New Income Tax Regime: Know How To Save Tax If Annual Income Is More Than Rs7 Lakh

Taxpayers opting for the new tax regime in FY24 will be able to claim a tax rebate of up to Rs12,500 in one financial year or assessment year.

There were certain changes proposed in the new income tax regime in the Budget 2023 to make it attractive for taxpayers filing an income tax return (ITR) in the financial year 2023-24.

The available limit of rebate under section 87A has also been increased from Rs5 lakh to Rs7 lakh in the new tax regime. It means taxpayers opting for the new tax regime in FY24 will be able to claim a tax rebate of up to Rs12,500 in one financial year or assessment year.

Also, note that those opting for the new tax regime cannot avail other rebates like HRA, LTA, Section 80C, Section 80CCD etc. However, the salaried individual, in that case, can claim a standard deduction of up to Rs50,000. Remember, if you are a salaried individual with an annual income of up to Rs7.50 lakh then your income is non-taxable.

Pankaj Mathpal, MD & CEO at Optima Money Managers told the publication Mint that the Section 87A benefit which was earlier restricted to the old tax regime will now be made available to the new tax regime from the next financial year. “Therefore, up to Rs7 lakh annual income in a single financial year will be non-taxable in the new tax regime as well," he said.

Also, note an additional standard deduction of up to Rs50,000 annually is available for such a salaried taxpayer. In case the annual income is Rs7.5 lakh or below, one can easily claim a standard deduction of up to Rs50,000 to avoid any income tax outgo.

If your annual income is above Rs7.5 lakh then under the new tax regime such an individual can claim a standard deduction of RS50,000. It means salaried individuals with a total income of up to Rs7,50,000 will pay zero tax under the new regime.

Experts also said that income tax assesses can claim exemptions as per Section 10(15) including an exemption up to Rs3,500 and Rs 7,000 for interest received from Post Office Savings Account in the case of individual and joint accounts.

“They can also avail other exemptions u/s 10(15) like interest received on deposit certificates issued under the Gold Monetisation Scheme, 2015," Vivek Jalan, Partner at Tax Connect Advisory told the publication.