Salaried Earners Up to Rs.15 Lakh May Get Income Tax Relief

Salaried Earners Up to Rs.15 Lakh May Get Income Tax Relief: The latest development in India’s income tax structure has brought a lot of relief to salaried individuals earning up to Rs.15 lakh per annum. These proposed changes are aimed at greatly simplifying tax compliance and making the new tax regime more attractive. Sources have revealed that the government is considering making changes to the new income tax system introduced in the financial year 2020-21, which will attract more than 70% of taxpayers due to its simple structure and regular enhancements. This article gives information about the new changes in income tax, proposed income tax slabs, and Rs.12,500 exemption in income tax and checks the exemptions offered under the new tax regime to provide clarity to taxpayers.

Key Updates on Income Tax Relief for Salaried Earners

The government is focused on offering considerable tax benefits for salaried individuals under the new tax regime.

1. Simplified Tax Slabs:
   Revised tax slabs encourage taxpayers to transition from the old regime to the new one.
2. Higher Rebates:
   Taxpayers with an annual income of up to Rs.7 lakh will not pay any taxes, thanks to a rebate of Rs.12,500 under Section 87A.
3. Reduced Surcharge for High Earners:
   For individuals earning over Rs.5 crore annually, the surcharge has been reduced from 37% to 25%.
4. Optional Exemptions:
   While the new regime minimizes paperwork, it simplifies tax filing, especially for individuals not claiming many exemptions.

1. New Changes in Income Tax

The new changes in income tax for FY 2023-24 and AY 2024-25 aim to enhance transparency and make the tax system more user-friendly.

Key Highlights of the Changes:

• Increased basic exemption limit under the new tax regime to Rs.3 lakh.
• Simplification of income tax return (ITR) forms to reduce filing errors.
• Promotion of the new tax regime over the traditional one.

These changes are expected to benefit middle-class taxpayers, especially those with minimal exemptions.

2. Proposed Income Tax Slabs

The proposed income tax slabs under the new regime offer clarity on the tax owed based on annual income.

Income Tax Slabs for FY 2023-24:

Why These Slabs Matter:

These simplified slabs reduce the burden for individuals earning up to Rs.15 lakh annually, offering a more straightforward tax process.

3. Rebate of Rs.12,500 in Income Tax

One of the standout features of the new tax regime is the rebate of Rs.12,500 available under Section 87A.

Who Can Avail This Rebate?

Taxpayers earning up to Rs.7 lakh annually in the new regime are eligible for a full rebate, resulting in zero tax liability.

Example:

If your taxable income is Rs.6.5 lakh, the rebate will reduce your tax liability to Rs.0, making it a valuable incentive for middle-income earners.

4. Exemptions Allowed in New Tax Regime

While exemptions under the new tax regime are limited compared to the old regime, a few key benefits remain.

Available Exemptions:

1. Standard Deduction for Salaried Employees: Rs.50,000 is allowed as a deduction.
2. Employer Contribution to NPS: Up to 10% of salary is tax-exempt.
3. EPF Contribution: Employer contributions up to Rs.7.5 lakh are tax-free.

Taxpayers relying on exemptions like HRA and LTA may still find the old regime more beneficial.

5. Exemptions in New Tax Regime

Unlike the old regime, the exemptions in the new tax regime are more restricted, simplifying the tax process.

What is Excluded?

1. HRA Exemption: No exemption for house rent allowance under the new regime.
2. Section 80C Deductions: Investments in PPF, ELSS, and LIC premiums are not deductible.
3. Home Loan Interest Deduction: No exemption for interest paid on home loans.

Who Benefits the Most?

Taxpayers with straightforward income structures and minimal exemptions stand to benefit the most.

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