The revenue tax division on Monday mentioned staff should inform their employers about their intention to go for the brand new elective tax regime to allow the latter to deduct TDS whereas paying salaries.
The brand new revenue tax regime, introduced in Finances, present an choice to people and Hindu Undivided Households (HUFs) to be taxed at decrease charges if they don’t avail specified exemptions and deductions, like home hire allowance (HRA), curiosity on dwelling mortgage, investments made beneath Part 80C, 80D and 80CCD. Below this, complete revenue as much as Rs 2.5 lakh can be tax exempt.
A 5 per cent tax can be levied on complete revenue between Rs 2.5 lakh and Rs 5 lakh, 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.
5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh, 25 per cent on Rs 12.5 lakh to Rs 15 lakh, and 30 per cent on above Rs 15 lakh.
In a round, the Central Board of Direct taxes (CBDT) mentioned an worker meaning to go for concessional charges of revenue tax as offered within the Finances 2020 could intimate the deductor or his employer of such intention.
“The deductor shall compute his complete revenue and make TDS (tax deducted at supply) thereon in accordance with the supply of Part 115 BAC of the (Earnings Tax) Act. If such intimation is just not made by the worker, the employer shall make TDS with out contemplating the supply of Part 115 BAC of the Act,” it mentioned.
The CBDT has, nonetheless, mentioned that the worker can change the choice of tax construction on the time of submitting revenue tax return and the quantity of TDS cost will get adjusted accordingly.
Nangia Andersen Consulting Director Shailesh Kumar mentioned there was no readability to the employers, whether or not they need to deduct TDS beneath the brand new choice or ought to proceed deducting TDS beneath the previous regime, since there was no corresponding change within the TDS provisions enabling them to deduct TDS beneath the brand new choice.
This round will take away the confusion amongst employers and also will guarantee there are minimal mismatch within the TDS and ITR (revenue tax return) of staff, in the event that they undertake a constant place whereas making declaration to the employer in addition to of their ITR, concerning choice (new or previous) opted by them.
AKM International Associate Amit Maheshwari mentioned, “Now, it is clear that the worker (solely these not having revenue from enterprise or occupation) can’t change the choice as soon as exercised for the aim of getting TDS deducted however can at all times change it on the time of submitting the tax return.”
Below the previous tax system, revenue as much as Rs 2.5 lakh is exempt from private revenue tax. Earnings between Rs 2.5 lakh and Rs 5 lakh attracts 5 per cent tax, whereas that between Rs 5 lakh and Rs 10 lakh is levied with 20 per cent tax. Earnings above Rs 10 lakh is taxed at 30 per cent.