TDS on salary of these employees will decrease and others may get the option to join this group This will reduce the amount of TDS on salary that will be deducted for certain employees. Read on to know who will benefit and who will not benefit
The changes announced by the finance minister Nirmala Sitharaman in Budget 2024 in the income tax slabs under new tax regime can help employees to reduce the taxes deducted from their salary.#sr_widget.onDemand p, #stock_pro.onDemand p{font-size: 14px;line-height: 1.28;} .onDemand .live_stock{left:17px;padding:1px 3px 1px 5px;font-size:12px;font-weight:600;line-height:18px;top:9px} #sr_widget.onDemand .sr_desc{margin:0 auto 0;} #sr_widget.onDemand .sr_desc{color: #024d99;margin-top:10px;} #sr_widget.onDemand .crypto .live_stock .lb-icon{8px 6px 5px 3px !important} #sr_widget.crypto.onDemand a.text{border-bottom:1px solid #ccc;padding-bottom:5px;display:block;width:100%} #sr_widget.onDemand .sr_desc .text p, #stock_pro.onDemand .sr_desc .text p{font-size:12px;font-weight:400;}
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Logically, employers should provide employees the option to choose between the old and new tax regime for TDS from salary again. In most cases, this exercise is already over in the first few months of the current FY . However, the changes made in the income tax slabs under the new tax regime may lead to your employer providing you the option to choose between the old and new tax regime again for the purpose of TDS on salary. This is because the changes made in the income tax slabs of the new tax regime are effective from April 1, 2024 for the current FY 2024-25.
The new income tax slabs will change the income tax calculations for salaried and other taxpayers. This may change the tax regime favourable to them. Consequently, employees should be allowed to choose the tax regime for TDS on salary again to lower their tax outgo for current financial year. This year, in April 2024, when employers asked for employees’ preferred tax regime, the income tax slabs under the new tax regime were different than those announced in the Budget 2024.
Also, the announcements have been made at the end of July, after one quarter of the current financial year has already passed and tax on salary has already been deducted for the first few months of the FY.
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More NewsThere may be employees who opted for old tax regime in April 2024 but post Budget 2024 announcements, the new tax regime has become more favourable for them to save taxes. It is likely that such employees would want to switch their tax regime from old to new to reduce the TDS on their salary for the remainder of the financial year 2024-25, ending on March 31, 2025.
Right from the time the new tax regime was introduced, the government has been trying to attract more and more people to adopt it. Over the years, it has been made more attractive in terms of reduction in tax and the announcements in Budget 2024 were a huge step in that direction.
Therefore, it is likely that the government would want that employees be allowed to choose between the two tax regimes again to allow more people to switch to the new regime. As no changes have been made in the old regime, it is unlikely that anyone who has opted for the new regime would want to switch to the old. Those employees who have opted for new tax regime for current FY 2024-25 in April 2024 will automatically decrease due to changes in the income tax slabs announced under the new tax regime. The reduction in TDS on salary will happen once the proposals are passed by the Parliament and receive President’s assent.
Shalini Jain, Tax Partner, People Advisory Services, EY India says, "In light of changes in the tax slabs announced in the Budget 2024, employers may again wish to provide employees with an option to switch between the old or new tax regimes at the time of tax withholding for the current financial year 2024-25. This choice is crucial as it allows employees to select the tax regime that aligns best with their financial situation and maximizes their take-home pay. "
Proposed income tax slabs under new tax regime
Income tax slabs
Income tax rate
0-Rs 3,00,000
0%
Rs 3,00,001-Rs 7,00,000
5%
Rs 7,00,001-10,00,000
10%
Rs 10,00,001-12,00,000
15%
Rs 12,00,001-15,00,000
20%
Rs 15,00,001 and above
30%
The Central Board of Direct Taxes (CBDT) via a circular in April 2023 clarified that there is no time limit or number of times an employee can switch between the two tax regimes. It is the discretion of the employer whether they allow their employees to switch the tax regimes during the financial year once the choice has already been made by the employee in April.
As per the current income tax laws, the new tax regime is the default tax regime from April 1, 2023. If an employee wants to opt for the old tax regime, then he/she has to specifically inform the employer of the choice.
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This story originally appeared on: India Times - Author:Faqs of Insurances
