If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default new tax regime
Also Read– Anil Singhvi shares ideas on which mutual funds to buy, recommends a minimum five-year horizon
The income tax department has said employers will have to seek details from employees about their preference for tax regime in the current fiscal and deduct TDS accordingly. In case an employee does not intimate his/her employer about the preferred tax regime, then the employer would be required to deduct TDS from salary income as per the new revamped tax regime announced in Budget 2023-24.
Individual taxpayers have the option to select whether they want to be in the old tax regime, which provides for exemptions and deductions or switch to the new tax regime which offers low tax rates but no exemptions.
Read More:- Want Loan At Cheaper Interest Rate of 0.83% Per Month? Check Muthoot Gold Loan
The Budget 2023-24 unveiled on February 1 tweaked the optional exemption-free tax regime, which is available under section 115BAC of the I-T Act to push salaried-class taxpayers to switch to the new tax regime. The revamped concessional tax regime was made the default regime for an individual taxpayer.
The Central Board of Direct Taxes (CBDT) on Wednesday issued a clarification about Tax Deducted at Source (TDS) deduction by employers in the current fiscal.
“…a deductor, being an employer, shall seek information from each of its employees…regarding their intended tax regime and each such employee shall intimate the same to the deductor, being his employer, regarding his intended tax regime for each year and upon intimation, the deductor shall compute his total income, and deduct tax at source thereon according to the option exercised,” the CBDT said.
If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default new tax regime, it added.
Read More:- Centre’s High-level Covid Meet Today as India Sees 6,050 New Infections, Cases ‘Triple’ in 7 Days
Homi Mistry, partner at Deloitte India, said, “The CBDT has clarified vide Circular no. 4 of 2023, dated April 5, 2023, that a deductor being an employer shall seek information from each employee having salary income regarding the tax regime they want to opt for (whether the old regime or the new [default tax] regime) and every employee shall intimate the same to the employer regarding their intended tax regime for each year and accordingly the deductor (i.e. employer) shall compute the employee’s income and deduct tax thereon based upon the option exercised.”
He added that if no intimation is made by the employee, it shall be presumed that the employee continues to be in the new tax regime (being the default tax regime). In such a case, the employer shall deduct TDS in accordance with the tax rates under the new tax regime.
Under the new tax regime, as announced in the Budget, there will be no tax for those with an annual income of up to Rs 7 lakh. A standard deduction of Rs 50,000 has also been allowed and the basic exemption limit hiked to Rs 3 lakh.
Income between Rs 3-6 lakh would be taxed at 5 per cent; Rs 6-9 lakh at 10 per cent, Rs 9-12 lakh at 15 per cent, Rs 12-15 lakh at 20 per cent and income of Rs 15 lakh and above will be taxed at 30 per cent.
The old tax regime, which allows for exemptions and deductions, has a basic exemption limit of Rs 2.5 lakh. Also, those having an annual income of Rs 5 lakh do not have to pay any tax.
Income between Rs 2.5 lakh and Rs 5 lakh attracts a 5 per cent tax, while that between Rs 5 lakh and Rs 10 lakh is levied with a 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent.
Read More:- Petrol and diesel prices on April 7. Check prices in your city
The clarification comes after the CBDT received representations expressing concerns regarding tax to be deducted at source (TDS) on the salary income of a person under section 192 of the Act as the deductor, being an employer, would not know if the person, being an employee, would opt out from taxation under section 115BAC of the Act or not.
