People opting for the lower income tax regime, without any exemption, will have ease in compliance. The apex income tax policy-making body, the Central Board of Direct Taxes (CBDT), has come out with a detailed clarification in that regard.
The Union Budget for 2020-21 prescribed a new personal income tax regime wherein income tax rates will be significantly reduced for individual taxpayers who forgo certain deductions and exemptions. Some of such deductions/exemptions include HRA (house rent allowance), interest on home loan, and deposits in Public Provident Fund, National Saving Certificates etc.
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The new tax regime is optional for the taxpayers. An individual who is currently availing deductions and exemptions under the Income Tax Act may choose to avail them and continue to pay tax as per the old regime. It was said that the assessee will have to make option for new scheme at the time of filing income tax return (ITR).
TDS-ITR mismatch
Earlier, it was said that individual can opt for new regime (no exemption, lower tax) or old regime (with exemption, higher tax) at the time of filing ITR. However, employers were required to deduct TDS (tax deducted at sources) only under the old regime, which could have resulted in mismatch between TDS and ITR.
Source: The Hindu BusinessLine
