Finance Minister Nirmala Sitharaman revised the income tax slabs of the new regime in Budget 2023. Tax savers should allocate their investments more intelligently now that the new fiscal year, FY24, has begun to meet their financial goals while also lowering their taxable income. Taxpayers must be informed about the changes and alternatives available to reduce their taxes when the updated income tax new regime goes into force in FY24.
The new tax regime income tax slabs offer lower tax rates while offering fewer exemptions and deductions. Nonetheless, if one has a salary structure that provides adequate benefits under the new tax regime, here's how to switch to it.
To begin, the employee must notify his or her employer at the start of the fiscal year of his or her decision to select between the old and new tax regimes. Every year, the employee has the option of switching between these two regimes. However, salaried taxpayers with professional income or a business must go through an additional process. Such salaried taxpayers with a business income must complete form 10-IE. It is a declaration made by taxpayers to choose the new tax regime or to opt out of the new tax regime.
If you have income classified as 'Profits and Gains of Business and Profession (PGBP)' and want to opt for the new tax regime, you must complete Form 10-IE. If a person does not have professional or business income, they can simply choose the new regime when submitting the ITR 1 or 2. If a salaried employee engages in any type of business activity, his income will be classified as PGBP and salary. Trading in futures and options (F&O), trading in stocks, freelancing employment, trading in commodities derivatives and revenue from YouTube or any other content publishing platform are examples of such activities.
Many deductions are no longer available under the new tax system. The deduction of up to ₹2 Lakhs on housing loan interest, for example, is not permitted under the new tax regime. Carrying forward of losses or set-off or depreciation is not possible if such depreciation or loss is attributable to any of the deductions described in section 115 BAC(2)(I).
Certain deductions under Chapter VI-A of the Income Tax Act of 1961 are no longer available under the new tax regime, with the exception of 80JJAA and 80CCD(2). Under the new tax structure, it is not possible to file a late tax return. If a tax return is filed beyond the due date, it must be filed under the old regime. Similarly, if one submits an amended late return, one cannot choose a new tax regime.
If you have made significant tax-saving investments, returning to the old tax regime may be more profitable. However, if your investments are minor, it is best to stick with the default new tax regime to save more.
In either case, increasing your savings and investments are important.
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The new tax regulations allow taxpayers to invest their money in any way they see fit. There is no obligation under the new scheme to invest in insurance plans or tax-saving schemes that may not be in line with their financial goals.
HUFs or individuals with business or professional income must file Form 10 IE to pay income tax under the new tax regime. They can notify the income tax department of their choice by filing this form.