Income Tax Season: How you can save tax while filing ITR under new tax regime
ITR filing: The new tax regime was introduced in Budget 2020 as a means to simplify tax calculations and offer concessional tax rates. So, unless you do not categorically opt for the old tax regime, the new tax regime is assumed as default, and hence, your income tax liability is calculated according to it.
As the income tax filing (ITR) deadline is nearing, it is time to choose your income tax regime.
There are two tax regimes- the old tax regime and the new tax regime. One should choose carefully as it can not be changed once you file ITR.
What is the new tax regime?
The new tax regime was introduced in Budget 2020 as a means to simplify tax calculations and offer concessional tax rates. So, unless you do not categorically opt for the old tax regime, the new tax regime is assumed as default, and hence, your income tax liability is calculated according to it.
Tax slab under new tax regime
Under this, you do not have to pay any tax up to Rs 3 lakh. Whereas if your taxable income is up to Rs 7 lakh, then you will also get tax exemption on Rs 3-7 lakh i.e. the remaining Rs 4 lakh. Also, to make it more attractive, the government has given the benefit of two types of deductions.
Deductions under the new tax regime
1- Employed people get a standard deduction of Rs 50 thousand in the old tax system. That means, no matter what your salary is, you will not have to pay any tax on Rs 50,000. In the last budget, it was also included in the new tax system. In this way, you will not have to pay any tax on your salary of up to Rs 7.50 lakh, because Rs 50 thousand will be reduced from your taxable income due to standard deduction.
Deductions under the new tax regime
2- You can get some additional exemptions over and above the standard deduction by making contributions to NPS through your employer. In NPS, apart from the exemption of Rs 1.5 lakh under 80CCD(1) and Rs 50 thousand under 80CCD(1B), an additional exemption is available in 80CCD(2). Under this, you will get a rebate on the investment made by your employer in NPS. Employees of private companies can invest up to 10 per cent of their basic salary in NPS. Whereas if you are a government employee then this figure can be up to 14 per cent for you.
How to make Rs 7.80 lakh tax-free under the new tax regime?
Let us assume that your package is Rs 7.80 lakh. In such a situation, your basic salary will be at least 50 per cent of your CTC (Rs 3.90 lakh). In such a situation, you can invest 10 per cent of it i.e. up to Rs 39,000 in a corporate NPS account. A standard deduction of Rs 50 thousand will be available on Rs 7.80 lakh and a tax rebate on corporate NPS of Rs 39 thousand will be available. In this way, you will get a total deduction of up to Rs 89,000, due to which your taxable income will be less than Rs 7 lakh (Rs 6.91 lakh) and your tax liability will become zero.
What you can do to get a tax rebate
Most of the companies provide NPS facilities. You can invest in NPS by talking to the HR of your company. This investment is made from your basic salary and the result will be that the in-hand salary you receive every month will be reduced. That way, you will be able to get additional tax exemption. If there is no NPS facility in your company then talk to HR once, he will guide you on this.