How to Save Income Tax in New Tax Regime: Most of the tax exemptions and deductions are not available in the new income tax regime. In lieu of this, the government has tried to make the new income tax regime attractive for those adopting the new income tax regime by making their annual income up to Rs 7 lakh tax free. Apart from this, there are some such deductions, the benefits of which can be availed by salaried employees in the new tax regime. Actually, in the interim budget of 2024, the government did not make any significant changes in the old income tax regime. But in 2023 Budget, in order to make the new tax regime more attractive, the government increased some benefits which were applicable from 1 April 2023. You can avail these benefits in the current financial year (2023-24).
Salaried employees are already getting the benefit of standard deduction of Rs 50 thousand in the old tax regime. But from April 1, 2023, this benefit is also be available in the new tax regime. This means that even if your annual taxable salary is Rs 7 lakh 50 thousand, you will not have to pay any tax. This is because annual salary up to Rs 7 lakh is already tax free in the new tax regime. If we add the benefit of standard deduction of Rs 50 thousand to this, then this amount becomes Rs 7.5 lakh. While filing Income Tax Return or ITR, standard deduction is claimed under the head Income from salaries/pension under Section 16(IA) of the Income Tax Act.
Apart from salaried employees and pensioners, the benefit of standard deduction is also available to those receiving family pension. But while the standard deduction amount for employees and pensioners is Rs 50 thousand, for those receiving family pension this amount is only Rs 15 thousand. Family pension is kept under the head “Income from other sources” in ITR.
Under the new tax regime, employed employees can also get the benefit of standard deduction on the amount deposited in the National Pension System (NPS). But to take advantage of this, some conditions must be fulfilled. The first condition is that in NPS this amount should be deposited by the employer in the Tier-1 NPS account of his employee. Secondly, this amount should not be more than 10 percent of the salary of private sector employees. For government employees this limit is 14 percent. This definition of salary includes basic salary as well as dearness allowance. Employed people can avail the benefit of this deduction under Section 80CCD (2) of the Income Tax Act. Since the employer deposits this money in the employee's account, generally you do not need to submit any proof or document to your employer to avail the benefit of this deduction. This amount deposited in your NPS account will be mentioned in Part B of your Form 16.
If we add the benefits of both the deductions mentioned here, then even those earning a salary of more than Rs 7.5 lakh can get complete relief from paying income tax. For example, if someone's annual salary is Rs 8 lakh, then after subtracting the standard deduction of Rs 50,000, his taxable salary will be Rs 7.5 lakh. Now if his employer deposits Rs 50 thousand in his Tier-1 NPS account, then the taxable income will further reduce to Rs 7 lakh. On which he will not have to pay any tax under the new tax regime. However, the employer of an employee getting an annual salary of Rs 8 lakh can deposit up to Rs 80 thousand annually in his NPS account, on which deduction can be claimed under section 80CCD (2).