The Central Board of Direct Taxes or CBDT has recently rolled out a new notification related to the new tax regime. It notifies that if an employee fails to pick between the new and old tax regime then by law, an employer is allowed to subtract the TDS or Tax Deducted At Source as per the new tax regime, by default. It is so because Finance Minister Nirmala Sitharaman has made the new tax regime a default from the financial year 2023-24.
New Circular Issued by CBDT
Regarding the same, CBDT has issued a new circular ruling on the TDS deductions.
“If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the new tax regime. Accordingly, in such a case, the employer shall deduct tax at source, on income under section 192 of the Act, in accordance with the rates provided under sub-section (lA) of section 115 BAC of the Act,” reads the circular.
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What’s the Difference Between New and Old Tax Regimes?
The first difference is that under the new tax regime, the basic exemption limit is ₹3 Lakhs, which earlier was ₹2.5 Lakhs. Furthermore, “The amount of rebate under Section 87A has been increased to the taxable income of Rs 7 lakh under the regime. A standard deduction of Rs 50,000 has also been introduced in the system. Salaried employees and pensioners can opt for a standard deduction of Rs 50,000 under the new income tax regime. There are six tax slabs under the regime,” mentioned News18.
“Those who wish to continue with the old income tax regime will get exemptions such as Section 80C, which can reduce the taxable income by Rs 1.5 lakh. The tax slabs and basic exemption limit remain unchanged. The old tax regime also offers deductions on loans and health insurance premiums. Those who wish to opt for the old tax regime must specify it each year,” mentioned further.