- Date : 15/04/2023
- Read: 4 mins
The Union budget for 2023 has allowed individuals earning up to Rs. 60 lakhs annually to file their next annual income tax return as Consultants or Salaried employees.
New Income Tax Regime for People with Rs. 60 lakhs of Annual Income
As per the new tax regime changes, under Indian law, a person earning Rs. 60 lakhs a year can choose between being a salaried employee or a consultant. If they opt to be a salaried employee, they will receive a fixed salary and be eligible for associated benefits like medical insurance, a provident fund, etc. On the other hand, if they opt to be consultants, they can charge fees for their work and will not be eligible for the same benefits as salaried employees. Ultimately, the choice between being a salaried employee or a consultant depends on the individual's preferences.
Also Read: Understand the break-up of your salary!
Changes in the New Tax Regime Suggested for Professionals:
- Raising the income tax threshold
- Lowering the tax rate from 50% to 40%.
- Enabling experts to change their presumptive Income by submitting documentation.
- Letting experts utilize the presumed tax regime for up to three years.
- Making it simpler to submit returns and establishing a streamlined procedure.
- Letting professionals bring forward losses from the prior year to lower their taxable Income.
- Encouraging experts to use e-payment systems.
- Raising the deduction cap for the health insurance premium to Rs. 50,000.
- Making it necessary for professionals to enroll for GST to take advantage of the Section 44ADA presumptive taxation arrangement.
Changes in the New Tax Regime Suggested for Salaried Employees:
- Rise in the basic exclusion limit: The deduction limit has been raised from Rs. 2.4 lakhs to Rs. 2.5 lakhs.
- Increase in standard deduction: The tax deduction has now been raised from Rs. 40,000 to Rs. 50,000.
- Increase in tax rebate: An increased tax rebate of Rs. 12,500 was envisaged in the budget for people with taxable incomes up to Rs. 5 lakhs.
- Increase in investment limit: The plan recommended raising the Section 80C investment cap from 1.5 lakhs to 2 lakhs rupees.
- Raise the exemption level for capital gains Tax: The exemption level for capital gains tax has been raised from Rs. 1 lakh to Rs. 2.5 lakh.
- Tax-Deductible premiums for health insurance: The tax regime recommended allowing healthcare insurance premiums up to Rs. 25,000 to be deducted from income taxes.
Before deciding to either be a Consultant or a Salaried Employee under this New Tax System, keep the following in mind:
You should assess your position and choose the best status based on the factors indicated below:
1. Taxable Income: Salaried people pay more taxes than consultants who work for a living. It is due to the progressive tax system for salaried individuals' Income; the higher the payment, the higher the tax rate. On the other hand, professional consultants pay a flat tax.
2. Deductions: Base deductions, home rent assistance, health insurance, etc., are available to salaried individuals. Likewise, professional taxes, business expenditures, etc., are known to consultants.
3. Taxable benefits: Salaried individuals can access tax-deductible advantages like housing allowances, health insurance, etc. Professional consultants have advantages like tax breaks, business expense deductions, etc.
4. Tax savings options: Salaried people can invest in tax-saving options such as the National Pension Plan, the Equity Linked Savings Scheme, and the Public Provident Fund. Expert consultants can invest in tax-saving strategies like capital gains tax, real estate property tax, etc.
5. Tax planning: Choices for salaried individuals include tax-saving devices, tax-saving investments, etc. Professionals are qualified to make investments that reduce taxes and avoid capital gains taxes.
6. Tax return filing: Salaried individuals must file ITR-1, while professional consultants must file ITR-4S.
Also Read: How to set off stock market losses in ITR?
Final words
It is recommended that the individual choose to be a consultant or a salaried employee after independently analyzing their profits, status, and benefits.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas
New Income Tax Regime for People with Rs. 60 lakhs of Annual Income
As per the new tax regime changes, under Indian law, a person earning Rs. 60 lakhs a year can choose between being a salaried employee or a consultant. If they opt to be a salaried employee, they will receive a fixed salary and be eligible for associated benefits like medical insurance, a provident fund, etc. On the other hand, if they opt to be consultants, they can charge fees for their work and will not be eligible for the same benefits as salaried employees. Ultimately, the choice between being a salaried employee or a consultant depends on the individual's preferences.
Also Read: Understand the break-up of your salary!
Changes in the New Tax Regime Suggested for Professionals:
- Raising the income tax threshold
- Lowering the tax rate from 50% to 40%.
- Enabling experts to change their presumptive Income by submitting documentation.
- Letting experts utilize the presumed tax regime for up to three years.
- Making it simpler to submit returns and establishing a streamlined procedure.
- Letting professionals bring forward losses from the prior year to lower their taxable Income.
- Encouraging experts to use e-payment systems.
- Raising the deduction cap for the health insurance premium to Rs. 50,000.
- Making it necessary for professionals to enroll for GST to take advantage of the Section 44ADA presumptive taxation arrangement.
Changes in the New Tax Regime Suggested for Salaried Employees:
- Rise in the basic exclusion limit: The deduction limit has been raised from Rs. 2.4 lakhs to Rs. 2.5 lakhs.
- Increase in standard deduction: The tax deduction has now been raised from Rs. 40,000 to Rs. 50,000.
- Increase in tax rebate: An increased tax rebate of Rs. 12,500 was envisaged in the budget for people with taxable incomes up to Rs. 5 lakhs.
- Increase in investment limit: The plan recommended raising the Section 80C investment cap from 1.5 lakhs to 2 lakhs rupees.
- Raise the exemption level for capital gains Tax: The exemption level for capital gains tax has been raised from Rs. 1 lakh to Rs. 2.5 lakh.
- Tax-Deductible premiums for health insurance: The tax regime recommended allowing healthcare insurance premiums up to Rs. 25,000 to be deducted from income taxes.
Before deciding to either be a Consultant or a Salaried Employee under this New Tax System, keep the following in mind:
You should assess your position and choose the best status based on the factors indicated below:
1. Taxable Income: Salaried people pay more taxes than consultants who work for a living. It is due to the progressive tax system for salaried individuals' Income; the higher the payment, the higher the tax rate. On the other hand, professional consultants pay a flat tax.
2. Deductions: Base deductions, home rent assistance, health insurance, etc., are available to salaried individuals. Likewise, professional taxes, business expenditures, etc., are known to consultants.
3. Taxable benefits: Salaried individuals can access tax-deductible advantages like housing allowances, health insurance, etc. Professional consultants have advantages like tax breaks, business expense deductions, etc.
4. Tax savings options: Salaried people can invest in tax-saving options such as the National Pension Plan, the Equity Linked Savings Scheme, and the Public Provident Fund. Expert consultants can invest in tax-saving strategies like capital gains tax, real estate property tax, etc.
5. Tax planning: Choices for salaried individuals include tax-saving devices, tax-saving investments, etc. Professionals are qualified to make investments that reduce taxes and avoid capital gains taxes.
6. Tax return filing: Salaried individuals must file ITR-1, while professional consultants must file ITR-4S.
Also Read: How to set off stock market losses in ITR?
Final words
It is recommended that the individual choose to be a consultant or a salaried employee after independently analyzing their profits, status, and benefits.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas
