Changes as per Finance Bill 2023-24
In TallyPrime Release 3.0, the income tax in all the employee masters is calculated based on the latest income tax slab rates announced in Finance Bill 2023-24.
Income Tax Computation report for Regular Tax Regime
There is no change in the income tax slab rates for the employees with the regular tax regime, and you can view the details in the Income Tax Computation report, as always.
In TallyPrime Release 3.0, the taxable income slabs are updated with definite values for better clarity and understanding of tax calculation.
- Press Alt+G (Go To) > type or select Income Tax Computation and press Enter.
- Select the Employee and press Enter.
- Drill down from the 10. Tax on Total Income section.
You can view the income slabs and the respective tax rates, as shown below:
Income Tax Computation report for New Tax Regime
TallyPrime Release 3.0 introduces the amended income tax slab rates for the employees with the new tax regime, as per Finance Bill 2023-24. This enables you to view the Tax Amount as per the latest income tax slab rates declared by the department. As a result, the Income Tax Computation report, Annexure II to 24Q, and Form 16 display values as per the latest income tax slab rates.
Income Tax Computation report for Employees taxable income beyond rebate limit
For employees beyond the rebate limit, you can drill down from the 10. Tax on Total Income section of the Income Tax Computation report and view the the income tax as per the latest slab rates, as shown below:
Moreover, Standard Deduction was always applicable to the employees with the regular tax regime. As per the Finance Bill 2023-24, the employees under the new tax regime will also have a Standard Deduction under Deductions U/s 16, as shown below:
Reduced Surcharge rate for Employees with taxable income greater than Rs. 5 crores
For employees with taxable income greater than Rs. 5 crores, the department has reduced the surcharge rate from 37% to 25%. So, when you drill down from 10. Tax on Total Income section of the Income Tax Computation report, you can observe that the row Add: Surcharge has Tax rate as 25%.
Rebate U/s 87A for Employees with taxable income up to Rs. 7 lakhs
Previously in the new tax regime, the rebate value of Rs. 12,500 was applicable to the employees with taxable income up to Rs. 5 lakhs.
In Finance Bill 2023-24, the department has amended the income tax slab rates to Rs. 7 lakhs and the rebate amount is amended to Rs. 25,000.
Marginal Tax Relief for Employees with taxable income between Rs. 7,00,001 and Rs. 7,27,777
Previously in the new tax regime, when the taxable income crossed the rebate limit even by a rupee, the employees had to pay the complete tax as per the slab rate.
As per Finance Bill 2023-24, if the annual income of an employee is up to Rs. 7 lakhs, then the tax payable is zero.
However, if the income becomes Rs 7,00,100, then the tax liability becomes Rs 25,010, as per calculation. Even when the income exceeds Rs. 7 lakhs by only Rs. 100, the tax will be calculated as Rs. 25,010, as per the income tax slab rate. To reduce the tax burden on the employees, the department has provided a marginal tax relief in the Finance Bill 2023-24.
If the taxable income after standard deduction of the employees is Rs. 7,00,001 to Rs. 7,27,777, then they will get a marginal tax relief.
However, if the taxable income after standard deduction is beyond Rs. 7,27,777, then the employee is liable to pay the income tax as per the slab rate.
In the screen below, when you drill down from 10. Tax on Total Income section of the Income Tax Computation report, you can see that the Income Chargeable to Tax is Rs. 7,12,000, exceeds Rs. 7 lakhs by Rs. 12,000.
Therefore, the employee avails a marginal tax relief, as displayed in the row Less: Excess Income Over 7,00,000.00. The amount that exceeds Rs. 7,00,000 gets deducted from the Total Income Tax as a marginal tax relief.
The calculated Income Tax in row 8 is the Total Income Tax under row 9.
When you deduct the amount that exceeds Rs. 7,00,000 from the Total Income Tax under row 9, you get the Tax amount that you need to deduct from the Total Income Tax.
As a result, you get Tax Before Cess.
It is important to note that rebate u/s 87A is not applicable to the employees eligible for the marginal tax relief.
