New Income Tax rules effective from today: Here's what taxpayers should know

With the beginning of the new financial year from April 1, the Income Tax rules change that will directly affect many taxpayers in India will come into effect. This means that the new tax slabs will be active, and taxpayers have to pay attention to the rule changes that will affect them.

The default tax regime will be the new tax regime unless a taxpayer chooses the old regime when filing their income tax return (ITR).

From April 1, the income tax rules will undergo major changes including the implementation of the new tax regime as the default option. Taxpayers can still choose to file their taxes under the old regime but they must explicitly indicate their preference.

The old regime allowed taxpayers to claim benefits such as house rent allowance (HRA), interest on a home loan, children's education allowance, and deductions for professional tax.

Taxpayers who choose the new tax regime will not be eligible to claim the common exemptions. In the new tax regime, taxpayers will be taxed according to the new slabs.

Additionally, the tax rebate limit will increase to Rs7 lakh from the current Rs 5 lakh. This implies that individuals earning up to Rs 7 lakh annually will not be required to pay any tax under the new tax regime. Experts predict that this change will encourage salaried taxpayers to switch to the new tax regime.

It is important to note that earning Rs10 lakh under the new tax regime does not automatically mean a flat tax rate of 15%.

As per the website, no tax will be charged on income up to Rs3 lakh, 5% tax (Rs 15,000) will be charged on income between Rs 3 lakh and Rs 6 lakh, 10% tax (Rs 30,000) on income between Rs 6 lakh and Rs 9 lakh, and the remainingRs1 lakh will attract a 15% tax rate (an additional Rs15,000). Therefore, the total tax payable by a person earning Rs10 lakh will be Rs 60,000.

The exempt limit for leave encashment under Leave Travel Allowance (LTA) has been raised to Rs 25 lakh per annum, from the previous limit of Rs 3 lakh that was in place since 2002.

The indexation benefit in long-term capital gains (LTCG) tax for debt funds will be discontinued starting from April 1, 2023. This means that the indexation benefit will not apply to debt funds held for over three years.

Senior citizens will receive greater benefits, as the limit for savings schemes will be increased from Rs 15 lakh to Rs 30 lakh.

The new tax slabs will be as follows:

Income part from Rs 3 lakh and Rs 6 lakh will be taxed at 5 per cent

Rs 6 lakh to Rs 9 lakh will be taxed at 10 per cent

Rs 9 lakh to Rs 12 lakh will be taxed at 15 per cent

Rs 12 lakh to Rs 15 lakh will attract a 20 per cent tax