- The income tax department said that an employee can change the option of tax structure at the time of filing income tax return
- TDS will get adjusted accordingly
The income tax department has come up with clarifications for those who want to opt for new tax slabs. The lower income tax rates, as announced in Budget 2020, came into effect from April 1, 2020. The old tax slabs will also continue to remain in effect, giving choice to individuals to opt between the two.
"The deductor shall compute his total income and make TDS (tax deducted at source) thereon in accordance with the provision of Section 115 BAC of the (Income Tax) Act. If such intimation is not made by the employee, the employer shall make TDS without considering the provision of Section 115 BAC of the Act," the income tax department said.
Whether an individual should choose the new tax regime or the old one depends on a case-to-case basis as under this new lower tax rates, the individual will have to give up on a lot of deductions that could help reduce taxable income.
Under the new tax rates,
there is zero tax for income up to ₹2.5 lakh;
5% for income between ₹2.5 lakh and up to ₹5 lakh;
10% for income between ₹5 lakh and up to ₹7.5 lakh;
15% for income between ₹7.5 lakh and up to ₹10 lakh;
20% for income between ₹10 lakh and up to ₹12.5 lakh;
25% for income between ₹12.5 lakh and up to ₹15 lakh;
30% for income above ₹15 lakh.
Here is what the income tax department clarified:
1) Employees, not having income from business or profession, will have to inform their employers about their intention to opt for the new tax regime for the purpose of deduction tax at source or TDS from salaries.
2) If such option is not exercised by an employee, he/she will continue to be taxed at the older slabs present in the IT Act.
3) Once intimated to the employer about the intention to opt for the new concessional tax rates, for TDS purpose it will be applicable for the year and can't be modified.
4) The income tax department said that the employee can change the option of tax structure at the time of filing income tax return and the amount of TDS payment will get adjusted accordingly.
5) AKM Global Partner Amit Maheshwari said, "Now, it's clear that the employee (only those not having income from business or profession) cannot change the option once exercised for the purpose of getting TDS deducted but can always change it at the time of filing the tax return."