With the income tax return deadline fast approaching on July 31, 2024, many taxpayers are still pondering over whether to opt for the old or new tax regime for the financial year 2023-24. If your income is around Rs 10 lakh and you haven't yet decided which regime to choose, this comprehensive guide will help you make an informed decision and potentially make your income tax-free.

Changes in the New Tax Regime Announced in the Union Budget 2024

The Union Budget 2024 introduced significant changes to the new tax regime, making it more appealing for taxpayers. Key changes include:

Standard deduction increased from Rs 50,000 to Rs 75,000.

Revised tax slabs with individuals earning up to Rs 7 lakh now exempt from paying income tax.

These modifications aim to provide substantial relief to taxpayers and simplify the tax filing process.

Old vs. New Tax Regime: Which to Choose for Rs 10 Lakh Income?

If your annual income is around Rs 10 lakh, the old tax regime might offer better tax-saving opportunities due to the various deductions and exemptions it allows. Here’s how you can utilize these to make your Rs 10 lakh income tax-free:

Section 80C: Maximize Your Deductions

Under Section 80C, you can claim deductions up to Rs 1.5 lakh by investing in:

Public Provident Fund (PPF)

Employee Provident Fund (EPF)

Equity Linked Savings Schemes (ELSS)

Life insurance premiums

Principal repayments on home loans

For instance, if your income is Rs 9.5 lakh, and you invest Rs 1.5 lakh in these options, your taxable income reduces to Rs 8 lakh.

Also Read : Delhi Police Arrest Coaching Centre Owner for Student Deaths in Flooded Basement

Section 80CCD (1B): Additional NPS Contributions

Section 80CCD (1B) allows for an additional tax deduction of up to Rs 50,000 on contributions to the National Pension System (NPS) Tier I account. This is over and above the Rs 1.5 lakh limit under Section 80C. Investing in NPS can further reduce your taxable income. For example, if your taxable income is Rs 8 lakh, and you contribute Rs 50,000 to NPS, your taxable income comes down to Rs 7.5 lakh.

Section 24B: Home Loan Interest Deduction

Under Section 24B, you can claim a tax deduction of up to Rs 2 lakh on the interest paid on your home loan. This deduction can significantly reduce your taxable income. If your income is Rs 7.5 lakh and you claim this deduction, your taxable income will be reduced to Rs 5.5 lakh.

Section 80D: Health Insurance Premium Deduction

Section 80D allows you to deduct health insurance premiums up to Rs 25,000 from your taxable income. If you or your spouse is a senior citizen, this limit increases to Rs 50,000. Additionally, you can claim up to Rs 5,000 for preventive health check-ups.

If your taxable income is Rs 5.5 lakh after other deductions, claiming Rs 25,000 under Section 80D will reduce it to Rs 5.25 lakh. For senior citizens, the total deduction can be up to Rs 50,000, reducing the taxable income to Rs 5 lakh.

Making Rs 10 Lakh Income Tax-Free

By effectively utilizing these deductions:

Rs 1.5 lakh under Section 80C

Rs 50,000 under Section 80CCD (1B)

Rs 2 lakh under Section 24B

Rs 25,000 - 50,000 under Section 80D

You can bring your taxable income down to Rs 4.75 lakh - 5 lakh, ensuring that you don't have to pay any income tax as incomes up to Rs 5 lakh are tax-free under the old tax regime.

Conclusion

With these strategies, you can make an informed choice between the old and new tax regimes and potentially make your Rs 10 lakh income tax-free. Remember, the last date to file your income tax return for FY 2023-24 is July 31, 2024. Ensure you leverage these deductions to optimize your tax savings and comply with the tax filing requirements.

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