Post Budget, we received many queries from our print and online subscribers on income-tax proposals. Here, we answer a few common ones.
What are the deductions available under the new regime?
The new regime by design is a deduction-free, exemption-free regime and the Budget hasn’t tweaked the same this time around. Currently, there are two deductions available for the individual taxpayer under this regime. One being the standard deduction of ₹75,000 on salary and the other being the deduction against your employer’s contribution to NPS. The latter is capped at 14 per cent of basic pay + dearness allowance for the financial year.
The relief – no tax up to an income of ₹12 lakh – does it apply only to salary income?
No. This relief applies on your total income (computed after giving effect to deductions, if any), which will include income of all kinds – be it salary, interest, dividend, business income, etc. However, the relief does not apply on incomes that are taxed at special rates rather than at slab rates. Long-term capital gains on shares, for instance, is taxed at 12.5 per cent.
What is the level of income over ₹12 lakh until which the marginal relief works?
Total income up to ₹12 lakh is tax-free by virtue of a rebate of ₹60,000. What if the total income marginally exceeds ₹12 lakh? Say, a person earns ₹12,10,000, the tax outgo (before cess of 4 per cent) would be ₹61,500, effectively taking home ₹11,48,500. While a person earning exactly ₹12 lakh takes home the entire ₹12 lakh (tax outgo of ₹60,000 is neutralised by the rebate).
To counter this unfair treatment, a marginal relief applies. The tax outgo after giving effect to the marginal relief would come to only ₹10,000, which is the income earned in excess of ₹12 lakh. Mathematically, the marginal relief would work until an income of ₹12,70,600, meaning you get to take home ₹12 lakh after tax, even if you earn ₹12,70,600. In case your income is more than ₹12,70,600, say ₹12,80,000, your tax outgo will work out to ₹72,000 and you can take home ₹12,08,000 in post-tax earnings, which is more than ₹12 lakh, the post-tax earnings of a person earning exactly ₹12 lakh.
For a detailed explanation of the marginal relief, read our ‘Safe Investing’ story published in bl.portfolio edition dated February 9.
Can a taxpayer switch between the new and old regime?
As things stand at the moment, the new regime is the default regime. However, if you wish to file returns under the old regime, you can do so, by filling in Form 10-IEA (integral part of the return-filing process). However, the return has to filed on or before the due date.
Switching back and forth between the new and old regimes can be done only once for a financial year and you are free to choose whichever regime you wish for a particular financial year.
However, if you earn profits from a business or a profession, the free switching is not possible. In case you opt for the old regime, you’ll have to stay with it for all subsequent financial years, until the financial year in which you don’t have income from business or profession. Meaning, if in a subsequent financial year, you don’t have income from business or profession, you can make the switch back to the new regime.
Note that even gains from day trading and trading in derivatives count as business income. Let’s say in a year in which you have gains from trading in derivatives, you opt for the old regime. In this case, you cannot switch to the new regime in any of the subsequent financial years. But if in a subsequent year, you neither have income from derivatives/ day trading nor have income from any other business or profession, in that year you can switch to the new regime.
The Budget hasn’t tweaked the status quo.
Is there any relief proposed on the TDS rate on interest from bonds in the Budget?
Currently, in case of interest from bonds of listed companies, the applicable TDS rate is 10 per cent over a threshold of ₹5,000 (for the full financial year), provided the recipient is a resident individual or a Hindu undivided family. In other cases, no threshold is applicable, and TDS applies right from the first rupee of interest.
The Budget now proposes a higher threshold of ₹10,000 (aggregate over the financial year) in all cases – whether the bond is listed or otherwise.
If a person does not have any income apart from interest income and such interest income also does not exceed ₹4 lakh, will there be any TDS on interest?
Banks and Post Office, for instance, are not required to deduct tax if aggregate interest earned during the financial year does not exceed ₹50,000 in case of senior citizens and ₹40,000 in other cases. These thresholds have been upped to ₹1 lakh and ₹50,000 respectively in this Budget.
In case interest income exceeds the above-said threshold, you can consider furnishing forms 15G or 15H (15G for non-senior citizens and 15H for senior citizens) to your banker or Post Office. These forms are basically a request to your banker not to deduct tax as your total income for that financial year does not exceed the basic exemption limit (₹4 lakh as proposed in the Budget).
However, if your banker happens to deduct tax, you can claim a refund of the TDS, by filing return.
Note: Questions have been answered in the context of the Finance Bill, 2025 and the Income-Tax Act, 1961 (as amended by the Finance (No.2) Act of 2024), without reference to the Income-Tax Bill, 2025
Published on February 15, 2025
