encashment on retirement
Deductions available under Section 80TTA/TTB
Agricultural Income
Entertainment allowance deduction and professional tax ( For government employees)
Standard Deduction on Rental Income and Standard Deduction of INR 50,000 for Salaried individuals, pensioners and of INR 15,000 for family pensioners (AY 2024-25 onwards)
Tax relief on interest paid on home loan for self-occupied or vacant property u/s 24
Retrenchment compensation
Deduction of INR 15,000 from the family pension (Up to AY 2023-24)
Changes under Income from House Property in the New Tax Regime
Changes in Deductions on Home Loan interest – Section 24(b)
Under the new income tax regime, there are specific provisions regarding the treatment of home loan interest for different types of properties:
No claim of home loan interest on self-occupied property: Individuals who have taken a home loan for their self-occupied property and are paying interest on it cannot claim the interest deduction under Section 24(b) of the Income Tax Act.
Claim of home loan interest on rental property: In the new regime, individuals can claim interest on home loans for properties that are let-out. However, the deduction is limited to the amount of rental income declared under the head of house property income. This means that individuals cannot claim interest expenses that exceed the rental income earned from the property.
These provisions aim to ensure that tax benefits are aligned with the usage and income generated from the property, promoting fairness and transparency in the tax system.
The setting off of losses from house property income
In the new income tax regime, there are specific rules regarding the treatment of losses from house property income:
Setting off of losses: Losses incurred from house property can only be set off against other income from house property in the same financial year. This means that if an individual has losses from one house property, they can offset these losses against income earned from another house property within the same financial year.
No carry forward of losses: Unlike the previous tax regime, where losses from house property could be carried forward to future years, the new regime does not allow for the carry forward of such losses. This means that any losses incurred from house property income cannot be carried forward to offset against income in future years.
These provisions aim to streamline the tax treatment of losses from house property income, ensuring that they are offset within the same financial year and not carried forward indefinitely.
Deduction for first-time Homebuyers
Under the new income tax regime, certain deductions that were previously available have been removed. One such deduction is under Section 80EE and Section 80EEA, which provided relief on interest paid on home loans for first-time home buyers. However, under the new regime, taxpayers are not eligible to claim this deduction. Therefore, individuals who have taken home loans for their first property purchase will not be able to avail of this tax benefit in the new income tax regime.
Deductions for business expenditure under New Tax Regime
In the context of business income, certain deductions and exemptions that were previously available are no longer allowed under the new income tax regime. These include:
Additional Depreciation under Section 32: Taxpayers can no longer claim additional depreciation on certain assets under Section 32 of the Income Tax Act.
Investment Allowance under Section 32AD: The investment allowance, which provided tax benefits for certain investments, is not permitted under the new regime.
Sector-specific Business Deductions under Sections 33AB and 33ABA: Deductions related to specific sectors, as outlined in Sections 33AB and 33ABA, are no longer applicable in the new regime.
Expenditure on Scientific Research under Section 35: Tax benefits associated with expenditures on scientific research, as provided by Section 35, are no longer available.
Capital Expenditure under Section 35AD: Tax benefits on capital expenditures, as specified in Section 35AD, are not permitted in the new regime.
Exemption under Section 10AA for SEZ Units: The exemption provided to Special Economic Zone (SEZ) units under Section 10AA is no longer applicable for business income under the new tax regime.
Setting-Off Business/Profession Loss
Under the new tax regime, individuals and Hindu Undivided Families (HUFs) with business income face certain limitations regarding the set-off and carry-forward of losses. Specifically:
Ineligibility to Set Off Brought Forward Business Loss or Unabsorbed Depreciation: Taxpayers cannot set off any brought forward business loss or unabsorbed depreciation against their current business income.
Inability to Carry Forward Brought Forward Business Loss or Unabsorbed Depreciation: Additionally, any business loss or unabsorbed depreciation from previous years cannot be carried forward to offset against future business income.
Restrictions on Deductions and Exemptions: These limitations apply specifically to losses related to deductions and exemptions withdrawn under clause (i) of sub-section (2) of section 115BAC. This includes losses from sources such as house property, additional depreciation, and others.
In simpler terms, while certain losses like short-term and long-term capital losses can be carried forward, losses related to specific deductions and exemptions withdrawn under section 115BAC cannot be set off or carried forward. Examples of such losses include those from house property and additional depreciation.
Comparison of Old and New Tax Regimes
Determining whether to opt for the old or new tax regime isn’t a one-size-fits-all decision. It hinges on individual circumstances and financial standing.
While the new tax regime offers lower tax rates, the absence of certain deductions or exemptions necessitates a thorough comparison before making a decision.
Consider the following examples illustrating the tax liability under both regimes for the same salary, assuming no exemptions are claimed.
A PERSON WITH AN ANNUAL INCOME OF INR 7,50,000
Let’s calculate the tax liability for the individual aged 45 years with an income of INR 7,50,000 using both the old and new tax regimes, considering the given details:
Solution
The following table shows the tax calculation under different regimes:
Particulars
Tax under Old Regime
Tax under New Regime (up to AY 2023-24)
Tax under New Regime (AY 2024-25 onwards)
Income from Salary
INR 3,50,000
INR 3,50,000
INR 3,50,000
Less: Standard Deduction
(INR 50,000)
NA
(INR 50,000)
Profit from Business & Profession
INR 2,00,000
INR 2,00,000
INR 2,00,000
Income from Other Sources
INR 2,00,000
INR 2,00,000
INR 2,00,000
Total headwise Income
INR 7,00,000
INR 7,50,000
INR 7,00,000
Less: Deduction under chapter VI-A
Section 80C Deduction
(INR 1,50,000)
NA
NA
Section 80D Deduction
(INR 20,000)
NA
NA
Net Taxable Income
INR 5,30,000
INR 7,50,000
INR 7,00,000
Total Tax Liability
INR 18,500
INR 37,500
INR 25,000
Less: Rebate u/s 87A
NA
NA
(INR 25,000)
Health and education Cess 4%
INR 740
INR 1,500
NA
Net Tax Payable (annually)
INR 19,240
INR 39,000
NA
A PERSON WITH AN ANNUAL INCOME OF INR 20,00,000
Imagine a person in their fifties, let’s call him Mr. Kumar. He earns a respectable income of INR 20,00,000 annually. Now, this isn’t solely from his job; it’s a blend of various sources. His primary source is his salary, fetching him INR 16,00,000. On top of that, he engages in trading, yielding him INR 2,00,000 in profits. Additionally, he has some savings parked in Fixed Deposits (FDs), which brings him INR 50,000 in interest. Lastly, Mr. Kumar also receives dividends, amounting to INR 1,50,000.
Solution
The following table shows the tax calculation under different regimes:
Particulars
Tax under Old Regime
Tax under New Regime (up to AY 2023-24)
Tax under New Regime (AY 2024-25 onwards)
Income from Salary
INR 16,00,000
INR 16,00,000
INR 16,00,000
Less: Standard Deduction
(INR 50,000)
NA
(INR 50,000)
Profit from Business & Profession
INR 2,00,000
INR 2,00,000
INR 2,00,000
Income from Other Sources
INR 2,00,000
INR 2,00,000
INR 2,00,000
Total headwise Income
INR 19,50,000
INR 20,00,000
INR 19,50,000
Less: Deduction under chapter VI-A
Section 80C Deduction
(INR 1,50,000)
NA
NA
Section 80D Deduction
(INR 20,000)
NA
NA
Net Taxable Income
INR 17,80,000
INR 20,00,000
INR 19,50,000
Total Tax Liability
INR 3,46,500
INR 3,37,500
INR 2,85,000
Less: Rebate u/s 87A
NA
NA
NA
Health and education Cess 4%
INR 13,860
INR 13,500
INR 11,400
Net Tax Payable (annually)
INR 3,60,360
INR 3,51,000
INR 2,96,400
Furthermore, it’s worth noting that taxes on incomes subject to special rates, such as long-term and short-term capital gains, will remain consistent across both the new and old tax regimes. In simpler terms, regardless of which tax system you choose, the rates for these types of income will not change. This aspect adds a layer of stability and predictability to the tax landscape, allowing taxpayers to make informed decisions about their financial strategies without the worry of fluctuating tax liabilities.
This table below gives a broad idea about the tax slab based on the income range applicable up to AY 2023-24:
Pros & Cons of New Tax Regime
Let’s delve into the merits and demerits of the new tax regime.
Pros:
Lower Tax Rates and Simplified Compliance: The new system offers reduced tax rates, making it more pocket-friendly for taxpayers. Moreover, since many exemptions and deductions are omitted, the paperwork is streamlined, simplifying the tax filing process.
Freedom from Locked Funds: Unlike the previous regime, where specific investments were necessary to avail deductions, the new system provides more flexibility. Taxpayers aren’t bound by prescribed instruments with lock-in periods. This benefits those who prefer open-ended investments, offering both good returns and the freedom to withdraw funds as needed.
Enhanced Liquidity: With lower tax rates, taxpayers have more disposable income at their disposal. This is particularly beneficial for individuals unable to invest in specified instruments due to financial constraints or personal reasons.
Customized Investment Choices: Unlike the traditional regime that limits investment options to specified instruments, the new system empowers taxpayers to customize their investment portfolios according to their preferences and financial goals.
Cons:
Limited Deductions: One drawback of the new regime is the absence of certain specified deductions, which could have helped taxpayers reduce their taxable income further.
Impact on Savings Culture: Since investments no longer offer tax benefits under Chapter VI-A, there’s a concern that the new regime may discourage the savings culture. This could potentially deter individuals from investing in long-term savings instruments, impacting their financial planning and security.
In summary, while the new tax regime offers several advantages such as lower tax rates and increased flexibility, it also comes with some drawbacks, including the lack of certain deductions and potential implications for savings behavior. It’s essential for taxpayers to carefully weigh these factors and choose the regime that best aligns with their financial objectives and circumstances.
