Income tax rules from April 1: The new financial years starts from April 1. It is important to know the correct income tax rules for every financial year so that an individual can do the tax planning for the same accordingly, make tax-saving investments for the current financial year.
Read on to know the income tax ready reckoner for financial year 2024-25.
April 1, which marks the beginning of a new financial year, is when many income tax rules usually come into effect (unless stated otherwise). Even if income tax rules are announced in the Union Budget or the middle of a financial year, they mostly come into force when the new financial year starts. This year, the government announced no changes in the income tax laws for FY 2024-25 during the interim budget. Hence, all income tax rules of the previous financial year remain.
Here is a ready reckoner of the income tax rules that will remain applicable from April 1, 2024.
1. Choose between the old and new tax regimes: For TDS (tax deducted at source) on salary, the employee is required to choose between the old and new tax regimes. Remember, the new tax regime is the default tax regime option. If you do not inform your employer that you want to opt for the old tax regime, your employer will deduct tax from salary income based on the new tax regime. Do it as soon as the employer asks you to do it.
In the case of the old tax regime, the basic exemption limit for an individual depends on his or her age. For individuals below 60 years of age, Rs 2.5 lakh in a financial year is exempt from tax. For senior citizens aged between 60 and 80 years, Rs 3 lakh is exempt from tax in a financial year. For super senior citizens, aged 80 years and above, income up to Rs 5 lakh is exempt from tax.
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3. Zero tax payable under old and new tax regime: Income tax laws offer tax rebate to resident individuals under both the tax regimes. The tax rebate – available under Section 87A – makes zero tax payable if the net taxable income does not exceed the specified limit. The new tax regime offers a higher tax rebate of Rs.25000 on income upto Rs.700000/- as compared to the old tax regime.
The old tax regime offers tax rebate up to Rs 12,500 which makes zero tax payable for net taxable income up to Rs 5 lakh.
4. Deductions and tax exemptions available: Both the tax regimes offer certain deductions and exemptions. However, the old tax regime offers more tax exemptions and deductions as compared to the new tax regime. Some of the examples of deductions available are Section 80C up to Rs 1.5 lakh for specified investments and expenditures; Section 80D for premium paid for health insurance policy; Section 80CCD (1B) for additional investment in National Pension System (NPS) up to Rs 50,000. Individuals can also claim deduction on interest paid on home loans for a maximum of Rs 2 lakh, deduction on interest paid on education loan as well as deduction on donations made. Apart from the deductions, an individual can claim tax exemption on house rent allowance (HRA) as well as leave travel allowance (LTA).
The new tax regime offers only two deductions to individuals. These are: Standard deduction of Rs 50,000 from salary and pension income and Section 80CCD (2) deduction for employer’s contribution to the NPS account. Family pensioners are also eligible for a standard deduction of Rs 15,000 in the new tax regime. These deductions are available under the old tax regime as well.
By claiming the eligible deductions (depending on the tax regime chosen), an individual can reduce their net taxable income and also tax liability.
5. File ITR on time to claim old tax regime benefit:Â If you are planning to opt for old tax regime while filing income tax return this year, ensure that ITR is filed before the July 31 deadline expires. This is because the new tax regime is the default option and income tax rules allow an individual to opt for the old tax regime only if ITR is filed on time. If an individual files a belated ITR (between August 1 and December 31), then tax liability will be calculated only on the basis of new tax regime
6. Reduced surcharge in new tax regime:Â A high-income earner opting for the new tax regime will have to pay a lower surcharge rate. The rate has been reduced from 37% to 25% for incomes of more than Rs 5 crore under the new tax regime. However, if the individual opts for the old tax regime, a surcharge rate of 37% will be applicable.
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