Income Tax: Under the new tax system, there is no tax due on income up to Rs. 8 lakh; be aware of the requirements

Income Tax: Under the new tax system, there is no tax due on income up to Rs. 8 lakh; be aware of the requirements

Income Tax: Under the new tax system, there is no tax due on income up to Rs. 8 lakh; be aware of the requirements

How To Save Income Tax: The government has introduced some perks from the previous tax system to the new one in order to make it more appealing.

Income tax payers in India have two choices for depositing their taxes. He may use the previous tax system to submit an ITR. He benefits from tax exemption and deduction in this way. However, the majority of tax exemptions and deductions are not available to income tax payers who opt for the new tax structure. An effort has been made to exclude individuals who embrace the new income tax system from paying taxes on income up to Rs 7 lakh annually. In addition, salaried workers are eligible for a few deductions under the new tax system.

There is little doubt that income tax payers who opt for the new tax system would profit from two deductions. There are two types of deductions: the standard deduction and the deduction for the employer's NPS payment. For a salaried individual, taking advantage of these two deductions may drastically lower their tax obligation. He won't be required to pay any income tax if his total yearly income is less than Rs 8 lakh.

Customary subtraction

The standard deduction is the amount that is subtracted from the taxpayer's income before any leftover income is subject to taxation. Family pensioners get a standard deduction of Rs 15,000 from the government, while employed persons are eligible for a standard deduction of up to Rs 50,000. Assume a working individual earns Rs 8 lakh a year. In this case, the tax would be computed on Rs 7,50,000 rather than Rs 8 lakh if you get the advantage of standard deduction up to Rs 50,000 for the whole package. To get this discount, no paperwork is required.

The standard deduction is now available to income taxpayers who have embraced the new tax structure. The standard deduction is claimed under the heading Income from salaries/pension under Section 16(ia) of the Income Tax Act while submitting an Income Tax Return, or ITR. The family pension is maintained in the ITR under the heading "Income from other sources."

Reduction of the amount paid into the NPS

Employed workers now benefit from a standard deduction on the amount deposited into the National Pension System (NPS) under the new tax scheme. This is contingent upon meeting specific requirements. The first requirement is that the employer deposit this amount in NPS into the employee's Tier-1 NPS account. Second, this sum shouldn't exceed ten percent of what private sector workers are paid.

This cap is 14% for workers of the government. Salary is the total income obtained by adding dearness allowance to base pay. This deduction is available to employed individuals under Income Tax Act Section 80CCD (2). Part B of Form 16 will reference this sum that was put in the NPS account.

Tax free income up to Rs 8 lakh is possible.

A working individual earning Rs 8 per year might have their income be tax-free after taking advantage of both of these deductions. His taxable income would be Rs 7.5 lakh once the standard deduction of Rs 50,000 is subtracted from his yearly income of Rs 8 lakh. The taxable income would now drop to Rs 7 lakh if the employer invests Rs 50,000 in the worker's Tier-1 NPS account. which, under the new tax system, will not need tax payment.