- April 7, 2023
- Posted by: Pravinjana Consultants
- Category: What's New
From April 1, 2024, a new tax regime will be applicable to individuals, Hindu undivided families, associations of persons (excluding cooperative societies), and artificial juridical persons. This regime will calculate income tax based on the rates provided in sub-section (1A) of section 115BAC of the Income-tax Act, 1961, subject to specific conditions, including not availing of certain exemptions and deductions.
The above mentioned new tax regime is the default tax regime applicable to all persons mentioned above. However, under sub section (6) of section 115BAC of the Act, a person may exercise an option to opt out of this tax regime. A person not having income from business or profession can exercise this option every year.
Representation have been received by CBDT expressing concerns regarding tax to be deducted at source (TDS) on salary income of a person under section 192 of the Act as the deductor, being an employer, would not know if the person, being an employee, would opt out from taxation under sub-section (1 A) of section 115BAC of the Act or not.
To prevent hardship in such cases, the CBDT (Vide Circular No. 04 of 2023 Dated 5 April, 2023) has directed employers to request information from employees under section 192 of the Act about their intended tax regime. Each employee must inform their employer of their intended tax regime for each year, and upon receiving the information, the employer will compute the total income and deduct the tax at the source according to the chosen option.
If intimation is not made by the employee, it shall be presumed that the employee continues to be in the default tax regime and has not exercised the option to opt out of the new tax regime.
It is also clarified that the intimation would not amount to exercising option in terms of sub-section (6) of section 115BAC of the Act and the person shall be required to do so separately in accordance with the provisions of the sub-section.