Income Tax Returns 2024: Top 5 Points to Note When Choosing the New Tax Regime for FY 2024-25 ????

Income Tax Returns 2024: The new tax regime became the default option for all taxpayers in the Union Budget 2023, including individuals, Hindu Undivided Families (HUFs), and Associations of Persons (AOPs).

Details on the New Tax Regime ????

New Tax Regime in ITR 2024: In the United States Union Budget of 2023, Finance Minister Nirmala Sitharaman announced that the new income tax regime will become the default option starting April 1, 2023. Nevertheless, the minister mentioned that taxpayers can still opt for the old regime if preferred. Initially introduced in the Union Budget of 2020, the new tax regime has been the default choice for all taxpayers, including individuals, Hindu Undivided Families (HUFs), and Associations of Persons (AOPs).

Tax System Overview ????

Income Tax Returns 2024: The new tax system, in which the tax brackets were adjusted and differed slightly from the previous tax system, provided reduced tax rates.

Also read: Core Banking Solutions: Definition, Features, and Benefits 2023?

Income Tax Returns 2024

Key Points to Consider ????

Income Tax Rebate ????.

Before the Union Budget 2023, individuals with an annual income up to Rs 5 lakh were not required to pay any tax. This limit was hiked to Rs 7 lakh.

Standard Deduction under New Tax Regime ?????

The standard deduction of Rs 50,000, earlier restricted to the Old Tax Regime, was extended to the new tax regime in Union Budget 2023. Following the inclusion, the tax-free income, including the rebate, now stands at Rs 7.5 lakh.

Revised Tax Slabs ????:

A major difference between the Old and New Tax Regime is that the latter offers lower tax rates. The government announced new income tax slabs in its 2023 Budget.

  • Zero tax on income up to Rs 3 lakh
    • 5% between Rs 3 lakh and Rs 6 lakh
    • 10% on Rs 6 lakh to Rs 9 lakh
    • 15% on Rs 9 lakh to Rs 12 lakh
    • 20% on Rs 12-15 lakh
    • 30% on Rs 15 lakh

Reduced Surcharge for High Net Worth Individuals ????:

  1. FM Sitharaman reduced the surcharge rate on income over Rs 5 crores from 37% to 25%. This move reduced the effective tax rate from 42.74% to 39%.

Surcharge Rates for Individual/HUF/AOP/BOI/ Artificial Judicial Person:

  • Less than Rs 50 lakhs: Nil
    • More than Rs 50 lakhs ≤ Rs 1 Crore: 10%
    • More than Rs 1 Crore ≤ Rs 2 Crore: 15%
    • More than Rs 2 Crore ≤ Rs 5 Crore: 25%
    • More than Rs 5 Crore: 37%

Higher Leave Encashment Exemption ✈️:

The leave encashment amount claimed as exemption increased to Rs 25 lakh from Rs 3 lakh for non-government employees.

Why Claiming a $7,500 EV Tax Credit May Be Tougher ⚡️

Meanwhile, consumers who want a tax break will likely have fewer cars to choose from next year.

Impact of the Inflation Reduction Act on EVs ????

The Inflation Reduction Act, which President Joe Biden signed into law in 2022, phases in certain manufacturing requirements aimed at enhancing domestic EV supply chains.

Challenges for EV Tax Credits ????

Income Tax Returns 2024: In the short term, however, they disqualify some EVs from being eligible for a full or partial tax credit as carmakers work to comply with the rules. These rules only apply to purchases of new EVs, not used models or leases.

Conclusion ????

Both the old and new tax regimes have their pros and cons. The New Tax System doesn’t offer certain exemptions and deductions, such as HRA, LTA, 80C, 80D, and more, making it suitable for those who prefer minimal deductions or wish to avoid the burden of extensive tax preparation. Conversely, the Old Tax Regime is more fitting for those investing in tax-saving instruments and a habit of saving.

Will I receive a larger tax refund in 2024?

In 2024, both federal income tax brackets and the standard deduction are set to increase. This adjustment responds to persistent inflation, which has kept prices elevated throughout the year. The higher thresholds will apply to your 2024 taxes, which you will file in 2025.

When can you file taxes for 2024 in the United States?

???? The IRS estimates it will start accepting and processing new tax returns on January 24th. The IRS anticipates that most taxpayers will receive their refunds within 21 days after electronically filing their tax returns unless there are any issues with processing their returns. 

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