ITR Filing 2024: Important Considerations for New and Old Tax Regimes
As the deadline for filing income tax returns approaches on July 31, it is crucial to prioritize key financial tasks to avoid last-minute issues. Rushing through this process can lead to errors or complications, such as glitches on the ITR e-filing portal.
Transition Between Tax Regimes
For salaried employees who inadvertently chose the new tax regime during their investment declarations in April 2023, there is an additional step to rectify. If your employer deducted TDS based on the new regime and you prefer the old regime, ensure you claim all eligible deductions under sections like 80C, 80D, and 24(b) when filing your returns. Any excess tax deducted can be claimed as a refund.
Record-Keeping for Deductions
It’s essential to maintain proper documentation for deductions claimed, especially when switching back from the new tax regime to the old one. Incorrect claims may lead to scrutiny by the tax department, potentially resulting in tax notices.
Benefits of the Old Tax Regime
The old tax regime offers various deductions that reduce taxable income, promoting savings. These include deductions under Section 80C for investments in instruments like ELSS, PPF, SCSS, and contributions to EPF and NPS. Additionally, home loan principal repayment and tuition fees are eligible. Section 24(b) allows deductions on home loan interest up to Rs.2 lakh. Ensure these deductions are reflected correctly in your Form-16 or assert them during filing.
NPS Benefits Under the New Regime
While the new tax regime simplifies tax filing with lower rates and fewer deductions, it still allows exemptions such as tax breaks on employer’s NPS contributions. Both tax regimes limit tax-free benefits from employers to Rs.7.5 lakh annually. Excess benefits are treated as taxable income.
Tax Exemption on Leave Encashment
Under the new regime, employees can claim tax exemption on leave encashment during resignation or retirement, up to Rs.25 lakh. Government employees enjoy full exemption, whereas non-government employees have this limit. However, encashing leave while still employed is fully taxable under both regimes.
Conclusion
Understanding these deductions can significantly reduce your taxable income and save money. It’s crucial to file your ITR accurately to avail these benefits and avoid penalties.
By adhering to these guidelines, you can navigate the complexities of tax filing effectively and ensure compliance with current regulations.