The deadline for filing taxes for salaried persons this year is July 31, 2021. (may get extended due to lockdown caused by the second wave of Covid-19).
However, once you have completed all of your estimates and have all of your records, you can file your income tax return without waiting for the deadline or an extension. Along with filing last year’s returns, you can begin tax preparation for the current fiscal year. We’ll share some tax-saving ideas that aren’t well recognised.
You can save money on your taxes without having to hire a CA. It is preferable if you are aware of your income tax responsibilities and make tax-saving contributions in advance.
First, you need to make a choice between the new tax regime or want to carry on with the old tax slabs.
NEW TAX REGIME VS. OLD TAX REGIME
Individuals and HUFs have the option to move to the new tax system in FY 2020-21. However, you must inform your employer of your decision at the start of the fiscal year.
The following are the income tax slabs:
|Income slabs (Rs)||Tax Rate (Old Regime)||Tax Rate (New Regime – devoid of exemptions & deductions)|
|Up to 2.5 lakh||Nil||Nil|
|2.5 – 5 lakh||5%||5%|
|5 – 7.5 lakh||20%||10%|
|7.5 – 10 lakh||20%||15%|
|10 – 12.5 lakh||30%||20%|
|12.5 – 15 lakh||30%||25%|
|Above 15 lakh||30%||30%|
The new regime has lower tax rates, but you won’t be able to take advantage of a total of 70 exemptions and deductions available under different provisions of the IT Act, such as the standard deduction of 50,000 dollars for salaried individuals, Leave Travel Allowance (LTA), House Rent Allowance (HRA), and Entertainment Allowance. Section 80 deductions are also available (such as 80C, 80CCC, 80CCD, 80D, 80DD, 80E, 80EE, 80G, 80GG, 80GGA, 80GGC).
In the circumstances described above, the old tax system is preferable.
The old tax regime is best for salaried workers who are able to take tax deductions, while the current tax regime is best for those who are either not qualified for deductions or do not want to participate in tax-saving schemes.
|Income||Taking Deduction/Investment||Regime to Choose|
|More than 15 lakh||Taking deduction min 2.5 L||Old tax regime|
|More than 15 lakh||No||New tax regime|
|Less than 15 lakh||Yes (full limit)||Old tax regime|
|Less than 15 lakh||Yes (a small amount)||Do your calculations|
|Less than 15 lakh||No||New tax regime|
*Note that you can adjust your tax filing option every year, so your decision isn’t set in stone.