Tax Declaration

According to the Income Tax law, an employer needs to deduct TDS on the estimated income of the employee every month. For this every employer seeks a tax declaration from their employees at the beginning of a financial year. This declaration is a list of all tax-saving investments that an employee commits to make in that particular year. Based on the information provided in the tax declaration, the employer calculates and deduct tax at source (TDS) proportionately from the employee’s monthly income.

Declaring Tax-saving investments is not all. Employees need to submit proof of expenses or investments during the year to support their declaration. If they fail to do so, the employer will have to recover the tax shortfall from the employee’s salary in the remaining months. 

But in Union Budget 2020, the government introduced a new tax regime with lower tax slabs with fewer exemptions and deductions. However, employees are free to compare and opt for the better-off regime based on their income.

Now the question arise for every employee at the starting of year that which Tax Regime is better for them so that provide tax declaration accordingly to the employer. To choose the best option for the A.Y 2024-25 following is the comparative slabs rates :

Under the provisions of section 87A of the Act, in case of old regime an assessee, being an individual resident in India, having total income not exceeding Rs 5 lakh, is provided a rebate of 100 percent of the amount of income-tax payable i.e., an individual having income till Rs 5 lakh is not required to pay any income-tax.

Whereas From assessment year 2024-25 onwards, an assessee, being an individual resident in India whose income is chargeable to tax under the proposed sub-section (1A) of section 115BAC, shall now be entitled to a rebate of 100 percent of the amount of income-tax payable on a total income not exceeding Rs 7 lakh.

Can I change the Tax Regime during the Year 

A salaried taxpayer should choose the tax regime at the beginning of FY and intimate their employer. The employee cannot change their choice anytime during the financial year. However, they can change their choice at the time of filing the income tax return.

If an employee does not select a tax regime at the start of the financial year, the employer will deduct tax (TDS) under the New tax regime because, according to the proposed budget 2023, the New tax regime will be the default tax regime from A.Y 2024-25 However, a salaried taxpayer has a option to switch between old and new Tax regime every financial year i.e they can chose the new tax regime in one year and choose the regular tax regime in another year.

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