Will income 19 lakhs be tax free in new regime? Understand the complete calculation
Choose the new tax regime or the old one? This question remains in the minds of taxpayers. Both regimes have their own advantages. For example, income up to Rs 12 lakh is out of the tax purview in the new regime. Whereas in the old regime there are some more provisions for tax deduction.
For example, exemptions like House Rent Allowance (HRA) are given only in the old tax system.
Therefore, the tax regime should be chosen very thoughtfully. Here we are going to tell you how annual income of more than Rs 19 lakh can be made tax free under the new regime.
Let us assume that the salary of an employee is as follows:
Basic Pay: Rs 6,00,000
Personal Allowance: Rs 5,50,000
PF: Rs 21,600
Gratuity: Rs 28,800
Variable Pay: Rs 96,000
Flexi Pay Tax-free component: Rs 6,23,600
Total CTC: Rs 19,20,000.
Standard Deduction + NPS
It is worth noting here that the standard deduction under the new tax regime is Rs 75,000. Thus, Rs 19,20,000 - Rs 75,000 = Rs 18,45,000. The calculation is Rs 18,45,000 – Rs 84,000 = Rs 17,61,000.
Flexi Pay Tax-Free Component
Transportation: Rs 2,85,600
Books & Magazines: Rs 1,08,000
Entertainment: Rs 2,40,000
Uniform: Rs 90,000
Total: Rs 6,23,600
Thus, Rs 17,61,000 – Rs 6,23,600 = Rs 11,37,400.
Home loan interest + rental income set-off
If the house is rented out, the limit is Rs 2,60,000
Interest deduction: Rs 2,00,000
Rental income adjustment: Rs 60,000
Rs 11,37,400 – Rs 2,60,000 = Rs 8,77,400.
Other deductions
Gifts, family pension and others: Rs 50,000. Thus, the final taxable income is Rs 8,77,400 – Rs 50,000 = Rs 8,27,400. As per the new rules, a tax exemption of Rs 25,000 is available on taxable income up to Rs 12 lakh. The tax as per the slab is Rs 25,000 and net tax after exemption = Rs 0. In this way, your entire salary of Rs 19.20 lakh will become tax-free.
Summary
The government wants more and more taxpayers to switch to the new regime, However, there are some provisions in the old tax regime, which still make it attractive. So choose the regime wisely.
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