Finance Minister Nirmala Sitharaman announced tax exemption in the budget on Tuesday, July 23. He increased the standard deduction from Rs 50,000 per year to Rs 75,000 per year. Along with this, the tax structure was also revised. This change was made under the New Tax Regime. In such a situation, people have a lot of confusion regarding tax saving that if their salary is Rs 50,000 or Rs 1 lakh, then which tax regime should they choose. Also how much tax will have to be paid? Let us understand what the complete mathematics is.
First of all, know that the new tax regime is the default from Budget 2023 itself, that is, if you do not select any regime then the new tax regime will already be selected. In such a situation, if your salary is Rs 50,000, then you do not need to take any kind of tension, because your annual salary is only Rs 6 lakh. This means that you do not come in the tax category.
Which tax regime is better on salary of Rs 1 lakh?
Now coming to the salary of Rs 1 lakh… If your salary is Rs 1 lakh per month, then you can choose either new tax regime or old tax regime. However, if you want to pay ‘0’ tax on salary of Rs 1 lakh i.e. do not want to pay even a single rupee of tax, then you will have to select OLD TAX REGIME, but for this you will have to show some claims, so that you can get tax exemption. Exemption) can be obtained.
How will ‘0’ tax be imposed on salary of Rs 1 lakh?
- If you want to pay 0 tax on salary of Rs 1 lakh, then you will have to claim tax exemption on various types of investments and reimbursements. Reimbursement can also be claimed for conveyance, LTA, entertainment, broadband bills, petrol bills and entertainment or food coupons.
- First of all let’s talk about LTA. You can avail this benefit twice in 4 years. This includes the travel plan fare. This is 10 percent of your basic salary. This means that on your annual salary of Rs 12 lakh, the basic salary will be Rs 6 lakh annual salary. That means LTA will be Rs 60 thousand and an average annual discount of Rs 30 thousand can be availed.
- HRA is given at the rate of 50% in metro cities and 40% in non-metro. The amount that is left after deducting 10 percent of the basic salary from the total rent can be claimed as HRA. In such a situation, people living in a metro city can claim HRA exemption of Rs 1.80 lakh on monthly rent of Rs 20,000.
How much exemption can be claimed in reimbursement?
- On a monthly salary of Rs 1 lakh or an annual salary of Rs 12 lakh, the conveyance allowance is Rs 1-1.50 lakh, which means that this amount is completely non-taxable.
- Tax exemption can be claimed on monthly broadband bill of Rs 700-1000 i.e. tax exemption of Rs 12000 can be claimed annually.
- Those with a salary of Rs 1 lakh are given an entertainment allowance of Rs 2000 every month, which means that you can get an annual tax exemption of Rs 24000 under this.
- Many companies give allowance on uniform, books or petrol bills. Which means that you can get exemption under this up to Rs 12 thousand annually.
- Now under total reimbursement, you can get tax exemption up to Rs 1.98 lakh.
How much will be the rebate on investment? (Savings Deduction)
- You can get annual tax exemption of Rs 1.5 lakh under Section 80C of Income Tax by investing in places like EPF, PPF, Sukanya Samriddhi Yojana, NPS, child’s tuition fees, LIC, home loan principal.
- Under Section 80CCD(1B), you can claim an extra Rs 50 thousand tax exemption by investing in NPS.
- Under Section 80D, you can avail tax exemption of Rs 25 thousand on health insurance and Rs 25 thousand on health insurance of parents, i.e. a total tax exemption of Rs 50 thousand.
- Now the rebate on total investment will be Rs 2.50 lakh.
Now if tax claim is added then the taxable income will be this much
| Total HRA claim | 1.80 lakhs of Rs |
| total reimbursement | 1.98 lakh rupees |
| deduction on investment | Total Rs 2.50 lakh |
| standard deduction | Rs 50,000 |
| Exemption under LTA | 30 thousand rupees |
| total tax exemption | Will be Rs 7.08 lakh. |
Now the total taxable income out of Rs 12 lakh annual income
12 lakh annual salary – Rs 7.08 lakh Tax claim = Rs 4.92 lakh
How will 0 tax be charged?
Now another rule of income tax will be applicable here. Now your taxable salary under the old tax regime ranges from Rs 2.5 lakh to Rs 5 lakh. 5 percent tax will be applicable on this under Income Tax rules, which comes to Rs 12500. Whereas in the old tax slab, a tax rebate of Rs 12,500 is available under Section 87A on income up to 5 years. In such a situation, no tax is payable after deducting rebate in income tax (12500- 12500 = 0). In this way, even on income of Rs 12 lakh, your entire salary will be tax free.