Income Tax News: Although it doesn’t always make the procedure more difficult, switching to the new tax regime may have an impact on income tax refund claims in specific circumstances. How to do it is as follows:
No Impact on Refund Eligibility
Your eligibility for an income tax refund is unaffected by your decision to use the new tax system. Tax liabilities, claimed deductions, and excess tax paid are the main elements that affect refunds.
Effect on Tax Deductions
Taxpayers lose out on a number of tax breaks and exemptions under the new tax law, including those provided by Section 80C. Although this might cut taxable income, if taxpayers heavily depended on these deductions to reduce their tax liability, it might also have an effect on refund amounts.
Potential for Higher Tax Liabilities
Some people may have higher taxable incomes as a result of the new tax regime’s lower tax rates but fewer deductions. Under the new regime, taxpayers may underestimate their tax liability, which could result in insufficient tax deductions at source (TDS) from their income and impact the amount of their refund.
Calculation Differences
The old and new regimes use different methods to calculate tax liability. In order to prevent disparities between TDS deductions and subsequent refunds, taxpayers transferring between regimes must make sure their calculations are precise. Calculation errors can cause revisions during the assessment process or postpone refunds.
Refund Processing Delays
While using the previous TDS tax regime can facilitate the upfront claim of all applicable exemptions, it may not always result in a more seamless income tax refund processing experience. Due to the complexity of the assessment or verification process, taxpayers should anticipate possible delays in the processing of their return.
All things considered, selecting the new tax system might not impede income tax refund requests. To prevent any issues with their refund, taxpayers should carefully consider the tax ramifications, get professional assistance if necessary, and make sure all computations are correct.
