As India paces up to outgrow various industrial pockets in launching innovative businesses and solving long-due societal problems with revolutionary ideas, founders and tax planning teams within organizations have their radars up for devising the most efficient tax-saving plans. As we near the end of FY 2022-2023, businesses seeking to renew their yearly compliance management plans with filing expert agencies, must zero down to the most inexpensive and advanced solutions providers.
Corporate tax planning is about understanding how an organization’s structure can benefit most in creating an efficient pool of savings by simply grasping to the opportunities that help minimize present and future income tax liabilities.
- In this article, you will read about essential tax planning benefits and understand how the new tax regime differs from the old one.
Here’s What You Need to Know Before Opting the New Tax Regime
Individual taxpayers in India currently have the option to select either the old tax regime or the new tax regime. But before you decide, bear in mind these considerations.
Opt Tax Saving Plan with Deductions: Compared to the previous tax regime, the new one will have more income tax slabs and lower income tax slab rates in FY 2022–2023 (FY2022). But there aren’t many exclusions and deductions available under the new tax regime. These include roughly 70 exemptions and deductions, such as HRA, Section 80C deductions, and the benefit for house loan interest, which are allowable under the previous tax regime but not under the new one.
Lower Exemption Limit based on Age: According to income tax slab rates in FY 2023–2024, the old tax regime offers larger tax exemptions for elderly citizens and super senior citizens of Rs. 3 lakh and Rs. 5 lakh, respectively. Under the new tax regime which offers the same Rs. 2.5 lakh exemption limit regardless of the taxpayer’s age; this greater limit is not available.
Consider Term Life and PPF Policies: Under the previous tax regime, spending and investments that save on taxes, such as term life insurance, the Public Provident Fund, and the National Pension System, offer a double advantage. On the one hand, you pay less taxes but also benefit from long-term wealth growth or family financial security. Under the new tax regime, you do not obtain any tax-saving benefits.
Take a quick look at the tax slabs for FY 2022-2023.
Surcharge: A Worry for the High-Income Employees at Your Firm
The income tax surcharge is calculated based on the income tax slab rates for FY 2022-23 and must be paid by high-income taxpayers with net taxable income over 50 lakhs in the assessment year 2023-24 or financial year 2022-23. For FY 2022–23, the applicable surcharge rate is as follows:
| Net Income Taxable (FY 22 - 23) | Surcharge (%) on Income Tax |
|---|---|
|
Rs. 50L to Rs. 1 Crore |
10% |
|
Rs. 1 Crore to Rs. 2 Crore |
15% |
|
Rs. 2 Crore to Rs. 5 Crore |
25% |
|
Rs. 5 Crore and Above |
37% |
Taxpayers can lower their taxes by investing, saving, or spending on particular financial instruments thanks to deductions and exemptions. Even if the income tax bracket rates for FY 2023–24 are lower than they were under the previous tax regime, the new regime gives you relatively limited possibilities for exemptions or deductions.
The old tax regime, in comparison, offered up to 70 deductions or exemptions that may be used to reduce your taxable income and income tax obligation for the fiscal years 2022–23.
Understand How Income Tax Return is Affected by Your Income
A new provision enables taxpayers to file an updated return upon payment of additional tax. Within two years of the conclusion of the pertinent assessment year, this updated return may be submitted. By allowing taxpayers to report any unreported income voluntarily, this new procedure of filing amended ITRs will assist in lowering litigation.
Only after paying an additional tax of 25% or 50% on the tax due on the additional income provided will the filing of the revised return be permitted.
Only if your total annual income exceeds the maximum exempt amount of Rs 2.5 lakh is filing an income tax return required for your tax purposes. Under the new tax regime, the new income tax slabs for FY 2022-23 do not vary based on the taxpayer’s age.
Therefore, regardless of the age of the individual taxpayer, the maximum amount of income exempt from taxes is Rs 2.5 lakh.
Maximise Savings with An Optimal Tax Saving Plan
A surplus over inflation is the ultimate goal of saving, and the majority of the other instruments in 80C are fixed-income products. Generally speaking, you could just be able to save enough by making an efficient tax-saving plan.
Are you a growing enterprise looking to maximise savings and plan your annual returns, compliance and filings to be handled by a one-point contact? Schedule a call with our expert team today.