Meanwhile, the government has made changes to the Finance Bill 2023 which has given ‘marginal relief’ to taxpayers with an annual income of just over Rs 7 lakh.
Under the revamped new tax regime, no tax would be levied on income up to Rs 3 lakh.
Income tax regime: Finance Minister Nirmala Sitharaman proposed a major change to the new tax structure in the 2023 Union budget to promote greater adoption. These changes will take effect from fiscal year 2023–2024.
The 2023-24 budget had announced the tax cut where no tax would be levied on people whose annual income is up to Rs 7 lakh under the new tax regime. The move that experts say was an incentive for self-employed taxpayers to switch to a new tax regime that does not provide exemptions for investments.
Under the revamped new tax regime, no tax would be levied on income up to Rs 3 lakh. Income between Rs 3-6 lakh would be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and income of Rs 15 lakh and above are taxed at 30 per cent.
Furthermore, a standard deduction of Rs 50,000 was allowed under the new regime.
How to save income tax under a new tax regime?
Vishal Raheja, MD, InvestoXpert.com, said: “This year’s budget introduced a new tax regime which gives taxpayers an exemption of up to 7 lakhs on their income. However, salaried individuals can claim an additional Rs. 50,000 discount which catapults their limit to a gross of Rs.7.5 lakhs. But beyond that, it seems like there’s little room for tax exemption.”
Tax-saving investments
However, Raheja added that taxpayers can still benefit from a few tools. For example, Section 80 CCD(2) exempts NPS contributions of up to 10% (14% for government employees) of base salary plus loved one’s allowance from income tax. Further EPF contributions of up to 12% of salary are untaxed under the new regime.
“If salaried employees want to take advantage of the new tax regime, they need to focus on restructuring their portfolio. Previously, PPF was an important tool for tax savings. However, according to the latest regulations, PPF contributions are eligible for taxation. But the maturity amount of each PPF account and the interest earned remain untaxed,” said Raheja.
He added another good investment option for wage earners to save on taxes is investment-cum-life insurance.
“Such investment vehicles can provide significant tax savings and are preferred by high net worth individuals. The only caveat is that ULIP policies are still taxable.”
“Finally, wage earners who have rented out their properties can take a standard deduction of 30% on the annual value of the property. The annual value of a property is calculated by determining the actual value of the property minus the council taxes paid on it,” Raheja stressed.
Meanwhile, the government has made changes to the Finance Bill 2023 which has given ‘marginal relief’ to taxpayers with an annual income of just over Rs 7 lakh.
While the government has not specified the threshold income that would qualify for marginal deduction, according to calculations, tax experts said that individual taxpayers with an income of Rs 7,27,777 would benefit from this exemption.
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