Individual taxpayers have the choice to pick out whether or not they need to be within the outdated tax regime.
If intimation shouldn’t be made by the worker, it shall be presumed that the worker continues to be within the default new tax regime
The earnings tax division has stated employers should search particulars from staff about their desire for tax regime within the present fiscal and deduct TDS accordingly. In case an worker doesn’t intimate his/her employer about the popular tax regime, then the employer could be required to deduct TDS from wage earnings as per the brand new revamped tax regime introduced in Budget 2023-24.
Individual taxpayers have the choice to pick out whether or not they need to be within the outdated tax regime, which gives for exemptions and deductions or swap to the brand new tax regime which affords low tax charges however no exemptions.
The Budget 2023-24 unveiled on February 1 tweaked the elective exemption-free tax regime, which is on the market beneath part 115BAC of the I-T Act to push salaried-class taxpayers to modify to the brand new tax regime. The revamped concessional tax regime was made the default regime for a person taxpayer.
The Central Board of Direct Taxes (CBDT) on Wednesday issued a clarification about Tax Deducted at Source (TDS) deduction by employers within the present fiscal.
“…a deductor, being an employer, shall search info from every of its staff…concerning their supposed tax regime and every such worker shall intimate the identical to the deductor, being his employer, concerning his supposed tax regime for every year and upon intimation, the deductor shall compute his complete earnings, and deduct tax at supply thereon in accordance with the choice exercised,” the CBDT said.
If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default new tax regime, it added.
Homi Mistry, partner at Deloitte India, said, “The CBDT has clarified vide Circular no. 4 of 2023, dated April 5, 2023, that a deductor being an employer shall seek information from each employee having salary income regarding the tax regime they want to opt for (whether the old regime or the new [default tax] regime) and every employee shall intimate the same to the employer regarding their intended tax regime for each year and accordingly the deductor (i.e. employer) shall compute the employee’s income and deduct tax thereon based upon the option exercised.”
He added that if no intimation is made by the worker, it shall be presumed that the worker continues to be within the new tax regime (being the default tax regime). In such a case, the employer shall deduct TDS in accordance with the tax charges beneath the brand new tax regime.
Under the brand new tax regime, as introduced within the Budget, there shall be no tax for these with an annual earnings of as much as Rs 7 lakh. An ordinary deduction of Rs 50,000 has additionally been allowed and the fundamental exemption restrict hiked to Rs 3 lakh.
Income between Rs 3-6 lakh could be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and earnings of Rs 15 lakh and above shall be taxed at 30 per cent.
The outdated tax regime, which permits for exemptions and deductions, has a primary exemption restrict of Rs 2.5 lakh. Also, these having an annual earnings of Rs 5 lakh don’t have to pay any tax.
Income between Rs 2.5 lakh and Rs 5 lakh attracts a 5 per cent tax, whereas that between Rs 5 lakh and Rs 10 lakh is levied with a 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent.
The clarification comes after the CBDT acquired representations expressing considerations concerning tax to be deducted at supply (TDS) on the wage earnings of an individual beneath part 192 of the Act because the deductor, being an employer, wouldn’t know if the individual, being an worker, would decide out from taxation beneath part 115BAC of the Act or not.
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