The Union Budget 2023–24 made the new tax regime more enticing, however it does not include the normal deductions that were part of the previous tax regime.

Tax In New Financial Year 2024-2025 : For those planning to opt for the new tax regime for the 2024–2025 fiscal year, there are two deductions that are accessible exclusively to salaried individuals.

For individuals with incomes up to Rs 7 lakh, the new tax regime has zero tax burden, and it is now the default regime for taxpayers.

The Union Budget 2023–24 made the new tax regime more enticing, however it does not include the normal deductions that were part of the previous tax regime.

However, there are some deductions that salaried deductions can claim under the new regime.

Standard Deduction

It’s a simple benefit that’s only available to pensioners and those on salaries. Employers automatically deduct Rs 50,000 as a standard deduction from the gross salary when determining the net taxable salary or pension income. To claim this deduction, no paperwork is needed.

Part B of Form 16, the employer-issued TDS certificate, which lists the taxes withheld from employee salaries for the fiscal year, shows this deduction. In accordance with Section 16(ia) of the Income-tax Act, taxpayers may claim this deduction under the heading “Income from salaries/pension” on their income tax return (ITR).

Furthermore, family pensioners can also benefit from the standard deduction, although at a lower amount of Rs 15,000 as opposed to the Rs 50,000 available for retirees and salaried individuals. The tax code for family pensions is “Income from other sources.”

Section 80CCD (2) deduction under NPS

Since the new tax system was introduced in the 2020–21 fiscal year, this deduction has been allowed.

It is applicable when money is deposited into a worker’s Tier-I NPS account by their employer. The highest deduction that can be taken by both government and private employees is specified by the income tax regulations.

Employees in the private sector are entitled to deduct up to 10% of their pay, while those in the government are eligible to deduct up to 14% of their pay under Section 80CCD (2).

Income tax laws define salary as base wage plus dearness allowance.

The employer’s portion of an employee’s Tier I NPS account typically counts toward the employee’s cost to the business (CTC), which has the potential to lower take-home pay.

The gross wage that the employer is required to pay is inclusive of the company’s NPS contribution. When completing their income tax return (ITR), employees are required to claim the deduction under Section 80CCD (2). Details on the employer’s contribution to the NPS account are included in Part B of Form 16.

Because the contribution is paid directly to the NPS account by the employer, just like Employees’ Provident Fund (EPF) contributions are made, employees do not need to show proof of their NPS contribution in order to avoid having their TDS from salary increased.

Employees should, however, confirm the evidence submission policy with their company.

It is noteworthy that an employer’s NPS contribution may become taxable for the employee if it surpasses a specific threshold.

Income tax laws provide that an employee will be subject to taxation if an employer’s total payments to the NPS, EPF, and superannuation fund in a given financial year above Rs 7.5 lakh.

In addition, there will be taxation on any interest, dividends, or returns obtained on the excess contribution.

By newsparviews.com

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