ITR Filing Guide: How to Pay Zero Tax Under New and Old Regimes

As taxpayers prepare for the upcoming filing season, understanding the nuances of tax rebates can be the difference between a heavy tax bill and zero liability. While many confuse the basic exemption limit with tax-free income, the real mechanism for achieving "zero tax" lies in the Section 87A rebate.

Understanding the Section 87A Rebate

The Section 87A rebate is a provision under the Income Tax Act that provides tax relief to resident individuals whose total income falls below specific thresholds. It is important to note that the rebate is applied after the tax is calculated based on applicable slabs but before the addition of cess.

The amount of relief you receive depends entirely on which tax regime you select. Under the Old Tax Regime, a rebate of up to ₹12,500 is available for those with a taxable income of up to ₹5 lakh. Conversely, the New Tax Regime offers a much more significant benefit, allowing individuals with total income up to ₹12 lakh to claim a rebate of up to ₹60,000, effectively reducing their tax liability to zero.

The New Regime: Higher Limits and Marginal Relief

The New Tax Regime has become increasingly attractive due to its higher rebate threshold. For example, if an individual has a total taxable income of ₹9 lakh, they will not pay any tax despite being above the basic exemption limit of ₹4 lakh, thanks to the Section 87A rebate.

A critical feature of the New Tax Regime is "Marginal Relief." This serves as a safety net for taxpayers whose income slightly exceeds the ₹12 lakh threshold. Marginal relief ensures that the tax payable is not higher than the amount by which the income exceeds ₹12 lakh. This protection is available for total taxable incomes up to ₹12,70,588. If your income rises above this specific limit, marginal relief is no longer applicable, and you must pay the full tax as per the slabs.

Comparative Analysis: Old vs. New Regime

The choice between regimes often depends on your ability to utilize deductions. In the Old Regime, taxpayers can leverage Section 80C deductions (up to ₹1.5 lakh) and other exemptions to bring their taxable income down to the ₹5 lakh mark to claim the ₹12,500 rebate.

ਨਵੀਂ ਰੈਜੀਮ ਵਿੱਚ, ਸਟੈਂਡਰਡ ਡਿਡਕਸ਼ਨ ਵਧਾ ਕੇ ₹75,000 ਕਰ ਦਿੱਤੀ ਗਈ ਹੈ, ਅਤੇ ਜ਼ੀਰੋ ਟੈਕਸ ਦਾ ਮਾਰਗ ਹੁਣ ਬਹੁਤ ਵਿਸ਼ਾਲ ਹੋ ਗਿਆ ਹੈ, ਜੋ ਕਿ ₹12 ਲੱਖ ਦੀ ਆਮਦਨ ਦੇ ਪੱਧਰ ਤੱਕ ਫੈਲਿਆ ਹੋਇਆ ਹੈ। ਹਾਲਾਂਕਿ, ਟੈਕਸਦਾਤਾਵਾਂ ਨੂੰ ਸਾਵਧਾਨ ਰਹਿਣਾ ਚਾਹੀਦਾ ਹੈ: ਨਵੀਂ ਰੈਜੀਮ ਵਿੱਚ ਸੈਕਸ਼ਨ 87A ਰਿਬੇਟ ਵਿਸ਼ੇਸ਼ ਦਰਾਂ 'ਤੇ ਟੈਕਸ ਕੀਤੇ ਗਏ ਮਾਲ ਦੀ ਆਮਦਨ 'ਤੇ ਲਾਗੂ ਨਹੀਂ ਹੁੰਦੀ, ਜਿਵੇਂ ਕਿ ਕੈਪੀਟਲ ਗੇਨਜ਼ ਜਾਂ ਲਾਟਰੀ ਦੀ ਜਿੱਤ। ਇਸੇ ਤਰ੍ਹਾਂ, ਪੁਰਾਣੀ ਰੈਜੀਮ ਦੇ ਤਹਿਤ, ਸੈਕਸ਼ਨ 112A ਦੇ ਅਧੀਨ ਇਕੁਇਟੀ ਸ਼ੇਅਰਾਂ ਜਾਂ ਇਕੁਇਟੀ-ਮੁਖੀ ਫੰਡਾਂ ਤੋਂ ਹੋਣ ਵਾਲੇ ਲੰਬੇ ਸਮੇਂ ਦੇ ਕੈਪੀਟਲ ਗੇਨਜ਼ ਦੇ ਵਿਰੁੱਧ ਰਿਬੇਟ ਦਾ ਦਾਅਵਾ ਨਹੀਂ ਕੀਤਾ ਜਾ ਸਕਦਾ।

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