How to file your taxes in the new regime
Filing taxes in India can be a complex process, made even more so by the introduction of the new tax regime in the Union Budget of 2020. This article aims to provide a comprehensive guide to filing taxes under the new tax regime in India.
Before we dive into the process of filing taxes under the new regime, it’s important to understand what the new tax regime is and how it differs from the old regime. The new tax regime offers lower tax rates but with fewer deductions and exemptions compared to the old regime.
Under the new tax regime, the tax rates are as follows:
* Up to Rs 2.5 lakh: Nil
* Rs 2.5 lakh to Rs 5 lakh: 5%
* Rs 5 lakh to Rs 7.5 lakh: 10%
* Rs 7.5 lakh to Rs 10 lakh: 15%
* Rs 10 lakh to Rs 12.5 lakh: 20%
* Rs 12.5 lakh to Rs 15 lakh: 25%
* Above Rs 15 lakh: 30%
It’s important to note that taxpayers have the option to choose between the old and new tax regimes every financial year. However, once a regime is chosen, it cannot be changed within the same financial year.
Now, let’s move on to the process of filing taxes under the new tax regime.
Step 1: Gather all necessary documents
Before you begin the process of filing taxes, it’s essential to gather all the necessary documents. These documents include:
* Form 16: Issued by your employer, this form contains details about your salary, tax deductions, and tax paid.
* Form 26AS: This is a consolidated tax credit statement that provides details of tax deducted at source (TDS) and tax collected at source (TCS).
* Bank statements: These are required to calculate your income from interest on savings accounts, fixed deposits, and recurring deposits.
* Investment proofs: These are required to claim deductions under sections 80C to 80U of the Income Tax Act, 1961.
Step 2: Calculate your taxable income
Once you have all the necessary documents, the next step is to calculate your taxable income. This involves calculating your total income and subtracting the deductions and exemptions available under the new tax regime.
To calculate your total income, you need to add up your income from all sources, such as salary, interest on savings accounts, fixed deposits, and recurring deposits, rental income, and income from business or profession.
Once you have calculated your total income, you can subtract the deductions and exemptions available under the new tax regime. These include:
* Standard deduction of Rs 50,000
* Deduction under section 80TTA for interest on savings accounts up to Rs 10,000
* Deduction under section 80TTB for interest on deposits held by senior citizens up to Rs 50,000
* Deduction under section 80C for investments and expenses up to Rs 1.5 lakh
* Deduction under section 80CCD(1) for contributions to the National Pension System (NPS) up to 10% of salary
* Deduction under section 80CCD(1B) for additional contributions to the NPS up to Rs 50,000
* Deduction under section 80CCD(2) for employer’s contributions to the NPS up to 10% of salary
* Deduction under section 80D for medical insurance premiums up to Rs 25,000 (Rs 50,000 for senior citizens)
* Deduction under section 80TTA for interest on savings accounts up to Rs 10,000
* Deduction under section 80U for disability expenses up to Rs 1 lakh
Step 3: Calculate your tax liability
Once you have calculated your taxable income, the next step is to calculate your tax liability. This involves applying the tax rates mentioned earlier to your taxable income.
For example, if your taxable income is Rs 8 lakh, your tax liability under the new tax regime would be as follows:
* Up to Rs 2.5 lakh: Nil
* Rs 2.5 lakh to Rs 5 lakh: Rs 12,500 (5% of Rs 2.5 lakh)
* Rs 5 lakh to Rs 7.5 lakh: Rs 25,000 (10% of Rs 2.5 lakh)
* Rs 7.5 lakh to Rs 8 lakh: Rs 50,000 (15% of Rs 50,000)
* Total tax liability: Rs 87,500
Step 4: Pay any outstanding tax
If you have any outstanding tax liability, you need to pay it before you can file your tax return. You can pay your tax liability online through the Income Tax Department’s e-pay portal or through your bank.
Step 5: File your tax return
Once you have calculated your tax liability and paid any outstanding tax, you can file your tax return. You can file your tax return online through the Income Tax Department’s e-filing portal.
To file your tax return, you need to:
* Log in to the e-filing portal using your PAN number and password.
* Select the assessment year for which you want to file your tax return.
* Select the income tax return (ITR) form that applies to you.
* Enter your personal details and income details.
* Claim any deductions and exemptions available under the new tax regime.
* Pay any outstanding tax liability.
* Verify your tax return using an Aadhaar-based OTP or through electronic verification code (EVC).
Step 6: Keep a copy of your tax return
Once you have filed your tax return, it’s important to keep a copy of it for your records. You may need to produce it in the future for various purposes, such as applying for a loan or a visa.
Conclusion
Filing taxes under the new tax regime in India can be a complex process, but with the right information and documents, it can be made easier. By following the steps outlined in this article, you can ensure that you file your tax return accurately and on time.
It’s important to note that the new tax regime offers lower tax rates but with fewer deductions and exemptions compared to the old regime. Therefore, it’s essential to calculate your tax liability carefully and claim any deductions and exemptions available to you under the new tax regime.
Remember, filing your tax return is not just a legal obligation, but it also helps you to keep track of your income and expenses, plan your finances, and save taxes. So, make sure you file your tax return on time and accurately every financial year.
