If you are a working professional, then it is important for you to understand the income tax rules, including income tax slabs, tax exemptions and deductions, etc. which can help you manage your finances. So, the more you are aware of tax regulations, the better your tax journey is.
So, let’s understand the 6 income tax rules you should certainly know.
6 Income Tax Rules You Should Know
When it comes to tax deducted at source (TDS) on your salary, you can either go with the old tax regime or the new tax regime. By default, the new regime applies unless you have specified beforehand to your employer. However, if you fail to select your preference, then it would result in your employer deducting tax based on the new tax regime. So, make sure you have informed your employer promptly.
There is a basic exemption limit in both the old tax regime and the new tax regime. Now, if you are a salaried person and your annual income does not exceed the basic exemption limit, then your income is exempted from tax. As of now (according to the new tax regime), if you have an annual income of up to ₹3 lakh, then you are exempted from tax. However, according to the old tax regime, the limit varies depending on your age:
As per the tax laws of India, there are provisions for tax rebates to resident individuals under Section 87A. This means you would not be under any obligations to pay taxes on your income if your net taxable income is below specified limits. As per the new tax regime, there is a tax rebate of up to ₹25,000, thereby, making zero tax payable for annual incomes up to ₹7 lakh. However, as per the old tax regime, the rebate limit is ₹12,500 and is applicable for annual incomes of up to ₹5 lakh.
Here are the deductions and exemptions available for you:
| Income Range (₹) | Tax Rate (₹) |
|---|---|
| 0 to ₹3lakh | 0% |
| ₹3,00,001 to ₹6 lakh | 5% |
| ₹6,00,001 to ₹9 lakh | 10% |
| ₹9,00,001 to ₹12 lakh | 15% |
| ₹12,00,001 to ₹15 lakh | 20% |
| ₹15,00,001 and above | 30% |
| Income Range (₹) | Tax Rate (₹) |
|---|---|
| 0 to ₹2,50,000 | 0% |
| ₹2,50,001 to ₹5 lakh | 5% |
| ₹5,00,001 to ₹10 lakh | 20% |
| ₹10,00,001 and above | 30% |
Make sure you file your ITR before July 31 (deadline date) to avail its benefits, if you are opting for the old tax regime. If you fail to file your ITR on time, you will not be able to opt for the old tax regime. With this, you would only be able to avail exemptions and deductions as per the new tax regime.
Did You Know?
In the new tax regime, high-income earners (₹5 crore or more) may avail reduced surcharge rates. Surcharge rates have dropped from 37% to 25% in the new regime.
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Conclusion
So, these are some income tax rules you must be aware of to make your tax journey smooth and hassle-free.
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