Winning Bizness Desk

Mumbai. Only a few days are left to file Income Tax Return (ITR) for the financial year 2023-24 as taxpayers have to complete this work by July 31. For some years, the taxpayer gets the option of two tax regimes to file ITR. If you choose the first or old tax regime, only your income up to Rs 2.5 lakh will be tax free. On the other hand, if you choose the new tax regime, you will not have to pay tax on income up to Rs 3 lakh. "Winning Bizness" here tells you about these two tax regimes available for filing ITR, so that you can save tax by choosing the right tax regime for yourself.

Old tax regime

Suppose if someone's annual income is Rs 5 lakh. In the old tax regime, income up to Rs 2.5 lakh is tax free. In such a situation, the person will be liable to pay tax at the rate of 5% on the remaining 2.5 lakh rupees. That is, he will have to pay tax of Rs 12,500. But the government waives this tax under Section 87A of the Income Tax Act. There is also a catch in this. If your income is even one rupee more than 5 lakh rupees, then you will have to pay tax not on one rupee but on two and a half lakh rupees. Now, at the rate of 5% on 2.5 lakh rupees, there will be a tax liability of Rs 12,500. On the other hand, tax will have to be paid at the rate of 20% on the remaining 1 rupee. That is, tax of Rs 12,500.20 will have to be paid.

New Tax Regime

This time in the budget, there is no tax on annual income up to Rs 3 lakh in income tax. On the other hand, tax will have to be paid at the rate of 5% on income of Rs 3 lakh to Rs 6 lakh. Suppose, someone's annual income is Rs 7 lakh. In the new tax regime, income up to Rs 3 lakh is tax free. In such a situation, out of the remaining Rs 4 lakh, Rs 15,000 will have to be paid as tax at the rate of 5% on Rs 3 lakh. At the same time, 10% tax will be levied on Rs 1 lakh, that is, Rs 10,000. That means a total tax of Rs 25,000. But in this regime, the government waives off tax on income up to Rs 7 lakh under section 87A. However, there is a catch in this too.

And If your income is even one rupee more than Rs 7 lakh, then you will have to pay tax not on one rupee but on Rs 4,00,001. Now, after the tax of Rs 3 lakh is waived, out of the remaining Rs 4,00001, Rs 15,000 will have to be paid at the rate of 5% on Rs 3 lakh and Rs 10,000.10 will have to be paid at the rate of 10% on the remaining Rs 1,00,001. That means the total tax liability will be Rs 25,000.10. The special thing about the new tax regime is that there is no exemption in it and under this, income up to Rs 7 lakh can be made zero tax. If you do not invest in any scheme, then you should choose the new tax regime.