ITR filing 2024: With just three days remaining to file your income tax return for the financial year 2023-24, if you’re still unsure whether to opt for the old or new tax regime and haven’t filed yet, there’s no need to worry. We will guide you on which tax regime to choose if your income is around Rs 10 lakh. Additionally, we will explain how you can make an income of Rs 10 lakh tax-free, meaning you won’t have to pay any tax. The last date to file an income tax return is July 31, 2024, for the financial year 2023-24.
Changes made in new tax regime in Union Budget
Major changes have been made in the New Tax Regime in Budget 2024, making it more appealing for taxpayers. In the new tax system announced in this year’s budget, the standard deduction has been raised from Rs 50,000 to Rs 75,000. Additionally, the tax slabs have been revised, and individuals with an annual income of up to Rs 7 lakh will now be exempt from paying income tax. These changes aim to provide relief to taxpayers and simplify the tax system.
Which tax regime should you choose if your income is Rs 10 lakh?
If your income is up to Rs 10 lakh, opting for the old tax regime may be more beneficial for tax savings. This is due to the numerous deductions and exemptions available under the old system. By utilising the investment options outlined below, you can potentially make your income completely tax-free.
Section 80C: Under Section 80C, investments in options like PPF, EPF, ELSS, and others can provide a tax exemption of up to Rs 1.5 lakh. This includes investments in Equity Linked Savings Schemes (ELSS), 5-year fixed deposits, life insurance premiums, children’s tuition fees, and principal repayments on home loans. By utilising the standard deduction of Rs 50,000 in the old tax regime and investing in these tax-saving instruments, you can reduce your taxable income. For instance, if your income is Rs 9.5 lakh and you invest Rs 1.5 lakh, your taxable income will be reduced to Rs 8 lakh.
Section 80CCD (1B): Under Section 80CCD (1B), in addition to the Rs 1.5 lakh limit available under Section 80C, contributions to NPS Tier I account qualify for an extra tax deduction of up to Rs 50,000. By investing up to Rs 50,000 in NPS, you can save more on taxes based on your tax bracket. For example, if your taxable income is Rs 8 lakh and you make a Rs 50,000 contribution to NPS, your taxable income will be reduced to Rs 7.5 lakh.
Home loan interest deduction: Under Section 24B, you can claim a tax deduction on the interest paid on your home loan. This section allows homeowners to deduct up to Rs 2 lakh from their taxable income for home loan interest payments. Utilising this deduction will significantly lower your taxable income. For example, if your income is Rs 7.5 lakh and you claim a Rs 2 lakh deduction, your taxable income will be reduced to Rs 5.5 lakh.
Deduction on health insurance premium: Under Section 80D, you can deduct health insurance premiums up to Rs 25,000 from your taxable income. If you or your spouse is a senior citizen (aged 60 years or above), you can claim an additional Rs 25,000, making the total deduction up to Rs 50,000. Additionally, you can deduct up to Rs 5,000 for expenses related to regular medical check-ups for yourself, your spouse, and your dependent children.
Under Section 80D, you can claim a maximum deduction of Rs 25,000 (or Rs 50,000 if you or your spouse are senior citizens) for health insurance premiums. After applying this deduction of Rs 75,000 to a taxable income of Rs 5.5 lakh, your income will be reduced to Rs 4.75 lakh. Since income up to Rs 5 lakh is tax-free under the old tax regime, you won’t owe any tax with this strategy. Thus, you can effectively earn up to Rs 10 lakh without paying any tax.
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