6 Income Tax Rules Every Salaried Person Should Know

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

1. Selection Between the Old Tax Regime and the New Tax Regime

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.

2. Basic Exemption Limit Variation

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:

  • Below 60 years: ₹2.5 lakh
  • 60 to 80 years: ₹3 lakh
  • 80 years and above: ₹5 lakh

3. Zero Tax Payable and Tax Rebates

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.

4. Available Deductions and Exemptions

Here are the deductions and exemptions available for you:

  • Old tax regime deductions: Section 80C (up to ₹1.5 lakh), Section 80D (health insurance premium), Section 80CCD (1B) (additional NPS investment), etc.
  • New regime deductions: Standard deduction (₹50,000) and Section 80CCD (2) (employer’s NPS contribution).

5. Income Tax Slabs

Income Tax Slabs As Per New Tax Regime

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 Tax Slabs As Per Old Tax Regime

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%
Income tax calculation

6. Timely Income Tax Return (ITR) Filing

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.

Recommended: Essential Financial Tips You Need to Know Before You Turn 30

Conclusion

So, these are some income tax rules you must be aware of to make your tax journey smooth and hassle-free. Looking for ways to grow your money apart from tax-saving investments? Consider P2P Investment with 13Karat App and enjoy high returns of up to 13% per annum.