Avoid New IT Regime If Claiming Tax Deduction Over INR 2.5 Lakh

This year’s Budget has provided an option for taxpayers to opt-in for a new tax regime with lower tax rates, but it will be without the tax exemptions as well as deductions. Recently on 13th April, a circular was issued by the Central Board of Direct Taxes instructing all employers to obtain a declaration from employees if they wish to opt for the new tax regime. After it, employers have started rolling out investment declaration forms and now they are asking employees to unfold their decision.

After this circular, If someone wants to choose the new tex regime he/she has to inform their employer using the investment declaration forms after it the employer will deduct TDS (Tax Deducted at Source) accordingly. Taxpayer’s choice will be applicable for the complete financial year 2020-21. On the other hand, if an employee doesn’t indicate their choice to the employer, then he/ she will be considered to be taxed under the old tax regime.

However, as far as TDS from salary is concerned, then if someone chooses an option then he/ she not allowed to return back to the previous one during the remaining period of the ongoing financial year. It is important to know that the employee can still choose between both tax regime at the time of tax return filing. Meanwhile, it is worth mentioning here that there are still a few exemptions that can only be claimed through the employer so these options may not be available at the time of filing return. In the case of more tax has been paid, the taxpayer will be eligible to claim an Income tax refund Simple steps to claim and know the status of income tax return refund online on government income tax website. Find the full process enclosed with the article. Read More.

If we talk about the new tax regime, then it has various tax slabs with lower tax rates compared to the current one, but it doesn’t feature most of the deductions. All taxpayers need to understand and choose which regime will be favorable to him on the basis of deductions and exemptions he/she plans to claim.

However, if someone claiming more than Rs 2.5 lakh deduction in a year including the Rs 50,000 standard deduction will not gain from the new tax regime. If someone lives on rent and claim HRA exemption or having a home loan and claiming a deduction Get to know tax benefit on home loan interest for the F.Y. 2019-20 (A.Y. 2020-21). Also, we have included tax benefits on principal repaid, interest Paid, etc. Read More for the interest then the threshold limit, which is Rs 2 lakh, can be very easily crossed. In the case of taxpayers who claim the full deduction according to Section, 80C, it will be better opt-in for the new tax regime.