In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced significant adjustments in the new income tax regime, including lower tax rates and tax exemptions on annual income. 7 lakhs. enhancement of exemption for persons subject to the new income tax regime from 5 lakhs onwards 7 lakh was the most important of the major announcements made by the Finance Minister. Additionally, FM announced amendments to the tax structure by reducing the number of tax slabs to five and increasing the tax exemption limit under the new tax regime 3 lakhs. Unlike the new income tax regime, the tax slabs of the old tax structure were not changed by Budget 2023. “We are also making the new income tax regime a default tax regime. However, citizens will continue to have the option of availing the benefits of the old tax regime,” Finance Minister Nirmala Sitharaman said during her budget speech.
Also, standard deduction has been added to the new income tax brackets 50,000 and deduction up to family pension 15,000 annually. This indicates that under the new income tax regime, a salaried individual will also be eligible for the one-time deduction 50,000 from his total taxable income, which was earlier possible only under the old tax regime.
Let us find out how individual taxpayers can make the most out of the old tax regime in terms of tax deduction for income made in Assessment Year (AY) 2024-25 or in FY 2023-24. Changes under the new tax regime
Tax saving investments for individuals under the old tax regime
Based on an exclusive interview with Dr. Suresh Surana, Founder, RSM India, the spokesperson said that as per the provisions of the Income Tax Act, 1961 (‘IT Act’), several deductions under Chapter VI-A are offered to individual taxpayers She goes. Fulfillment of certain conditions. As per the prevailing laws, most of these benefits are restricted only to individuals who continue with the old tax regime. We have provided an overview of some of the most widely used and optimal tax saving instruments for individuals.
1. Section 80C – Deduction for certain specified investments and expenditure:
Section 80C of the IT Act is one of the most popular deductions among individuals as it offers investment-linked and expense-based deductions. Some of the investment options under this segment include life insurance premium, contribution to PPF, investment in Sukanya Samriddhi Yojana, Equity Linked Savings Scheme (‘ELSS’), investment in 5-year fixed deposits, etc.
Further, this section allows deduction for expenses incurred towards tuition fee, stamp duty/registration fee, repayment of principal of housing loan, etc., paid for education of children in India. The total amount of deduction under this section is limited to Rs. 1,50,000 per financial year (FY) under this section. Most taxpayers aim to avail full benefits under this section which can eventually reduce their basic tax liability by up to Rs. 45,000 (ie Rs. 1,50,000×30% – assuming they fall in the 30% tax bracket)
2. Section 80CCD(1b) – Deduction for National Pension Scheme
Individuals contributing to the notified National Pension Scheme are given additional relief of up to Rs. 50,000 under this section. Thus, a person can effectively save tax on taxable income up to Rs. 2,00,000 per financial year i.e. 1,50,000 u/s 80C and 50,000 under this section.
3. Section 80TTA/80TTB – Deduction for interest on bank accounts:
Almost every person has a savings account in one or the other bank and earns interest on it. Furthermore, as India is moving towards a cashless economy, the lower and weaker sections of the society are also encouraged to open and maintain a bank account.
As per section 80TTA, individuals who earn interest on savings account maintained with a bank or post office can claim a deduction of up to Rs. 10,000 per financial year. Further, Section 80TTB of the IT Act provides additional benefits to resident senior citizens wherein it increases the maximum deduction limit to Rs. 50,000 per financial year and also offers the benefit of interest earned on fixed/fixed deposits.
Commenting on the overall Budget 2023 approach in terms of taxation, Dr. Suresh Surana said, “Union Budget 2023 to focus on investment and infrastructure, digital initiatives, fiscal consolidation, sustainability of corporate tax regime and major simplification of personal Have a dream budget. tax regime. There has been a huge increase in investment outlay, with emphasis on agri-based activities, tourism, fintech and education. Measures to improve ease of doing business, speedy return processing and appellate proceedings and increase in the presumptive tax limit for small businesses and professionals will significantly improve tax administration. The personal tax regime has been revamped and the new regime provides for higher basic exemption, reduction in the number of tax slabs from 7 to 6 in a symmetrical manner, higher exemptions and reduction in the top tax rate from 42.74% to 39%. There is also no change in this regard, given the widespread apprehension of an increase in capital gains tax or new taxes to meet the additional outlay. The corporate tax regime is already very attractive with effective tax rates of 25.17% and even a lower tax rate of 17.16% for new manufacturing companies. Potential areas of further reform include extending the period for starting construction to take advantage of the lower tax rate and reducing the tax on dividends to a maximum of 20%.”
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