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Income Tax News: Big Relief! Tax Exemption on Cards in New Tax Regime, Add THIS Component to the Slab, Check Update Here

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Sparsh Goel
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Income Tax News

Income Tax News: The budget for 2020 included a few modifications to the income tax laws. A new tax structure was introduced. We call this the New Tax Regime. In the 2023 budget, a few additional adjustments were made to this new tax system. Addition of standard deduction. Moreover, tax exemption was granted to individuals earning up to Rs 7 lakh. The issue persisted after this. Beginning with the fiscal year 2023–2024, Finance Minister Nirmala Sitharaman declared the new tax regime to be the default tax system.

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Default Tax Regime Transition

The new tax regime will now be the default when we file our income tax return or pay investment tax. According to experts, plans are underway in the near future to establish the new tax regime as the exclusive tax system. However, as of right now, there are no longer any exemptions that were offered under the previous tax system. It is therefore possible to focus on making it more appealing. This time, adjustments might be made if the sources are to be trusted.

Income tax rate
0 to 3 lakh Zero
3 to 6 lakhs 5 percent
6 to 9 lakhs 10 percent tax
9 to 12 lakhs 15 percent tax
12 to 15 lakhs 20 percent

Benefits of EPF can be added

If the sources are reliable, the budget should focus on making the new tax structure more alluring. For an employee, the Employee Provident Fund (EPF) is the most important thing. This can be a part of the new tax structure. Up until now, EPF has been eligible for Section 80C tax exemptions under the previous tax system.

The employer deducts this from wages on Form 16. However, the benefit is limited to Section 80C, where the maximum tax exemption is Rs 1.5 lakh. If it is incorporated into the new tax system, there is a possibility that the 80C window will open. It is not yet known, though, if it will be granted an additional tax exemption or included as 80C.

Setting up the environment for 80C

Tax experts claim that there was indication during the new tax regime's implementation that it would be implemented gradually. This series was the first to add standard deduction. Now, taxpayers will benefit from additional tax exemptions if the EPF category is added. This provides additional proof that 80C tax exemption channels are opening up. Future additions of deductions may be possible if EPF is included. However, due to the continued existence of the previous tax structure, the government will not directly provide all of the benefits.

Which provisions of the new tax system are exemptions?

In 2023, a few modifications were made to the new tax system. The base exemption limit was raised to Rs 3 lakh from Rs 2.5 lakh. The tax exemption limit with rebate has been raised from Rs 5 lakh to Rs 7 lakh concurrently. The tax rebate for this structure has been extended. In addition, there is a standard deduction of Rs 50,000 towards tax exemption. Under the new tax regime, there is no tax on total savings up to Rs 7.5 lakh in such a scenario.

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