Choose new or old tax regime for TDS deduction, says CBDT circular.

The Central Board of Direct Taxes (CBDT) has issued a circular regarding the modalities of TDS deduction in 2023-24. With the new financial year starting, employers are required to ask their employees whether they want to opt for the new income tax regime or the old tax regime. According to the circular, the new income tax regime has become the default tax regime from the current financial year.

The CBDT has told employers that they must ask their employees whether they want to opt for the new tax regime or the old tax regime. All employees will have to inform their employer at the beginning of every financial year about their choice. The CBDT has said that choosing between the two options is necessary because the employer will deduct TDS on the income of the employee based on their choice. If an employee does not inform their employer, the default tax regime will be the new tax regime and TDS will be deducted accordingly.

The new income tax regime offers lower tax rates compared to the old tax regime. However, it does not provide any deduction on home loan interest and investment. In contrast, the old income tax regime allows taxpayers to get tax exemption on Mediclaim by taking exemption on investment and home loan interest.

Salaried taxpayers will have the option to choose either the new or old income tax regime while filing their income tax returns, even if they have informed their employer to choose another option. They can make this decision every year. On the other hand, those who earn income from business or profession can change their tax regime from one to another only once.